<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON OCTOBER 30, 2000
REGISTRATION NOS. 2-95973 AND 811-4236
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
POST-EFFECTIVE AMENDMENT NO. 53 |X|
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT |X|
OF 1940
AMENDMENT NO. 54 |X|
ONE GROUP(R)MUTUAL FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(800) 480-4111
(REGISTRANT'S TELEPHONE NUMBER)
MARK A. BEESON
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
ALAN G. PRIEST, ESQUIRE MICHAEL V. WIBLE, ESQUIRE
ROPES & GRAY BANK ONE CORPORATION
ONE FRANKLIN SQUARE 100 EAST BROAD STREET, 5TH FL.
1301 K STREET, N.W., SUITE 800E COLUMBUS, OHIO 43271-0152
WASHINGTON, D.C. 20005
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: IMMEDIATELY UPON
EFFECTIVENESS
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
_____ IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
__X__ ON NOVEMBER 1, 2000 PURSUANT TO PARAGRAPH(B)
_____ 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH(A)(1)
_____ ON (DATE) PURSUANT TO PARAGRAPH(A)(1)
_____ 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH(A)(2)
_____ ON (DATE) PURSUANT TO PARAGRAPH(A)(2) OF RULE 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
_____ POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
<PAGE>
ONE GROUP MUTUAL FUNDS
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
--------------------- ------------------
<S> <C> <C>
1. Front and Back Cover Page Cover Page
2. Risk/Return Summary: Investments, Risks & Performance Fund Summaries: Investments, Risk
& Performance
3. Risk/Return Summary: Fee Table Fund Summaries: Investments, Risk
& Performance
4. Investment Objectives, Principal Investment Strategies Fund Summaries: Investments, Risk
&Performance, More About the Funds, Appendix A
5. Management's Discussion of Fund Performance Annual Report
6. Management, Organization, and Capital Structure Management of One Group Mutual Funds
7. Shareholder Information How To Do Business with One
Group Mutual Funds, Shareholder Information
8. Distribution Arrangements How To Do Business with
One Group Mutual Funds
9. Financial Highlights Financial Highlights
10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History The Trust
12. Description of Fund and its Investments and Risk The Trust; Investment Objectives
and Policies Additional Information - Description of
Shares
13. Management of the Fund Management of the Trust
14. Control Persons and Principal Additional Information -
Holders of Securities Miscellaneous
15. Investment Advisory and Other
Services Management of the Trust
16. Brokerage Allocation and Other Practices Management of the Trust -
Portfolio Transactions
</TABLE>
<PAGE>
<TABLE>
Form N-1A Part A Item Prospectus Caption
--------------------- ------------------
<S> <C> <C>
17. Capital Stock and Other Securities Valuation; Additional
Information Regarding the
Calculation of Per Share Net
Asset Value; Additional Purchase
and Redemption Information;
Additional Information
18. Purchase, Redemption and Pricing of The Trust, Valuation; Additional
Shares Information Regarding the
Calculation Per Share Net Asset
Value; Additional Purchase and
Redemption Information;
Management of the Trust
19. Taxation of the Fund Investment Objectives and Policies - Additional Tax
Information Concerning the Fund
20. Underwriters Management of the Trust - Distributor
21. Calculation of Performance Data Additional Information - Calculation of Performance Data
22. Financial Statements Incorporated by reference
</TABLE>
<PAGE>
Equity Funds
PROSPECTUS
November 1, 2000
[LOGO OF ONE GROUP MUTUAL FUNDS]
One Group(R) Small Cap Growth Fund
One Group(R) Small Cap Value Fund
One Group(R) Mid Cap Growth Fund
One Group(R) Mid Cap Value Fund
One Group(R) Diversified Mid Cap Fund
One Group(R) Large Cap Growth Fund
One Group(R) Large Cap Value Fund
One Group(R) Equity Income Fund
One Group(R) Diversified Equity Fund
One Group(R) Balanced Fund
One Group(R) Equity Index Fund
One Group(R) Market Expansion Equity Index Fund
One Group(R) Technology Fund
One Group(R) International Equity Index Fund
One Group(R) Diversified International Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SHARES OF ANY OF THE FUNDS AS AN INVESTMENT OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING
A CRIME.
<PAGE>
Table of
CONTENTS
<TABLE>
<CAPTION>
Fund Summaries: Investments, Risk & Performance
<S> <C>
One Group Small Cap Growth Fund 2
---
One Group Small Cap Value Fund 5
---
One Group Mid Cap Growth Fund 9
---
One Group Mid Cap Value Fund 12
---
One Group Diversified Mid Cap Fund 15
---
One Group Large Cap Growth Fund 19
---
One Group Large Cap Value Fund 22
---
One Group Equity Income Fund 25
---
One Group Diversified Equity Fund 29
---
One Group Balanced Fund 33
---
One Group Equity Index Fund 37
---
One Group Market Expansion Index Fund 40
---
One Group Technology Fund 44
---
One Group International Equity Index Fund 47
---
One Group Diversified International Fund 51
---
</TABLE>
<TABLE>
<CAPTION>
More About the Funds
<S> <C>
Principal Investment Strategies 56
---
Investment Risks 60
---
Investment Policies 62
---
Portfolio Quality 62
---
Temporary Defensive Positions 63
---
Portfolio Turnover 64
---
</TABLE>
<TABLE>
<CAPTION>
How to Do Business with One Group Mutual Funds
<S> <C>
Purchasing Fund Shares 65
---
Sales Charges 68
---
Sales Charge Reductions and Waivers 71
---
Exchanging Fund Shares 74
---
Redeeming Fund Shares 75
---
</TABLE>
<TABLE>
<CAPTION>
Shareholder Information
<S> <C>
Voting Rights 79
---
Dividend Policies 79
---
Tax Treatment of Shareholders 80
---
Shareholder Statements and Reports 81
---
</TABLE>
<TABLE>
<CAPTION>
Management of One Group Mutual Funds
<S> <C>
The Advisor 82
---
The Fund Managers 83
---
</TABLE>
<TABLE>
<S> <C>
Financial Highlights 84
----
Appendix A: Investment Practices 115
----
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Small Cap Growth Fund
What is the goal of the Small Cap Growth Fund?
The Fund seeks long-term capital growth primarily by investing in a portfolio
of equity securities of small-capitalization and emerging growth companies.
What are the Small Cap Growth Fund's main investment strategies?
The Fund invests mainly in common stock, debt securities, preferred stocks,
convertible securities, warrants and other equity securities of small-
capitalization companies. Generally, the Fund invests in small-cap companies
with market capitalizations ranging from $100 million to $3 billion. For more
information about the Small Cap Growth Fund's investment strategies, please
read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Small Cap Growth Fund?
The main risks of investing in the Small Cap Growth Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Small Cap Growth Fund will change every day in response to market
conditions. You may lose money if you invest in the Small Cap Growth Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. 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. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or small-cap stocks in
particular) may decline over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in the Fund decreases in
value.
Smaller Companies. The Fund's primary investment strategy is to invest in
smaller, growth companies. These investments may be riskier than investments in
larger, more established companies. Securities of smaller, growth companies
tend to be less liquid and more volatile than stocks of larger companies. In
addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their stock price.
This may cause unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
2
<PAGE>
------------------
Small Cap Growth Fund
How has the Small Cap Growth Fund performed?
By showing the variability of the Small Cap Growth Fund performance from year
to year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Small Cap Growth Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class A Shares
--------------------------------------------------------------------------------
[GRAPH]
1992 16.42%
1993 7.85%
1994 -7.73%
1995 22.06%
1996 15.57%
1997 28.42%
1998 -4.22%
1999 26.76%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 13.56%. The above-quoted performance data includes the
performance of the Paragon Gulf South Growth Fund for the period before its
consolidation with the One Group Small Cap Growth Fund on March 26, 1996.
--------------------------------------------------------------------------------
Best Quarter: 21.57% 3Q1997 Worst Quarter: -22.19% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEAR PERFORMANCE
SINCE
DATE OF CLASS 7/1/91
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 7/1/91 20.14% 15.83% 14.90%
------------------------------------------------------------------
Class B 9/12/94 20.22% 15.82% 14.71%
------------------------------------------------------------------
Class C 11/4/97 24.54% 16.11% 14.76%
------------------------------------------------------------------
Class I 3/26/96 26.57% 17.17% 15.69%
------------------------------------------------------------------
S&P SmallCap 600 Index/2/ 12.40% 17.04% 15.65%
------------------------------------------------------------------
S&P SmallCap 600 /BARRA
Growth Index/3/ 19.57% 16.21% *
</TABLE>
/1/The above-quoted performance data includes the performance of the Paragon
Gulf South Growth Fund for the period before its consolidation with the One
Group Small Cap Growth Fund on March 26, 1996. For periods prior to the
commencement of operations of Class I shares on March 26, 1996, Class I
performance is based on Class A share 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 shares 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.
/2/The S&P SmallCap 600 Index is an unmanaged index generally representative of
the performance of small companies in the U.S. stock market. The performance
of the index does not reflect the deduction of expenses associated with a
mutual fund, such as investment management fees. By contrast, the
performance of the Fund reflects the deduction of these expenses as well as
the deduction of sales charges on Class A shares and applicable contingent
deferred sales charges on Class B and Class C shares.
/3/The S&P SmallCap 600/BARRA Growth Index is an unmanaged index generally
representative of the performance of small- capitalization domestic stocks
with higher price-to-book ratios. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses as well as the deduction of sales
charges on Class A Shares and applicable contingent deferred sales charges
on Class B and Class C shares.
* Index did not exist.
------
3
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Small Cap Growth Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------
Other Expenses .31% .31% .31% .31%
------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.40% 2.05% 2.05% 1.05%
------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.10%) NONE NONE NONE
------------------------------------------------------------------
Net Expenses 1.30% 2.05% 2.05% 1.05%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.30% for Class A shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown.
There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 650 $ 708 $ 208 $ 308 $ 208 $ 107
------------------------------------------------------------------------------
3 Years 936 943 643 643 643 334
------------------------------------------------------------------------------
5 Years 1,242 1,303 1,103 1,103 1,103 579
------------------------------------------------------------------------------
10 Years 2,108 2,213 2,213 2,379 2,379 1,283
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Class A shares would be
$660.
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
4
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Small Cap Value Fund
What is the goal of the Small Cap Value Fund?
The Fund seeks long-term capital growth primarily by investing in equity
securities of small-capitalization companies.
What are the Small Cap Value Fund's main investment strategies?
The Fund invests mainly in equity securities of small domestic companies with
market capitalizations of $100 million to $3 billion. In reviewing investment
opportunities, Banc One Investment Advisors uses a value-oriented approach.
Companies are selected based upon such valuation characteristics as price-to-
earnings, price-to-book and price-to-cash flow ratios which are at a discount
to market averages. Banc One Investment Advisors also evaluates companies based
on market value, balance sheet strength, management depth and quality, market
and industry position, normalized return on capital and recent transactions
involving similar businesses. Stocks are sold based on price considerations or
when they are no longer expected to appreciate in value. For more information
about the Small Cap Value Fund's investment strategies, please read "More About
the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Small Cap Value Fund?
The main risks of investing in the Small Cap Value Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Small Cap Value Fund will change every day in response to market
conditions. You may lose money if you invest in the Small Cap Value Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. 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. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or small-cap stocks in
particular) may decline over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in the Fund decreases in
value.
Smaller Companies. The Fund's primary investment strategy is to invest in
smaller, newer companies. These investments may be riskier than investments in
larger, more established companies. Securities of smaller companies tend to be
less liquid and more volatile than stocks of larger companies. In addition,
small companies may be more vulnerable to economic, market and industry
changes. Because economic events have a greater impact on smaller companies,
there may be greater and more frequent changes in their stock price. This may
cause unexpected and frequent decreases in the value of your investment in the
Fund.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
5
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Small Cap Value Fund
How has the Small Cap Value Fund performed?
By showing the variability of the Small Cap Value Fund performance from year to
year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Small Cap Value Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 -7.34%
1991 58.42%
1992 17.00%
1993 12.29%
1994 -5.04%
1995 25.33%
1996 25.63%
1997 30.57%
1998 -4.09%
1999 -11.85%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 14.89%. The above quoted performance data includes the
performance of a common trust fund, the predecessor to the Pegasus Small Cap
Opportunity Fund, and the Pegasus Small Cap Opportunity Fund for the period
before the consolidation with One Group Small Cap Value Fund on March 22,
1999. The predecessor to the Pegasus Small Cap Opportunity Fund commenced
operations on January 27, 1995, subsequent to the transfer of assets from a
common trust fund with materially equivalent investment objectives,
policies, guidelines and restrictions as the Fund. The quoted performance of
the Fund includes the performance of the common trust fund for periods prior
to the commencement of operations of the predecessor to the Pegasus Small
Cap Opportunity Fund as adjusted to reflect the expenses associated with the
Fund. The common trust fund was not registered with the SEC and was not
subject to the investment restrictions, limitations and diversification
requirements imposed by law on registered mutual funds. If the common trust
fund had been registered, its return may have been lower.
--------------------------------------------------------------------------------
Best Quarter: 23.56% 1Q1991 Worst Quarter: -24.07% 3Q1998
--------------------------------------------------------------------------------
------
6
<PAGE>
------------------
Small Cap Value Fund
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 6/30/72
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 1/27/95 -16.51% 10.14% 11.28% 8.68%
----------------------------------------------------------------------
Class B 1/27/95 -16.91% 10.32% 11.16% 8.18%
----------------------------------------------------------------------
Class C 3/22/99 -13.57% 10.54% 11.14% 8.18%
----------------------------------------------------------------------
Class I 1/27/95 -11.85% 11.69% 12.27% 9.26%
----------------------------------------------------------------------
S&P SmallCap 600
Index/2/ 12.40% 17.04% 13.04% *
----------------------------------------------------------------------
S&P SmallCap
600/BARRA Value
Index/3/ 3.03% 17.08% * *
</TABLE>
/1/The above-quoted performance data includes the performance of a common trust
fund, the predecessor to the Pegasus Small Cap Opportunity Fund, and the
Pegasus Small Cap Opportunity Fund prior to the consolidation with the One
Group Small Cap Value Fund on March 22, 1999. The predecessor to the Pegasus
Small Cap Opportunity Fund commenced operations on January 27, 1995,
subsequent to the transfer of assets from a common trust fund with materially
equivalent investment objectives, policies, guidelines and restrictions as
the Fund. The quoted performance of the Fund includes the performance of the
common trust fund for periods prior to the commencement of operations of the
predecessor to the Pegasus Small Cap Opportunity Fund as adjusted to reflect
the expenses associated with the Fund. The common trust fund was not
registered with the SEC and was not subject to the investment restrictions,
limitations and diversification requirements imposed by law on registered
mutual funds. If the common trust fund had been registered, its return may
have been lower. 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.
/2/The S&P SmallCap 600 Index is an unmanaged index generally representative of
the performance of small companies in the U.S. stock market. The performance
of the index does not reflect the deduction of expenses associated with a
mutual fund, such as investment management fees. By contrast, the performance
of the Fund reflects the deduction of these expenses as well as the deduction
of sales charges on Class A shares and applicable contingent deferred sales
charges on Class B and Class C shares.
/3/The S&P SmallCap 600/BARRA Value Index is an unmanaged index generally
representative of the performance of small-capitalization domestic stocks
with lower price-to-book ratios. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Fund reflects
the deduction of these expenses as well as the deduction of sales charges on
Class A shares and applicable contingent deferred sales charges on Class B
shares.
* Index did not exist.
------
7
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Small Cap Value Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------
Other Expenses .32% .32% .32% .32%
------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.41% 2.06% 2.06% 1.06%
------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.19%) (.09%) (.09%) (.09%)
------------------------------------------------------------------
Net Expenses 1.22% 1.97% 1.97% .97%
------------------------------------------------------------------
</TABLE>
/1/ If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/ Except for purchases of $1 million or more. Please see "Sales Charges."
/3/ Expense information has been restated to reflect current fees.
/4/ Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.22% for Class A shares, 1.97% for Class B
shares, 1.97% for Class C shares and .97% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 643 $ 700 $ 200 $ 300 $ 200 $ 99
-----------------------------------------------------------------------------
3 Years $ 930 $ 937 $ 637 $ 637 $ 637 $ 328
-----------------------------------------------------------------------------
5 Years $1,238 $1,300 $1,100 $1,100 $1,100 $ 576
-----------------------------------------------------------------------------
10 Years $2,112 $2,216 $2,216 $2,383 $2,383 $1,286
-----------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $661
Class B (with
redemption) $709
Class B (no
redemption) $209
Class C (with
redemption) $309
Class C (no
redemption) $209
Class I $108
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
8
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Mid Cap Growth Fund
What is the goal of the Mid Cap Growth Fund?
The Fund seeks growth of capital and secondarily, current income by investing
primarily in equity securities.
What are the Mid Cap Growth Fund's main investment strategies?
The Fund invests in securities that have the potential to produce above-average
earnings growth per share over a one-to-three year period. The Fund typically
invests in mid-cap companies with market capitalizations of $500 million to $10
billion. Typically, the Fund acquires shares of established companies with a
history of above-average growth, as well as those companies expected to enter
periods of above-average growth. Not all the securities purchased by the Fund
will pay dividends. The Fund also invests in smaller companies in emerging
growth industries. For more information about the Mid Cap Growth Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are the main risks of investing in the Mid Cap Growth Fund?
The main risks of investing in the Mid Cap Growth Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Mid Cap Growth Fund will change every day in response to market
conditions. You may lose money if you invest in the Mid Cap Growth Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
mid-cap growth stock prices in particular) may decline over short or extended
periods of time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Smaller Companies. Investments in smaller, newer companies may be riskier than
investments in larger, more established companies. Securities of smaller
companies tend to be less liquid than securities of larger companies. In
addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their stock price.
This may cause unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
9
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Mid Cap Growth Fund
How has the Mid Cap Growth Fund performed?
By showing the variability of the Mid Cap Growth Fund's performance from year
to year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Mid Cap Growth Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 1.37%
1991 42.91%
1992 9.54%
1993 12.73%
1994 -3.72%
1995 27.87%
1996 20.29%
1997 30.08%
1998 37.34%
1999 29.11%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 27.07%.
--------------------------------------------------------------------------------
Best Quarter: 39.91% 4Q1998 Worst Quarter: -17.05% 3Q1990
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
SINCE
DATE OF CLASS 3/2/89
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 2/18/92 21.98% 27.12% 18.90% 19.34%
-------------------------------------------------------------------
Class B 1/14/94 22.78% 27.38% 18.63% 19.03%
-------------------------------------------------------------------
Class C 11/4/97 27.02% 27.76% 18.74% 19.14%
-------------------------------------------------------------------
Class I 3/2/89 29.11% 28.82% 19.84% 20.25%
-------------------------------------------------------------------
S&P MidCap 400
Index/2/ 14.72% 23.05% 17.32% 18.34%
-------------------------------------------------------------------
Russell Mid Cap
Growth Index/3/ 51.29% 28.02% 18.95% 19.87%
-------------------------------------------------------------------
S&P MidCap
400/BARRA
Growth Index/4/ 28.74% 27.78% * *
</TABLE>
/1/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.
/2/The S&P MidCap 400 Index is an unmanaged index generally representative of
the performance of the mid-size company segment of the U.S. Market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
applicable contingent deferred sales charges on Class B and Class C shares.
The benchmark index for the Mid Cap Growth Fund has changed from the Russell
Mid Cap Growth Index to the S&P MidCap 400 Index in order to better
represent the investment policies of the Fund for comparison purposes.
/3/The Russell Mid Cap Growth Index is an unmanaged index generally
representative of the mid-cap growth market. The performance of the index
does not reflect the deduction of expenses associated with a mutual fund,
such as investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses as well as the deduction of sales
charges on Class A shares and applicable contingent deferred sales charges
on Class B and Class C shares
/4/The S&P MidCap 400/BARRA Growth Index is an unmanaged index generally
representative of the performance of the highest price-to-book securities in
the S&P MidCap 400 Index. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management fees. By contrast, the performance of the Fund reflects the
deduction of these expenses as well as the deduction of sales charges on
Class A shares and applicable contingent deferred sales charges on Class B
and Class C shares.
* Index did not exist.
------
10
<PAGE>
------------------
Mid Cap Growth Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
-------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .73% .73% .73% .73%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------
Other Expenses .26% .26% .26% .26%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.34% 1.99% 1.99% .99%
-------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.10%) NONE NONE NONE
-------------------------------------------------------------------
Net Expenses 1.24% 1.99% 1.99% .99%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.24% for Class A shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them for the periods shown. The examples also assume that your investment has a
5% return each year and that the Fund's operating expenses remain the same.
Your actual costs may be higher or lower than those shown below. There is no
sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 645 $ 702 $ 202 $ 302 $ 202 $ 101
------------------------------------------------------------------------------
3 Years 918 924 624 624 624 315
------------------------------------------------------------------------------
5 Years 1,211 1,273 1,073 1,073 1,073 547
------------------------------------------------------------------------------
10 Years 2,045 2,149 2,149 2,317 2,317 1,213
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Class A shares would be
$654.
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
11
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Mid Cap Value Fund
What is the goal of the Mid Cap Value Fund?
The Fund seeks capital appreciation with the secondary goal of achieving
current income by investing primarily in equity securities.
What are the Mid Cap Value Fund's main investment strategies?
The Fund invests mainly in equity securities of companies with below-market
average price-to-earnings and price-to-book value ratios and with market
capitalizations of $500 million to $10 billion. In choosing investments, the
Fund considers the issuer's soundness and earnings prospects. In seeking to
achieve the objective of capital appreciation, Banc One Investment Advisors
looks at anticipated changes that may positively impact the value of the
company such as new products, deployment of new technologies, cost cutting
efforts and changes in management. As a secondary consideration, Banc One
Investment Advisors looks for companies that have the potential to increase
their dividends over time. If Banc One Investment Advisors thinks that a
company's fundamentals are declining or that a company's ability to pay
dividends has been impaired, it may eliminate the Fund's holding of the
company's stock. For more information about the Mid Cap Value Fund's investment
strategies, please read "More About the Funds" and "Principal Investment
Strategies."
What are the main risks of investing in the Mid Cap Value Fund?
The main risks of investing in the Mid Cap Value Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Mid Cap Value Fund and its yield will change every day in response to
interest rates and other market conditions. You may lose money if you invest in
the Mid Cap Value Fund. For additional information on risk, please read
"Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) which are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
mid-cap value stock prices in particular) may decline over short or extended
periods of time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Smaller Companies. The Fund's investments in smaller, newer companies may be
riskier than investments in larger, more established companies. Securities of
small companies tend to be less liquid than securities of larger companies. In
addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their stock price.
This may cause unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
12
<PAGE>
------------------
Mid Cap Value Fund
How has the Mid Cap Value Fund performed?
By showing the variability of the Mid Cap Value Fund's performance from year to
year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Mid Cap Value Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 -14.47%
1991 27.18%
1992 12.91%
1993 13.20%
1994 -0.71%
1995 26.03%
1996 16.51%
1997 35.10%
1998 5.67%
1999 -0.10%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 17.65%.
--------------------------------------------------------------------------------
Best Quarter: 15.97% 4Q1998 Worst Quarter: -17.70% 3Q1990
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 3/2/89
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 2/18/92 -5.50% 14.41% 10.34% 11.21%
--------------------------------------------------------------------
Class B 1/14/94 -5.54% 14.52% 10.11% 10.95%
--------------------------------------------------------------------
Class C 3/22/99 -1.74% 14.82% 10.13% 10.96%
--------------------------------------------------------------------
Class I 3/2/89 -0.10% 15.93% 11.20% 12.04%
--------------------------------------------------------------------
S&P MidCap 400
Index/2/ 14.72% 23.05% 17.32% 18.34%
--------------------------------------------------------------------
Russell Mid Cap
Value Index/3/ -0.11% 18.01% 13.81% 14.10%
--------------------------------------------------------------------
S&P MidCap
400/BARRA Value
Index/4/ 2.33% 18.15% * *
</TABLE>
/1/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.
/2/The S&P MidCap 400 Index is an unmanaged index generally representative of
the performance of the mid-size company segment of the U.S. market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
applicable contingent deferred sales charges on Class B and Class C shares.
The benchmark index for the Mid Cap Value Fund has changed from the Russell
Mid Cap Value Index to the S&P MidCap 400 Index in order to better represent
the investment policies of the Fund for comparison purposes.
/3/The Russell Mid Cap Value Index is an unmanaged index generally
representative of the performance of the mid-cap value market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
applicable contingent deferred sales charges on Class B and Class C shares.
/4/The S&P MidCap 400/BARRA Value Index is an unmanaged index generally
representative of the performance of the lowest price-to-book securities in
the S&P Mid Cap 400 Index. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management fees. By contrast, the performance of the Fund reflects the
deduction of these expenses as well as the deduction of sales charges on
Class A shares and applicable contingent deferred sales charges on Class B
and Class C shares.
* Index did not exist.
------
13
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Mid Cap Value Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
-----------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-----------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------
(expenses that are deducted
from Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
-----------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-----------------------------------------------------------------
Other Expenses .25% .25% .25% .25%
-----------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.34% 1.99% 1.99% .99%
-----------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.13%) (.03%) (.03%) (.03%)
-----------------------------------------------------------------
Net Expenses 1.21% 1.96% 1.96% .96%
-----------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.21% for Class A shares, 1.96% for Class
B shares, 1.96% for Class C shares and .96% for Class I shares for the
period beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 642 $ 699 $ 199 $ 299 $ 199 $ 98
------------------------------------------------------------------------------
3 Years 915 922 622 622 622 312
------------------------------------------------------------------------------
5 Years 1,209 1,270 1,070 1,070 1,070 544
------------------------------------------------------------------------------
10 Years 2,042 2,147 2,147 2,314 2,314 1,210
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for would be as follows:
<TABLE>
<S> <C>
Class A $654
Class B (with
redemption) $702
Class B (no
redemption) $202
Class C (with
redemption) $302
Class C (no
redemption) $202
Class I $101
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
14
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Diversified Mid Cap Fund
What is the goal of the Diversified Mid Cap Fund?
The Fund seeks long-term capital growth by investing primarily in equity
securities of companies with intermediate capitalizations.
What are the Diversified Mid Cap Fund's main investment strategies?
The Fund invests mainly in equity securities of mid-cap companies. Mid-cap
companies are defined as companies with market capitalizations of $500 million
to $10 billion. The Fund looks for companies of this size with strong
potential, stable market share and an ability to quickly respond to new
business opportunities. In choosing securities, the Fund invests in mid-cap and
other companies across different capitalization levels targeting both value-
and growth-oriented companies. Because the Fund seeks return over the long
term, Banc One Investment Advisors will not attempt to time the market. For
more information about the Diversified Mid Cap Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Diversified Mid Cap Fund?
The main risks of investing in the Diversified Mid Cap Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Diversified Mid Cap Fund will change every day in
response to market conditions. You may lose money if you invest in the
Diversified Mid Cap Fund. For additional information on risk, please read
"Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities also
are subject to "stock market risk" meaning that stock prices in general (or
mid-cap stock prices in particular) may decline over short or extended periods
of time. When the value of the Fund's securities goes down, your investment in
the Fund decreases in value.
Smaller Companies. Investments in smaller, newer companies may be riskier than
investments in larger, more-established companies. Securities of smaller
companies tend to be less liquid than securities of larger companies. In
addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their stock price.
This may cause unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
15
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Diversified Mid Cap Fund
How has the Diversified Mid Cap Fund performed?
By showing the variability of the Diversified Mid Cap Fund performance from
year to year, the chart and the table below help show the risk of investing in
the Fund. Please remember that the past performance of the Diversified Mid Cap
Fund is not necessarily an indication of how the Fund will perform in the
future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 -8.58%
1991 35.20%
1992 24.57%
1993 24.04%
1994 -3.26%
1995 19.74%
1996 25.05%
1997 27.89%
1998 4.62%
1999 10.58%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 25.37%. The above-quoted performance data includes the
performance of a common trust fund, the predecessor to the Pegasus Mid Cap
Opportunity Fund, and the Pegasus Mid Cap Opportunity Fund for the period
prior to the consolidation with the One Group Diversified Mid Cap Fund on
March 22, 1999. The predecessor to the Pegasus Mid Cap Opportunity Fund
commenced operations on June 1, 1991, subsequent to the transfer of assets
from a common trust fund with materially equivalent investment objectives,
policies, guidelines and restrictions as the Fund. The quoted performance of
the Fund includes the performance of the common trust fund for periods prior
to the commencement of operations of the predecessor to the Pegasus Mid Cap
Opportunity Fund as adjusted to reflect the expenses associated with the
Fund. The common trust fund was not registered with the SEC and was not
subject to the investment restrictions, limitations and diversification
requirements imposed by law on registered mutual funds. If the common trust
fund had been registered, its return may have been lower.
--------------------------------------------------------------------------------
Best Quarter: 22.78% 4Q1998 Worst Quarter: -20.69% 3Q1998
--------------------------------------------------------------------------------
------
16
<PAGE>
------------------
Diversified Mid Cap Fund
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 12/31/83
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 5/1/92 4.58% 15.79% 14.32% 13.69%
---------------------------------------------------------------------
Class B 9/23/96 5.64% 16.03% 14.06% 13.24%
---------------------------------------------------------------------
Class C 3/22/99 8.82% 16.24% 14.06% 13.25%
---------------------------------------------------------------------
Class I 6/1/91 10.58% 17.25% 15.14% 14.34%
---------------------------------------------------------------------
S&P MidCap 400
Index/2/ 14.72% 23.05% 17.32% 17.18%
---------------------------------------------------------------------
Russell 2500
Index/3/ 24.15% 19.43% 15.05% 13.92%
</TABLE>
/1/The above-quoted performance data includes the performance of a common trust
fund, the predecessor to the Pegasus Mid Cap Opportunity Fund, and the
Pegasus Mid Cap Opportunity Fund for the period prior to the consolidation
with the One Group Diversified Mid Cap Fund on March 22, 1999. The
predecessor to the Pegasus Mid Cap Opportunity Fund commenced operations on
June 1, 1991, subsequent to the transfer of assets from a common trust fund
with materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for periods prior to the commencement
of operations of the predecessor to the Pegasus Mid Cap Opportunity Fund as
adjusted to reflect the expenses associated with the Fund. The common trust
fund was not registered with the SEC and was not subject to the investment
restrictions, limitations and diversification requirements imposed by law on
registered mutual funds. If the common trust fund had been registered, its
return may have been lower. 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, 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.
/2/The S&P MidCap 400 Index is an unmanaged index generally representative of
the mid-size company segment of the U.S. market. The performance of the
index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management fees. By contrast, the performance of
the Fund reflects these expenses as well as the deduction of sales charges
on Class A shares and applicable contingent deferred sales charges on Class
B and Class C shares. The benchmark index for the Diversified Mid Cap Fund
has been changed from the Russell 2500 Index to the S&P MidCap 400 Index in
order to better represent the investment policies of the Fund for comparison
purposes.
/3/The Russell 2500 Index is an unmanaged index generally representative of the
performance of the 2500 smallest companies in the Russell 3000 index which
represents approximately 16% of the total market capitalization of the
Russell 3000 Index. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management fees. By contrast, the performance of the Fund reflects the
deduction of these expenses as well as the deduction of sales charges on
Class A shares and applicable contingent deferred sales charges on Class B
and Class C shares.
------
17
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Diversified Mid Cap Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
-----------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-----------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------
(expenses that are deducted
from Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
-----------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-----------------------------------------------------------------
Other Expenses .26% .26% .26% .26%
-----------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.35% 2.00% 2.00% 1.00%
-----------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.11%) (.01%) (.01%) (.01%)
-----------------------------------------------------------------
Net Expenses 1.24% 1.99% 1.99% .99%
-----------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.24% for Class A shares, 1.99% for Class B
shares, 1.99% for Class C shares and .99% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 645 $ 702 $ 202 $ 302 $ 202 $ 101
-----------------------------------------------------------------------------
3 Years 920 926 626 626 626 317
-----------------------------------------------------------------------------
5 Years 1,216 1,277 1,077 1,077 1,077 551
-----------------------------------------------------------------------------
10 Years 2,055 2,159 2,159 2,326 2,326 1,224
-----------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $655
Class B (with
redemption) $703
Class B (no
redemption) $203
Class C (with
redemption) $303
Class C (no
redemption) $203
Class I $102
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
18
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Large Cap Growth Fund
What is the goal of the Large Cap Growth Fund?
The Fund seeks long-term capital appreciation and growth of income by investing
primarily in equity securities.
What are the Large Cap Growth Fund's main investment strategies?
The Fund invests mainly in equity securities of large, well-established
companies. The weighted average capitalization of companies in which the Fund
invests normally will exceed the median market capitalization of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500 Index")./1/ For more
information about the Large Cap Growth Fund's investment strategies, please
read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Large Cap Growth Fund?
The main risks of investing in the Large Cap Growth Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Large Cap Growth Fund will change every day in response to market
conditions. You may lose money if you invest in the Large Cap Growth Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
large-cap growth stock prices in particular) may decline over short or extended
periods of time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
/1/"S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with the Fund.
------
19
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Large Cap Growth Fund
How has the Large Cap Growth Fund performed?
By showing the variability of the Large Cap Growth Fund's performance from year
to year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Large Cap Growth Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1993 13.95%
1994 5.56%
1995 27.04%
1996 17.25%
1997 32.84%
1998 44.71%
1999 27.81%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was -5.31%
--------------------------------------------------------------------------------
Best Quarter: 24.51% 4Q1998 Worst Quarter: -6.66% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF CLASS SINCE 2/28/92
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 2/22/94 20.82% 27.79% 20.66%
------------------------------------------------------------------
Class B 1/14/94 21.59% 28.21% 20.62%
------------------------------------------------------------------
Class C 11/4/97 25.59% 28.35% 20.61%
------------------------------------------------------------------
Class I 2/28/92 27.81% 29.62% 21.78%
------------------------------------------------------------------
Russell 1000 Growth
Index/2/ 33.16% 32.42% 21.58%
------------------------------------------------------------------
S&P 500/BARRA Growth
Index/3/ 28.25% 33.64% 22.29%
</TABLE>
/1/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 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.
/2/The Russell 1000 Growth Index is an unmanaged index representing the
performance of those Russell 1000 companies with higher price-to-book ratios
and higher forecasted growth values. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses as well as the deduction of sales
charges on Class A shares and applicable contingent deferred sales charges
on Class B and Class C shares. The benchmark index for the Large Cap Growth
Fund has been changed from the S&P 500/BARRA Growth Index to the Russell
1000 Growth Index in order to better represent the investment policies of
the Fund for comparison purposes.
/3/The S&P 500/BARRA Growth Index is an unmanaged index representing the
performance of the highest price-to-book securities in the S&P 500 Index.
The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
applicable contingent deferred sales charges on Class B and Class C shares.
------
20
<PAGE>
------------------
Large Cap Growth Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
----------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
----------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
----------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
----------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
----------------------------------------------------------------
(expenses that are deducted
from Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .69% .69% .69% .69%
----------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
----------------------------------------------------------------
Other Expenses .24% .24% .24% .24%
----------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.28% 1.93% 1.93% .93%
----------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.10%) NONE NONE NONE
----------------------------------------------------------------
Net Expenses 1.18% 1.93% 1.93% .93%
----------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.18% for Class A shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 639 $ 696 $ 196 $ 296 $ 196 $ 95
------------------------------------------------------------------------------
3 Years 900 906 606 606 606 296
------------------------------------------------------------------------------
5 Years 1,181 1,242 1,042 1,042 1,042 515
------------------------------------------------------------------------------
10 Years 1,981 2,085 2,085 2,254 2,254 1,143
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Class A shares would be
$649.
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
21
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Large Cap Value Fund
What is the goal of the Large Cap Value Fund?
The Fund seeks capital appreciation with the incidental goal of achieving
current income by investing primarily in equity securities.
What are the Large Cap Value Fund's main investment strategies?
The Fund invests mainly in equity securities of large-capitalization companies
that are believed to be selling below their long-term investment values. The
weighted average capitalization of companies in which the Fund invests normally
will exceed the market median capitalization of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index")./1/ The Fund also may invest in
the stock of companies which have "breakup values" well in excess of current
market values or which have uniquely undervalued corporate assets. For more
information about the Large Cap Value Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Large Cap Value Fund?
The main risks of investing in the Large Cap Value Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Large Cap Value Fund will change every day in response to market
conditions. You may lose money if you invest in the Large Cap Value Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
large-cap value stock prices in particular) may decline over short or extended
periods of time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
/1/"S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with the Fund.
------
22
<PAGE>
------------------
Large Cap Value Fund
How has the Large Cap Value Fund performed?
By showing the variability of the Large Cap Value Fund's performance from year
to year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Large Cap Value Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1992 9.19%
1993 4.65%
1994 0.78%
1995 24.88%
1996 19.94%
1997 26.32%
1998 13.89%
1999 11.89%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.21%.
--------------------------------------------------------------------------------
Best Quarter: 15.50% 4Q1998 Worst Quarter: -10.86% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF SINCE
CLASS 3/1/91
<S> <C> <C> <C> <C>
Class A 2/18/92 5.74% 17.71% 12.96%
------------------------------------------------------------------
Class B 1/14/94 5.86% 17.69% 12.96%
------------------------------------------------------------------
Class C 3/22/99 9.84% 17.93% 12.97%
------------------------------------------------------------------
Class I 3/1/91 11.89% 19.25% 13.85%
------------------------------------------------------------------
S&P 500/BARRA Value Index/2/ 12.72% 22.94% 17.11%
</TABLE>
/1/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.
/2/The S&P 500/BARRA Value Index is an unmanaged index representing the
performance of the lowest price-to-book securities in the S&P 500 Index. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on Class B and Class C shares.
------
23
<PAGE>
ONE GROUP(R)
------------------
Fund Summary
Large Cap Value Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
SHARES OF THE FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
-------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------
Other Expenses .23% .23% .23% .23%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.32% 1.97% 1.97% .97%
-------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.10%) NONE NONE NONE
-------------------------------------------------------------------
Net Expenses 1.22% 1.97% 1.97% .97%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.22% for Class A shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 643 $ 700 $ 200 $ 300 $ 200 $ 99
------------------------------------------------------------------------------
3 Years 912 918 618 618 618 309
------------------------------------------------------------------------------
5 Years 1,201 1,262 1,062 1,062 1,062 536
------------------------------------------------------------------------------
10 Years 2,023 2,128 2,128 2,296 2,296 1,190
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Class A shares would be
$652.
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
24
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Equity Income Fund
What is the goal of the Equity Income Fund?
The Fund seeks current income through regular payment of dividends with the
secondary goal of achieving capital appreciation by investing primarily in
equity securities.
What are the Equity Income Fund's main investment strategies?
The Fund attempts to keep its dividend yield above the Standard & Poor's 500
Composite Price Index ("S&P 500 Index")/1/ by investing in common stock of
corporations which regularly pay dividends, as well as stocks with favorable
long-term fundamental characteristics. As part of its main investment strategy,
the Fund may invest in convertible bonds and REITs. Because yield is the main
consideration in selecting securities, the Fund may purchase stocks of
companies that are out of favor in the financial community. For more
information about the Equity Income Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
What is a REIT?
A REIT or a real estate investment trust is a pooled investment vehicle which
invests in income-producing real estate or real estate loans. REITs are
classified as equity REITs, mortgage REITs, or a combination of equity and
mortgage REITs. Equity REITs mainly invest directly in real estate and obtain
income from collecting rent. Mortgage REITs invest in mortgages and obtain
income from collecting interest payments on the mortgages. REITs are not taxed
on income distributed to shareholders if they comply with several requirements
of the Internal Revenue Code.
What are the main risks of investing in the Equity Income Fund?
The main risks of investing in the Equity Income Fund and the circumstances
likely to adversely affect your investment are described below. The share price
and yield of the Equity Income Fund will change every day in response to market
conditions. You may lose money if you invest in the Equity Income Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general may
decline over short or extended periods of time. When the value of the Fund's
securities goes down, your investment in the Fund decreases in value.
/1/"S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with the Fund.
------
25
<PAGE>
ONE GROUP(R)
------------------
Fund Summary
Equity Income Fund
Yield. Because of the Fund's emphasis on yield, the Fund may purchase stocks of
companies that are out of favor with the financial community. These stocks may
have less of a chance for capital appreciation than securities of companies
that are considered to be more attractive investments. In addition, there can
be no assurance that a company will continue to pay dividends.
Real Estate Securities. The Fund's investments in real estate securities are
subject to the same risks as direct investments in real estate. Real estate
values rise and fall in response to many factors, including local, regional and
national economic conditions, the demand for rental property, and interest
rates. When economic growth is slowing, demand for property decreases and
prices may fall. Rising interest rates, which drive up mortgage and financing
costs, can inhibit construction, purchases and sales of property. Property
values could decrease because of overbuilding, extended vacancies, increase in
property taxes and operating expenses, zoning laws, environmental regulations,
clean-up of and liability for environmental hazards, uninsured casualty or
condemnation losses, or a general decline in neighborhood values. The Fund's
investments and your investment may decline in response to declines in property
values or other adverse changes to the real estate market.
REIT Risk. In addition to the risks facing real estate securities, the Fund's
investments in REITs involve unique risks. REITs may have limited financial
resources, may trade less frequently and in limited volume and may be more
volatile than other securities.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
26
<PAGE>
------------------
Equity Income Fund
How has the Equity Income Fund performed?
By showing the variability of the Equity Income Fund's performance from year to
year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Equity Income Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 -3.14%
1991 23.66%
1992 6.81%
1993 11.40%
1994 0.98%
1995 34.94%
1996 16.71%
1997 32.52%
1998 17.18%
1999 0.29%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 3.50%.
--------------------------------------------------------------------------------
Best Quarter: 16.77% 2Q1997 Worst Quarter: -9.67% 3Q1990
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total return is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns for more than one year tend to smooth out variations in the Fund's
total returns and are not the same as actual year-by-year results. The average
annual returns shown on the Average Annual Total Return Table do include
applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF SINCE
CLASS 7/2/87
<S> <C> <C> <C> <C> <C>
Class A 2/18/92 -5.15% 18.05% 12.52% 11.77%
---------------------------------------------------------------
Class B 1/14/94 -5.42% 18.28% 12.36% 11.51%
---------------------------------------------------------------
Class C 11/4/97 -1.59% 18.54% 12.39% 11.53%
---------------------------------------------------------------
Class I 7/2/87 0.29% 19.65% 13.44% 12.59%
---------------------------------------------------------------
S&P 500 Index/2/ 21.04% 28.56% 18.21% 16.17%
</TABLE>
/1/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.
/2/The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market. The performance of
the index does not reflect the deduction of expenses associated with a
mutual fund, such as investment management fees. By contrast, the
performance of the Funds reflects the deduction of these expenses as well as
the deduction of sales charges on Class A shares and applicable contingent
deferred sales charges on Class B and Class C shares.
------
27
<PAGE>
ONE GROUP(R)
------------------
Fund Summary
Equity Income Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
--------------------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
--------------------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------------------
(expenses that are deducted
from Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
--------------------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
--------------------------------------------------------------------------------
Other Expenses .24% .24% .24% .24%
--------------------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.33% 1.98% 1.98% .98%
--------------------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.10%) NONE NONE NONE
--------------------------------------------------------------------------------
Net Expenses 1.23% 1.98% 1.98% .98%
--------------------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.23% for Class A shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 644 $ 701 $ 201 $ 301 $ 201 $ 100
------------------------------------------------------------------------------
3 Years 915 921 621 621 621 312
------------------------------------------------------------------------------
5 Years 1,206 1,268 1,068 1,068 1,068 542
------------------------------------------------------------------------------
10 Years 2,034 2,139 2,139 2,306 2,306 1,201
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Class A shares would be
$653.
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
28
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Diversified Equity Fund
What is the goal of the Diversified Equity Fund?
The Fund seeks long-term capital growth and growth of income with a secondary
objective of providing a moderate level of current income.
What are the Diversified Equity Fund's main investment strategies?
The Fund invests mainly in common stocks of companies that have good
fundamentals and reasonable valuations with the potential for continued
earnings growth over time. The Fund uses a multi-style approach, meaning that
it may invest across different capitalization levels targeting both value- and
growth-oriented companies. Because the Fund seeks return over the long term,
Banc One Investment Advisors will not attempt to time the market. For more
information about the Diversified Equity Fund's investment strategies, please
read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Diversified Equity Fund?
The main risks of investing in the Diversified Equity Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Diversified Equity Fund will change every day in
response to market conditions. You may lose money if you invest in the
Diversified Equity Fund. For additional information on risk, please read
"Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general may
decline over short or extended periods of time. When the value of the Fund's
securities goes down, your investment in the Fund decreases in value.
Smaller Companies. Investments in smaller, newer companies may be riskier than
investments in larger, more-established companies. Securities of smaller
companies tend to be less liquid than securities of larger companies. In
addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their stock price.
This may cause unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
29
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Diversified Equity Fund
How has the Diversified Equity Fund performed?
By showing the variability of the Diversified Equity Fund performance from year
to year, the charts and table below help show the risk of investing in the
Fund. Please remember that the past performance of the Diversified Equity Fund
is not necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Total Return (per calendar year)/1/ -- Class A Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 1.40%
1991 38.13%
1992 13.64%
1993 7.33%
1994 -3.64%
1995 27.54%
1996 21.42%
1997 34.53%
1998 27.96%
1999 13.51%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 2.76%. The above quoted performance data includes the
performance of the Paragon Value Equity Income Fund for the period before
its consolidation with the One Group Diversified Equity Fund on March 26,
1996.
--------------------------------------------------------------------------------
Best Quarter: 21.43% 4Q1998 Worst Quarter: -11.31% 3Q1990
--------------------------------------------------------------------------------
------
30
<PAGE>
------------------
Diversified Equity Fund
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF SINCE 12/29/89
CLASS
<S> <C> <C> <C> <C> <C>
Class A 12/29/89 7.58% 23.45% 16.78% 16.87%
------------------------------------------------------------------
Class B 9/9/94 7.69% 23.64% 16.58% 16.65%
------------------------------------------------------------------
Class C 11/4/97 11.76% 23.88% 16.62% 16.67%
------------------------------------------------------------------
Class I 3/26/96 13.78% 25.05% 17.54% 17.62%
------------------------------------------------------------------
S&P 500 Index/2/ 21.04% 28.56% 18.21% 18.21%
------------------------------------------------------------------
S&P
SuperComposite
1500 Index/3/ 20.26% 27.55% * *
</TABLE>
/1/The above quoted performance data includes the performance of the Paragon
Value Equity Income Fund for the period before its consolidation with the
One Group Diversified Equity Fund on March 26, 1996. 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.
/2/The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market. The performance of
the index does not reflect the deduction of expenses associated with a
mutual fund, such as investment management fees. By contrast, the
performance of the Fund reflects the deduction of these expenses as well as
the deduction of sales charges on Class A shares and applicable contingent
deferred sales charges on Class B and Class C shares.
/3/The S&P SuperComposite 1500 Index is an unmanaged index consisting of those
stocks making up the S&P 500, S&P MidCap 400 and S&P SmallCap 600 indices
representing approximately 87% of the total U.S. equity market
capitalization. The performance of the index does not reflect the deduction
of expenses associated with a mutual fund, such as investment management
fees. By contrast, the performance of the Fund reflects the deduction of
these expenses as well as the deduction of sales charges on Class A shares
and applicable contingent deferred sales charges on Class B and Class C
shares.
* Index did not exist
------
31
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Diversified Equity Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
-----------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-----------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------
(expenses that are deducted
from Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .72% .72% .72% .72%
-----------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-----------------------------------------------------------------
Other Expenses .23% .23% .23% .23%
-----------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.30% 1.95% 1.95% .95%
-----------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.10%) NONE NONE NONE
-----------------------------------------------------------------
Net Expenses 1.20% 1.95% 1.95% .95%
-----------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.20% for Class A shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 641 $ 698 $ 198 $ 298 $ 198 $ 97
------------------------------------------------------------------------------
3 Years 906 912 612 612 612 303
------------------------------------------------------------------------------
5 Years 1,191 1,252 1,052 1,052 1,052 525
------------------------------------------------------------------------------
10 Years 2,002 2,107 2,107 2,275 2,275 1,166
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Class A would be $650.
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
32
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Balanced Fund
What is the goal of the Balanced Fund?
The Fund seeks to provide total return while preserving capital.
What are the Balanced Fund's main investment strategies?
The Fund invests in a combination of stocks (including both growth and value
securities), fixed income securities and money market instruments. Banc One
Investment Advisors will regularly review the Fund's asset allocations and vary
them over time to favor investments that it believes will provide the most
favorable total return. In making asset allocation decisions, Banc One
Investment Advisors will evaluate projections of risk, market and economic
conditions, volatility, yields and expected returns. Because the Fund seeks
total return over the long term, Banc One Investment Advisors will not attempt
to time the market. Rather, asset allocation shifts will be made gradually over
time. For more information about the Balanced Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Balanced Fund?
The main risks of investing in the Balanced Fund and the circumstances likely
to adversely affect your investment are described below. The share price of the
Balanced Fund and its yield will change every day in response to interest rates
and other market conditions. You may lose money if you invest in the Balanced
Fund. For additional information on risk, please read "Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) which are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general may
decline over short or extended periods of time. When the value of the Fund's
securities goes down, your investment in the Fund decreases in value.
Interest Rate Risk. In connection with the Fund's fixed income strategy, the
Fund invests in bonds and other debt securities. These securities will increase
or decrease in value based on changes in interest rates. If rates increase, the
value of the Fund's investments generally declines. On the other hand, if rates
fall, the value of the investments generally increases. Your investment will
decline in value if the value of the Fund's investments decreases. Securities
with greater interest rate sensitivity and longer maturities tend to produce
higher yields, but are subject to greater fluctuations in value. Usually,
changes in the value of fixed income securities will not affect cash income
generated, but may affect the value of your investment.
------
33
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Balanced Fund
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Derivative Risk. The Fund invests in securities that may be considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and riskier in
terms of both liquidity and value than traditional investments.
Prepayment and Call Risk. As part of its fixed income investment strategy, the
Fund invests in mortgage-backed and asset-backed securities. The issuers of
these securities and other callable securities may be able to repay principal
in advance, especially when interest rates fall. Changes in prepayment rates
can affect the return on investment and yield of mortgage- and asset-backed
securities. When mortgages and other obligations are prepaid and when
securities are called, the Fund may have to reinvest in securities with a lower
yield. The Fund also may fail to recover additional amounts (i.e., premiums)
paid for securities with higher interest rates, resulting in an unexpected
capital loss.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
How has the Balanced Fund performed?
By showing the variability of the Balanced Fund's performance from year to
year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Balanced Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class A Shares
--------------------------------------------------------------------------------
[GRAPH]
1994 -3.23%
1995 24.72%
1996 12.39%
1997 22.26%
1998 19.46%
1999 7.38%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.12%.
--------------------------------------------------------------------------------
Best Quarter: 12.36% 4Q1998 Worst Quarter: -4.22% 3Q1998
--------------------------------------------------------------------------------
------
34
<PAGE>
------------------
Balanced Fund
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/,/2/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 PERFORMANCE
DATE OF YEARS SINCE
CLASS 4/2/93
<S> <C> <C> <C> <C>
Class A 4/2/93 1.73% 15.81% 11.76%
-------------------------------------------------------------------
Class B 1/14/94 1.57% 16.01% 11.84%
-------------------------------------------------------------------
Class C 5/30/00 5.57% 16.25% 11.83%
-------------------------------------------------------------------
Class I 4/2/93 7.65% 17.39% 12.94%
-------------------------------------------------------------------
S&P 500 Index/3/ 21.04% 28.56% 22.39%
-------------------------------------------------------------------
Lehman Brothers Intermediate
Government/Credit Bond
Index/4/ 0.39% 7.10% 5.56%
-------------------------------------------------------------------
Lipper Balanced Funds Index/5/ 8.98% 16.33% 12.92%
</TABLE>
/1/The table above compares the average annual return of the Fund, which holds
a mix of stocks, bonds and other debt securities to an unmanaged, broad-based
index (i.e., the S&P 500 Index) as well as supplemental indices for the
period indicated.
/2/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 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.
/3/The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market. The performance of
the index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management fees. By contrast, the performance of the
Fund reflects the deduction of these expenses as well as the deduction of
sales charges on Class A shares and applicable contingent deferred sales
charges on Class B and Class C shares.
/4/The Lehman Brothers Intermediate Government/Credit Bond Index is an
unmanaged market-weighted index which encompasses U.S. Treasury and agency
securities and investment grade corporate and international (dollar-
denominated) bonds, with maturities between five and 10 years. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
applicable contingent deferred sales charges on Class B and Class C shares.
/5/The Lipper Balanced Funds Index is an index of funds whose primary objective
is to conserve principal by maintaining at all times a balanced portfolio of
both stocks and bonds. Unlike the indices shown above, the performance of the
index reflects the deduction of expenses associated with mutual funds, such
investment management fees. These expenses are not identical to the expenses
charged by the Fund.
------
35
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Balanced Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
-----------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-----------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------
(expenses that are deducted
from Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .65% .65% .65% .65%
-----------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-----------------------------------------------------------------
Other Expenses .36% .36% .36% .36%
-----------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.36% 2.01% 2.01% 1.01%
-----------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.22%) (.12%) (.12%) (.12%)
-----------------------------------------------------------------
Net Expenses 1.14% 1.89% 1.89% .89%
-----------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.14% for Class A shares, 1.89% for Class B
shares, 1.89% for Class C shares and .89% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 635 $ 692 $ 192 $ 292 $ 192 $ 91
------------------------------------------------------------------------------
3 Years 913 919 619 619 619 310
------------------------------------------------------------------------------
5 Years 1,211 1,272 1,072 1,072 1,072 546
------------------------------------------------------------------------------
10 Years 2,056 2,161 2,161 2,328 2,328 1,225
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $656
Class B (with
redemption) $704
Class B (no
redemption) $204
Class C (with
redemption) $304
Class C (no
redemption) $204
Class I $103
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
36
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Equity Index Fund
What is the goal of the Equity Index Fund?
The Fund seeks investment results that correspond to the aggregate price and
dividend performance of securities in the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index")./1/
What are the Equity Index Fund's main investment strategies?
The Fund invests mainly in stocks included in the S&P 500 Index. The Fund also
may invest in stock index futures and other equity derivatives. Banc One
Investment Advisors attempts to track the performance of the S&P 500 Index to
achieve a correlation of 0.95 between the performance of the Fund and that of
the S&P 500 Index without taking into account the Fund's expenses. For more
information about the Equity Index Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Equity Index Fund?
The main risks of investing in the Equity Index Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Equity Index Fund will change every day in response to market
conditions. You may lose money if you invest in the Equity Index Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Index Investing. The Fund attempts to track the performance of the S&P 500
Index. Therefore, securities may be purchased, retained and sold by the Fund at
times when an actively managed fund would not do so. If the value of securities
that are heavily weighted in the index changes, you can expect a greater risk
of loss than would be the case if the Fund were not fully invested in such
securities.
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
S&P 500 Index stock prices in particular) may decline over short or extended
periods of time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
/1/"S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with the Fund.
------
37
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Equity Index Fund
How has the Equity Index Fund performed?
By showing the variability of the Equity Index Fund's performance from year to
year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Equity Index Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1992 6.85%
1993 9.37%
1994 0.75%
1995 37.07%
1996 22.59%
1997 33.00%
1998 28.24%
1999 20.54%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was -1.56%.
--------------------------------------------------------------------------------
Best Quarter: 21.26% 4Q1998 Worst Quarter: -9.96% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
SINCE
DATE OF CLASS 7/2/91
<S> <C> <C> <C> <C>
Class A 2/18/92 13.93% 26.43% 18.67%
----------------------------------------------------------
Class B 1/14/94 14.36% 26.68% 18.59%
----------------------------------------------------------
Class C 11/4/97 18.44% 26.91% 18.64%
----------------------------------------------------------
Class I 7/2/91 20.54% 28.14% 19.72%
----------------------------------------------------------
S&P 500 Index/2/ 21.04% 28.56% 19.87%
</TABLE>
/1/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.
/2/The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market. The performance of
the index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management fees. By contrast, the performance of the
Fund reflects the deduction of these expenses as well as the deduction of
sales charges on Class A shares and applicable contingent deferred sales
charges on Class B and Class C shares.
------
38
<PAGE>
------------------
Equity Index Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .30% .30% .30% .30%
-----------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-----------------------------------------------------------------
Other Expenses .27% .27% .27% .27%
-----------------------------------------------------------------
Total Annual Fund Operating
Expenses .92% 1.57% 1.57% .57%
-----------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.32%) (.22%) (.22%) (.22%)
-----------------------------------------------------------------
Net Expenses .60% 1.35% 1.35% .35%
-----------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .60% for Class A shares, 1.35% for Class B
shares, 1.35% for Class C shares and .35% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 583 $ 637 $ 137 $ 237 $ 137 $ 36
------------------------------------------------------------------------------
3 Years 773 774 474 474 474 160
------------------------------------------------------------------------------
5 Years 978 1,034 834 834 834 296
------------------------------------------------------------------------------
10 Years 1,569 1,674 1,674 1,849 1,849 693
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $ 614
Class B (with
redemption) $ 660
Class B (no
redemption) $ 160
Class C (with
redemption) $ 260
Class C (no
redemption) $ 160
Class I $ 58
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
39
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Market Expansion Index Fund
What is the goal of the Market Expansion Index Fund?
The Fund seeks to provide a return which substantially duplicates the price and
yield performance of domestically traded common stocks in the small- and mid-
capitalization equity markets, as represented by a market capitalization
weighted combination of the Standard & Poor's Small Cap 600 Index ("S&P Small
Cap 600") and the Standard & Poor's Mid Cap 400 Index ("S&P Mid Cap 400")./1/
What are the Market Expansion Index Fund's main investment strategies?
The Fund invests in a representative sampling of stocks of medium-sized and
small U.S. companies that are included in the S&P Small Cap 600 and S&P Mid Cap
400 and which trade on the New York and American Stock Exchanges as well as
over-the-counter stocks that are part of the National Market System. (Not all
of the stocks in the indices are included in the Fund.) The Fund uses a
sampling methodology to determine which stocks to purchase or sell in order to
closely replicate the performance of the combined indices. The Fund seeks to
achieve a correlation between its portfolio and that of the indices of at least
0.95, without taking into account the Fund's expenses. For more information
about the Market Expansion Index Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Market Expansion Index Fund?
The main risks of investing in the Market Expansion Index Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Market Expansion Index Fund and its yield will change
every day in response to economic and other market conditions. You may lose
money if you invest in the Market Expansion Index Fund. For additional
information on risk, please read "Investment Risks."
MAIN RISKS
Index Investing. The Fund attempts to track the performance of the S&P Small
Cap 600 Index and the S&P Mid Cap 400 Index. Therefore, securities may be
purchased, retained and sold by the Fund at times when an actively managed fund
would not do so. If the value of securities that are heavily weighted in the
index changes, you can expect a greater risk of loss than would be the case if
the Fund were not fully invested in such securities.
Market Risk. The Fund invests in equity securities (such as stocks) which are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
small-cap and mid-cap stock prices in particular) may decline over short or
extended periods of time. When the value of the Fund's securities goes down,
your investment in the Fund decreases in value.
/1/ "S&P Small Cap 600" and "S&P Mid Cap 400" are registered service marks of
Standard & Poor's Corporation, which does not sponsor and is in no way
affiliated with the Fund.
------
40
<PAGE>
------------------
Market Expansion Index Fund
Smaller Companies. The Fund's investments in smaller, newer companies may be
riskier than investments in larger, more-established companies. Securities of
smaller companies tend to be less liquid than securities of larger companies.
In addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their stock price.
This may cause unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
How has the Market Expansion Index Fund performed?
By showing the variability of the Market Expansion Index Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the Market Expansion
Index Fund is not necessarily an indication of how the Fund will perform in the
future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1999 11.56%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 16.57%.
--------------------------------------------------------------------------------
Best Quarter: 15.10% 4Q 1999 Worst Quarter: -7.52% 1Q 1999
--------------------------------------------------------------------------------
------
41
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Market Expansion Index Fund
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 7/31/98
<S> <C> <C> <C>
Class A 7/31/98 5.46% 10.92%
--------------------------------------------------------------
Class B 7/31/98 8.16% 13.21%
--------------------------------------------------------------
Class C 3/22/99 9.61% 14.13%
--------------------------------------------------------------
Class I 7/31/98 11.56% 15.45%
--------------------------------------------------------------
S&P MidCap 400 Index/2/ 14.72% 20.91%
--------------------------------------------------------------
S&P SmallCap 600 Index/3/ 12.40% 9.15%
</TABLE>
/1/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 form
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.
/2/S&P MidCap 400 Index is an unmanaged index generally representative of the
performance of the mid-size company segment of the U.S. market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
applicable contingent deferred sales charges on Class B and Class C shares.
/3/The S&P SmallCap 600 Index is an unmanaged index generally representative of
the performance of small companies in the U.S. stock market. The performance
of the index does not reflect the deduction of expenses associated with a
mutual fund, such as investment management fees. By contrast, the
performance of the Fund reflects the deduction of these expenses as well as
the deduction of sales charges on Class A shares and applicable contingent
deferred sales charges on Class B and Class C shares.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------------------
CLASS
(fees paid directly from your investment)/1/ CLASS A B CLASS C CLASS I
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
-------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------
(expenses that are deducted from Fund CLASS
assets)/3/ CLASS A B CLASS C CLASS I
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .35% .35% .35% .35%
-------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------
Other Expenses .53% .53% .53% .53%
-------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.23% 1.88% 1.88% .88%
-------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/4/ (.41%) (.31%) (.31%) (.31%)
-------------------------------------------------------------------------------
Net Expenses .82% 1.57%% 1.57% .57%
-------------------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .82% for Class A shares, 1.57% for Class B
shares, 1.57% for Class C shares and .57% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
------
42
<PAGE>
------------------
Market Expansion Index Fund
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C I
ASSUMING ASSUMING ASSUMING ASSUMING
REDEMPTION AT NO REDEMPTION REDEMPTION AT NO REDEMPTION
THE END THE END
OF EACH PERIOD OF EACH PERIOD
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 604 $ 660 $ 160 $ 260 $ 160 $ 58
-----------------------------------------------------------------------------------
3 Years 856 861 561 561 561 250
-----------------------------------------------------------------------------------
5 Years 1,128 1,187 987 987 987 457
-----------------------------------------------------------------------------------
10 Years 1,901 2,006 2,006 2,176 2,176 1,056
-----------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $644
Class B (with
redemption) $691
Class B (no
redemption) $191
Class C (with
redemption) $291
Class C (no
redemption) $191
Class I $ 90
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
43
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Technology Fund
What is the goal of the Technology Fund?
The Fund is designed to provide long-term capital growth.
What are the Technology Fund's main investment strategies?
The Fund mainly invests in equity securities of companies that have developed,
or are expected to develop, products, processes or services that will provide
significant technological advances and improvements. This may include, for
example, companies that develop, produce or distribute products in the
computer, electronics and communications sectors. In selecting investments, the
Fund will generally invest in companies that are positioned for accelerated
growth or higher earnings. In addition, the Fund also may invest in companies
(regardless of size) whose stocks appear to be trading below their true value.
For more information about the Technology Fund's investment strategies, please
read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Technology Fund?
The main risks of investing in the Technology Fund and the circumstances likely
to adversely affect your investment are described below. The share price of the
Technology Fund will change every day in response to interest rates and other
market conditions. You may lose money if you invest in the Technology Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Securities of Technology Companies: The Fund's performance is closely tied to
and affected by the technology sector. The stock price of technology companies
tends to be more volatile than the stock price of companies in other
industries. In addition, the valuation of many technology stocks could be high
when considered by such traditional measures of value as price-to-earnings
ratios. Competitive pressures also may have a significant effect on the
financial condition of technology-sensitive companies. Further, because of the
rapid pace of technological development, products and services produced by
companies in which the Fund invests may become obsolete or have relatively
short product cycles. As a result, the Fund's value and its returns may be
considerably more volatile and pose greater risks than the values and returns
of other mutual funds that do not focus their investments on companies in the
technology sector.
Smaller Companies. The Fund's investments in smaller, newer companies may be
riskier than investments in larger, more-established companies. Small companies
may be more vulnerable to economic, market and industry changes. Because
economic events have a greater impact on smaller companies, there may be
greater and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in the Fund.
Finally, emerging companies in the technology sector may not be profitable and
may not anticipate earning profits in the foreseeable future.
------
44
<PAGE>
------------------
Technology Fund
Market Risk. The Fund invests in equity securities (such as stocks) which are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. 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. Equity securities also are subject to "stock
market risk" meaning that stock prices in general (or technology stock prices
in particular) may decline over short or extended periods of time. When the
value of the Fund's securities goes down, your investment in the Fund decreases
in value.
Non-Diversified. The Fund is considered non-diversified and can invest more of
its assets in securities of a single issuer than a "diversified" fund. In
addition, the Fund's investments are concentrated in the technology sector.
This concentration increases the risk of loss to the Fund by increasing its
exposure to economic, business, political or regulatory developments that may
be adverse to the technology sector of the economy.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency
The Fund began operations on July 28, 2000, and does not have a full calendar
year of investment returns at the date of this prospectus.
------
45
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Technology Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
--------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE/2/
--------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(expenses that are deducted from
Fund assets) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees 1.00% 1.00% 1.00% 1.00%
--------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
--------------------------------------------------------------------
Other Expenses/3/ .50% .50% .50% .50%
--------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.85% 2.50% 2.50% 1.50%
--------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.30%) (.20%) (.20%) (.20%)
--------------------------------------------------------------------
Net Expenses 1.55% 2.30% 2.30% 1.30%
--------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more and for shares purchased during
the subscription period. Please see "Sales Charges."
/3/Expense information is based on estimated amounts for the current fiscal
year.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.55% for Class A shares, 2.30% for Class B
shares, 2.30% for Class C shares and 1.30% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS B CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 674 $ 733 $233 $333 $233 $132
------------------------------------------------------------------------------
3 Years 1,049 1,060 760 760 760 454
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $703
Class B (with
redemption) $753
Class B (no
redemption) $253
Class C (with
redemption) $353
Class C (no
redemption) $253
Class I $153
</TABLE>
------
46
<PAGE>
ONE GROUP(R)
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
International Equity Index Fund
What is the goal of the International Equity Index Fund?
The Fund seeks to provide investment results that correspond to the aggregate
price and dividend performance of the securities in the MSCI EAFE GDP Index./1/
What are the International Equity Index Fund's main investment strategies?
The Fund invests mainly in foreign stocks included in the MSCI EAFE GDP Index.
The Fund also may invest in stock index futures. Banc One Investment Advisors
attempts to track the performance of the MSCI EAFE GDP Index to achieve a
correlation of 0.90 between the performance of the Fund and that of the MSCI
EAFE GDP Index, without taking into account the Fund's expenses. As part of its
investment strategy, the Fund may invest in securities of emerging
international markets such as Mexico, Chile and Brazil. Banc One Investment
Advisors selects securities of emerging markets that are included in the Morgan
Stanley Emerging Market Free Index based on size, risk and the ease of
investing in the country's market (e.g., reasonable settlement procedures).
Most of the Fund's assets will be denominated in foreign currencies. For more
information about the International Equity Index Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the International Equity Index Fund?
What are the main risks of investing in the International Equity Index Fund?
The main risks of investing in the International Equity Index Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the International Equity Index Fund will change every day in
response to market conditions. You may lose money if you invest in the
International Equity Index Fund. For additional information on risk, please
read "Investment Risks."
MAIN RISKS
Index Investing. The Fund attempts to track the performance of the MSCI EAFE
GDP Index. Therefore, securities may be purchased, retained and sold by the
Fund at times when an actively managed fund would not do so. If the value of
securities that are heavily weighted in the index change, you can expect a
greater risk of loss than would be the case if the Fund were not fully invested
in such securities.
Foreign Securities. Investments in foreign securities involve risks in addition
to those of U.S. investments. These risks include political and economic risks,
currency fluctuations, higher transaction costs, delayed settlement, and less
stringent investor protection and disclosure standards of some foreign markets.
These risks can make foreign investments more volatile and potentially less
liquid than U.S. investments.
/1/Gross Domestic Product Weighted Morgan Stanley Capital International Europe,
Australasia and Far East Index. MSCI EAFE GDP Index is a registered service
mark of Morgan Stanley Capital International, which does not sponsor and is
in no way affiliated with the Fund.
------
47
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
International Equity Index Fund
Emerging Market Risk. The Fund may invest up to 10% of its net assets in
securities of emerging international markets. The risks associated with foreign
securities are magnified in countries in "emerging markets." These countries
may have relatively unstable governments and less-established market economies
than developed countries. Emerging markets may face greater social, economic,
regulatory and political uncertainties. These risks make emerging market
securities more volatile and less liquid than securities issued in more
developed countries.
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
stocks comprising the MSCI EAFE GDP Index in particular) may decline over short
or extended periods of time. When the value of the Fund's securities goes down,
your investment in the Fund decreases in value.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
How has the International Equity Index Fund performed?
By showing the variability of the International Equity Index Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the International Equity
Index Fund is not necessarily an indication of how the Fund will perform in the
future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1993 29.60%
1994 3.90%
1995 10.19%
1996 6.61%
1997 5.68%
1998 21.57%
1999 33.42%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was -13.38%.
--------------------------------------------------------------------------------
Best Quarter: 20.46% 4Q1998 Worst Quarter: -14.47% 3Q1998
--------------------------------------------------------------------------------
------
48
<PAGE>
------------------
International Equity Index Fund
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF CLASS SINCE 10/28/92
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 4/23/93 26.37% 13.60% 13.93%
--------------------------------------------------------------------
Class B 1/14/94 27.16% 13.60% 13.84%
--------------------------------------------------------------------
Class C 11/4/97 31.26% 13.99% 13.95%
--------------------------------------------------------------------
Class I 10/28/92 33.42% 15.03% 15.01%
--------------------------------------------------------------------
MSCI EAFE GDP Index/2/ 31.00% 16.00% 16.78%
</TABLE>
/1/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.
/2/The MSCI EAFEGDP Index is an unmanaged index generally representative of the
performance of international stock markets. The performance of the index
does not reflect the deduction of expenses associated with a mutual fund,
such as investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses as well as the deduction of sales
charges on Class A shares and applicable contingent deferred sales charges
on Class B and Class C shares.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .55% .55% .55% .55%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------
Other Expenses .38% .38% .38% .38%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.28% 1.93% 1.93% .93%
-------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.10%) NONE NONE NONE
-------------------------------------------------------------------
Net Expenses 1.18% 1.93% 1.93% .93%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.18% for Class A shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
------
49
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
International Equity Index Fund
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 639 $ 696 $ 196 $ 296 $ 196 $ 95
------------------------------------------------------------------------------
3 Years 900 906 606 606 606 296
------------------------------------------------------------------------------
5 Years 1,181 1,242 1,042 1,042 1,042 515
------------------------------------------------------------------------------
10 Years 1,981 2,085 2,085 2,254 2,254 1,143
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Class A shares would be
$649.
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
50
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Diversified International Fund
What is the goal of the Diversified International Fund?
The Fund seeks long-term capital growth by investing primarily in equity
securities of foreign issuers.
What are the Diversified International Fund's main investment strategies?
The Fund invests mainly in the securities of companies located in Europe, Asia
and Latin America. The Fund also will invest in other regions and countries
that present attractive investment opportunities, including developing
countries. In selecting a country for investment, Banc One Investment Advisors
analyzes the global economic and political situation, as well as the securities
market of selected countries. In selecting individual securities, Banc One
Investment Advisors selects a representative sampling of the companies
comprising the individual country's stock market index. For more information
about the Diversified International Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Diversified International Fund?
The main risks of investing in the Diversified International Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Diversified International Fund will change every day in
response to market conditions. You may lose money if you invest in the
Diversified International Fund. For additional information on risk, please read
"Investment Risks."
------
51
<PAGE>
ONE GROUP(R)
------------------
----------------
FUND SUMMARY
Diversified International Fund
MAIN RISKS
Foreign Securities. Investments in foreign securities involve risks in addition
to those of U.S. investments. These risks include political and economic risks,
currency fluctuations, higher transaction costs, delayed settlement, and less
stringent investor protection and disclosure standards of some foreign markets.
These risks can make foreign investments more volatile and potentially less
liquid than U.S. investments. Because the Fund may invest over 25% of its total
assets in a single country, political and economic developments in that country
will have a greater impact on the performance of the Fund than would be the
case if the Fund were more widely diversified.
Emerging Market Risk. The risks associated with foreign securities are
magnified in countries in "emerging markets." These countries may have
relatively unstable governments and less-established market economies than
developed countries. Emerging markets may face greater social, economic,
regulatory and political uncertainties. These risks make emerging market
securities more volatile and less liquid than securities issued in more
developed countries.
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general may
decline over short or extended periods of time. When the value of the Fund's
securities goes down, your investment in the Fund decreases in value.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
52
<PAGE>
------------------
Diversified International Fund
How has the Diversified International Fund performed?
By showing the variability of the Diversified International Fund performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the Diversified
International Fund is not necessarily an indication of how the Fund will
perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 -14.35%
1991 6.57%
1992 -6.65%
1993 29.66%
1994 0.00%
1995 11.48%
1996 7.74%
1997 3.97%
1998 16.43%
1999 41.19%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was -15.82%. The above quoted performance data includes the
performance of a common trust fund, the predecessor to the Pegasus
International Equity Fund and the Pegasus International Equity Fund for the
period prior to the consolidation with One Group Diversified International
Fund on March 22, 1999. The predecessor to the Pegasus International Equity
Fund commenced operations on December 3, 1994, subsequent to the transfer of
assets from a common trust fund with materially equivalent investment
objectives, policies, guidelines and restrictions as the Fund. The quoted
performance of the Fund includes the performance of the common trust fund
for periods prior to the commencement of operations of the predecessor to
the Pegasus International Equity Fund as adjusted to reflect the expenses
associated with the Fund. The common trust fund was not registered with the
SEC and was not subject to the investment restrictions, limitations and
diversification requirements imposed by law on registered mutual funds. If
the common trust fund had been registered, its return may have been lower.
--------------------------------------------------------------------------------
Best Quarter: 26.98% 4Q1999 Worst Quarter: -22.67% 3Q1990
--------------------------------------------------------------------------------
------
53
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Diversified International Fund
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 4/30/86
<S> <C> <C> <C> <C> <C>
Class A 12/3/94 33.48% 14.01% 7.65% 10.66%
--------------------------------------------------------------------
Class B 8/26/96 35.00% 14.29% 7.54% 10.41%
--------------------------------------------------------------------
Class C 3/22/99 38.93% 14.50% 7.54% 10.40%
--------------------------------------------------------------------
Class I 12/3/94 41.19% 15.47% 8.53% 11.43%
--------------------------------------------------------------------
MSCI EAFE + EMF
Index/2/ 30.33% 12.15% 7.24% *
</TABLE>
/1/The above quoted performance data includes the performance of a common trust
fund, the predecessor to the Pegasus International Equity Fund, and the
Pegasus International Equity Fund for the period prior to the consolidation
with One Group Diversified International Fund on March 22, 1999. The
predecessor to the Pegasus International Equity Fund commenced operations on
December 3, 1994, subsequent to the transfer of assets from a common trust
fund with materially equivalent investment objectives, policies, guidelines
and restrictions as the Fund. The quoted performance of the Fund includes
the performance of the common trust fund for periods prior to the
commencement of operations of the predecessor to the Pegasus International
Equity Fund as adjusted to reflect the expenses associated with the Fund.
The common trust fund was not registered with the SEC and was not subject to
the investment restrictions, limitations and diversification requirements
imposed by law on registered mutual funds. If the common trust fund had been
registered, its return may have been lower. For periods prior to the
commencement of operations of Class B shares on August 26, 1996, Class B
performance is based on 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.
/2/The Morgan Stanley Capital International (MSCI) EAFE + EMF Index is an
unmanaged index generally representative of the performance of international
stock markets and of emerging markets. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses as well as the deduction of sales
charges on Class A shares and applicable contingent deferred sales charges
on Class B and Class C shares.
* Index did not exist.
------
54
<PAGE>
------------------
Diversified International Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
-------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .80% .80% .80% .80%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------
Other Expenses .28% .28% .28% .28%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.43% 2.08% 2.08% 1.08%
-------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.13%) (.03%) (.03%) (.03%)
-------------------------------------------------------------------
Net Expenses 1.30% 2.05% 2.05% 1.05%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.30% for Class A shares, 2.05% for Class B
shares, 2.05% for Class C shares, and 1.05% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION REDEMPTION
THE END OF AT THE END
EACH PERIOD OF EACH PERIOD
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 650 $ 708 $ 208 $ 308 $ 208 $ 107
-------------------------------------------------------------------------------
3 Years 942 949 649 649 649 340
-------------------------------------------------------------------------------
5 Years 1,254 1,316 1,116 1,116 1,116 593
-------------------------------------------------------------------------------
10 Years 2,138 2,242 2,242 2,408 2,408 1,314
-------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $663
Class B (with
redemption) $711
Class B (no
redemption) $211
Class C (with
redemption) $311
Class C (no
redemption) $211
Class I $110
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
55
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
More About the Funds
Each of the fifteen funds described in this prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of One Group Mutual Funds" and the Statement of Additional
Information.
--------------------------------------------------------------------------------
Principal Investment Strategies
This prospectus describes fifteen mutual funds with a variety of investment
objectives, including total return, capital appreciation, current income, and
long-term capital growth. The principal investment strategies that are used to
meet each Fund's investment objective are described in "Fund Summaries:
Investments, Risk & Performance" in the front of this prospectus. They are also
described below. There can be no assurance that the Funds will achieve their
investment objectives. Please note that each Fund also may use strategies that
are not described below, but which are described in the Statement of Additional
Information.
--
ONE GROUP SMALL CAP GROWTH FUND. The Fund may invest in common stocks, debt
securities, preferred stocks, convertible securities, warrants and other equity
securities of small-capitalization companies. The Fund may occasionally hold
securities of companies with large capitalizations if doing so contributes to
the Fund's investment objective.
. The Fund invests at least 65% of its total assets in the securities of
small-capitalization companies. Small-capitalization companies have market
capitalizations ranging from $100 million to $3 billion.
. Although the Fund may invest up to 35% of its total assets in U.S.
government securities, other investment grade fixed income securities, cash
and cash equivalents, the Fund's main investment strategy is to invest in
equity securities of small-capitalization companies.
--
ONE GROUP SMALL CAP VALUE FUND. The Fund invests mainly in equity securities of
small domestic issuers with market capitalizations of $100 million to $3
billion.
. The Fund invests at least 65% of its total assets in common and preferred
stocks, rights, warrants, convertible securities, and other equity
securities of small-capitalization companies.
. The Fund may invest up to 25% of the Fund's net assets in foreign
securities.
. Up to 20% of the Fund's total assets may be invested in U.S. government
securities, other investment grade fixed income securities, cash and cash
equivalents.
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--
ONE GROUP MID CAP GROWTH FUND. The Fund invests in securities of companies that
have the potential to produce above-average earnings growth per share over a
one to three-year period.
. At least 80% of the Fund's total assets will be invested in equity
securities of mid-cap companies, including common stocks and debt securities
and preferred stocks that are convertible to common stocks. Mid-cap
companies are defined as companies with market capitalizations of $500
million to $10 billion.
. A portion of the Fund's assets will be held in cash equivalents.
--
ONE GROUP MID CAP VALUE FUND. The Fund invests mainly in equity securities of
mid-cap companies with below-market average price-to-earnings and price-to-book
value ratios. Mid-Cap companies are defined as companies with market
capitalizations of $500 million to $10 billion.
. At least 80% of the Fund's total assets will be invested in equity
securities, including common stock and debt securities and preferred stocks
both of which are convertible into common stocks.
. A portion of the Fund's assets will be held in cash equivalents.
--
ONE GROUP DIVERSIFIED MID CAP FUND. The Fund invests mainly in equity
securities of mid-capitalization companies. Mid cap companies are defined as
companies with market capitalizations of $500 million to $10 billion.
. At least 65% of the Fund's total assets normally will be invested in common
and preferred stocks, rights, warrants, convertible securities, and other
equity securities of mid-capitalization companies.
. Up to 25% of the Fund's net assets may be invested in foreign securities. Up
to 20% of the Fund's total assets may be invested in U.S. government
securities, other investment grade fixed income securities, cash and cash
equivalents. Although the Fund may use these strategies more in the future,
the Fund's main strategy is to invest in equity securities of mid-
capitalization companies.
--
ONE GROUP LARGE CAP GROWTH FUND. The Fund invests mainly in equity securities
of large, well-established companies. The weighted average capitalization of
companies in which the Fund invests normally will exceed the median market
capitalization of the S&P 500 Index.
. At least 65% of the Fund's total assets will be invested in the equity
securities of large, well-established companies.
--
ONE GROUP LARGE CAP VALUE FUND. The Fund invests in equity securities of large-
capitalization companies that are believed to be selling below their long-term
investment values.
. At least 65% of the Fund's total assets will be invested in equity
securities of large-cap companies described above, including common stocks,
and debt securities and preferred stocks which are convertible to common
stock.
. A portion of the Fund's assets will be held in cash equivalents.
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--
ONE GROUP EQUITY INCOME FUND. The Fund invests in the equity securities of
corporations which regularly pay dividends, as well as stocks with favorable
long-term fundamental characteristics.
. The Fund normally invests at least 65% of its total assets in the equity
securities of corporations described above, including common stocks and debt
securities and preferred stock convertible to common stock.
. A portion of the Fund's assets will be held in cash equivalents.
--
ONE GROUP DIVERSIFIED EQUITY FUND. The Fund invests mainly in common stocks of
companies that have the potential for continued earnings growth with strong
fundamentals and a reasonable value.
. At least 65% of the Fund's total assets will be invested in equity
securities.
. Although the Fund may invest up to 35% of the Fund's total assets in U.S.
government securities, other investment grade fixed income securities, cash
and cash equivalents, the Fund's main investment strategy is to invest in
equity securities.
--
ONE GROUP BALANCED FUND. The Fund invests in a combination of stocks, fixed
income securities and money market instruments. Normally, the Fund will invest:
. between 40% and 75% of its total assets in all types of equity securities
(including stock of both large- and small-capitalization companies and
growth and value securities). Up to 25% of the Fund's total assets may be
invested in foreign securities, including American Depositary Receipts.
. between 25% and 60% of its total assets in mid- to long-term fixed income
securities, including bonds, notes and other debt securities. The balance
will be invested in cash equivalents.
HOW DOES BANC ONE INVESTMENT ADVISORS SELECT FIXED INCOME SECURITIES FOR THE
BALANCED FUND?
Banc One Investment Advisors analyzes four major factors in managing and
constructing the portfolio of fixed income securities for the Balanced Fund:
duration, market sector, maturity concentrations and individual securities.
Rather than attempting to time the market, Banc One Investment Advisors looks
for sectors and securities that it believes will perform consistently well over
time as measured by total return. The fixed income portion of the Balanced Fund
attempts to enhance total return by selecting market sectors and securities
that offer risk/reward advantages based on market trends, structural make-up
and credit trends. Individual securities that are purchased by the Fund are
subject to a disciplined risk/reward analysis both at the time of purchase and
on an ongoing basis. This analysis includes an evaluation of interest rate
risk, credit risk, and risks associated with the complex legal and technical
structure of the investment (e.g., asset-backed securities).
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--
ONE GROUP EQUITY INDEX FUND. The Fund invests in stocks included in the S&P 500
Index. (The Fund also invests in stock index futures and other equity
derivatives.) The Fund may hold up to 10% of its total assets in cash or cash
equivalents. (Assets held in margin deposits and segregated accounts for
futures contracts are not considered cash or cash equivalents for purposes of
the 10% limitation.)
. The percentage of a stock that the Fund holds will be approximately the same
percentage that the stock represents in the S&P 500 Index.
. Banc One Investment Advisors generally picks stocks in the order of their
weightings in the S&P 500 Index, starting with the heaviest weighted stock.
. The Fund attempts to achieve a correlation between the performance of its
Fund and that of the S&P 500 Index of at least 0.95, without taking into
account Fund expenses. Perfect correlation would be 1.00.
--
ONE GROUP MARKET EXPANSION INDEX FUND. The Fund invests in stocks included in
the S&P SmallCap 600 Index and S&P MidCap 400 Index.
. The Fund also may invest up to 10% of its net assets in foreign securities,
including Depositary Receipts.
. Up to 10% of the Fund's total assets may be held in cash and cash
equivalents. (Assets held in margin deposits and segregated accounts for
futures contracts are not considered cash or cash equivalents for purposes
of the 10% limitation.)
--
ONE GROUP TECHNOLOGY FUND. The Fund mainly invests in equity securities that
have, or are expected to develop products, processes or services that will
provide significant technological advances and improvements.
. The Fund normally invests at least 65% of its total assets in common and
preferred stocks, rights, warrants, convertible securities and other equity
securities of companies that develop significant technological advancements
or improvements.
. Up to 35% of the Fund's total assets may be invested in U.S. government
securities, other investment grade fixed income securities, cash and cash
equivalents, and equity securities of companies outside the technology
industry.
. The Fund also may invest up to 25% of its net assets in the securities of
foreign issuers.
A portion of the Fund's assets will be held in cash and cash equivalents.
--
ONE GROUP INTERNATIONAL EQUITY INDEX FUND. The Fund invests in stocks included
in the MSCI EAFE GDP Index. (The Fund also invests in stock index futures.)
Banc One Investment Advisors seeks to achieve a correlation between the
performance of the Fund and that of the MSCI EAFE GDP Index of at least 0.90,
without taking into account expenses. Perfect correlation would be 1.00.
. At least 65% of the Fund's total assets will be invested in foreign equity
securities, consisting of common stocks (including American Depositary
Receipts) and preferred stocks, securities convertible to common stock
(provided they are traded on an exchange or over-the-counter), warrants and
receipts.
. No more than 10% of the Fund's assets will be held in cash or cash
equivalents. (Assets held in margin deposits and segregated accounts for
futures contracts are not considered cash or cash equivalents for purposes
of this 10% limitation.)
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. Up to 10% of the Fund's net assets may be invested in securities of emerging
international markets such as Mexico, Chile and Brazil included in the
Morgan Stanley Market Free Index. These investments may be made directly or
through local exchanges, through publicly traded closed-end country funds or
through "passive foreign investment companies."
. Up to 20% of the Fund's total assets may be invested in debt securities
issued or guaranteed by foreign governments or any of their political
subdivisions, agencies, or instrumentalities, or by supranational issuers
rated in one of the three highest rating categories.
. A substantial portion of the Fund's assets will be denominated in foreign
currencies.
--
ONE GROUP DIVERSIFIED INTERNATIONAL FUND. The Fund invests mainly in the
securities of companies located in Europe, Asia and Latin America.
. At least 65% of the Fund's total assets normally will be invested in foreign
equity securities, consisting of common stock (including American Depositary
Receipts), preferred stocks, rights, warrants, convertible securities,
foreign currencies and options on foreign currency, and other equity
securities.
. Up to 20% of the Fund's total assets may be invested in U.S. government
securities, other investment grade fixed income securities, cash and cash
equivalents.
--------------------------------------------------------------------------------
Investment Risks
The risks associated with investing in the Equity Funds are described below and
in "Fund Summaries: Investments, Risk & Performance" at the front of this
prospectus.
--
DERIVATIVES. The Funds invest in securities that may be considered to be
derivatives. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity
and management risks. A Fund's use of derivatives may cause the Fund to
recognize higher amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use such instruments.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and options) that derive
their value from the performance of underlying assets or securities.
--
SMALL-CAPITALIZATION COMPANIES. Investments in smaller, younger companies may
be riskier and more volatile than investments in larger, more-established
companies. These companies may be more vulnerable to changes in economic
conditions, specific industry conditions, market fluctuations and other factors
affecting the profitability of other companies. Because economic events may
have a greater impact on smaller companies, there may be a greater and more
frequent fluctuation in their stock price. This may cause frequent and
unexpected increases or decreases in the value of your investment.
--
FOREIGN SECURITIES. Investments in foreign securities involve risks different
from investments in U.S. securities. These risks include the risks associated
with higher transaction costs, delayed settlements, currency controls and
adverse
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economic developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may negatively
affect an investment. Adverse changes in exchange rates may erode or reverse
any gains produced by foreign currency denominated investments and widen any
losses. Exchange rate volatility also may affect the ability of an issuer to
repay U.S. dollar denominated debt, thereby increasing credit risk. Because of
these risk factors, the share price of the International Equity Index Fund and
the Diversified International Fund is expected to be volatile, and you should
be able to sustain sudden, and sometimes substantial, fluctuations in the value
of your investment.
--
EUROPE. Europe includes countries with highly-developed markets as well as
countries with emerging markets. Many developed countries in Western Europe are
members of the European Union and the European Monetary Union which require
compliance with stringent fiscal and monetary controls. The markets of Eastern
European countries continue to remain relatively undeveloped and are sensitive
to political and economic developments.
--
ASIA. Asia includes countries in all stages of economic development from the
highly developed market economy of Japan to the emerging market economy of the
People's Republic of China. Generally, Asian economies face over-extension of
credit, currency devaluation, rising unemployment, decreased exports and
economic recessions. Currency devaluation in any one country may have a
negative affect on the entire region. The markets in each Asian country
suffered significant downturns and volatility in recent years. Although the
Asian markets are recovering, continued volatility may persist.
--
LATIN AMERICA. Latin American countries are considered to be emerging market
economies that are marked by high interest rates, inflation and unemployment.
Currency devaluation in any one country may have an adverse affect on the
entire region. The markets in many Latin American countries have experienced
significant downturns as well as significant volatility in recent years.
Although the Latin American market appears to be recovering, continued
volatility may persist. A small number of companies and industries, including
the telecommunications sector, represent a large portion of the market in many
Latin American countries.
--
SECURITIES OF TECHNOLOGY COMPANIES: The Technology Fund invests a significant
portion of its assets in the securities of companies in the technology sector.
Because of this focus, the Fund's performance is closely tied to and affected
by this sector. The valuation of many technology stocks could be high when
considered by such traditional measures of value as price-to-earnings ratios,
price-to-book or dividend yield. This reflects the fact that many technology
stocks are issued by relatively new companies that have not yet achieved
profitability. Companies in the rapidly changing technology field also often
have unusually high price volatility. For example, products and services that
at first appear promising may not prove commercially successful. Such earnings
disappointments can result in sharp stock price declines. Competitive pressures
also may have a significant effect on the financial condition of technology-
sensitive companies. For example, if technology continues to advance at an
accelerated rate, and the number of companies and product offerings continues
to expand, increasingly aggressive pricing may affect the profitability of
companies in which the Fund invests. In addition, because of the
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rapid pace of technological development, products and services produced by
companies in which the Fund invests may become obsolete or have relatively
short product cycles. As a result the Fund's value and returns may be
considerably more volatile and pose greater risks than the value and returns of
other mutual funds with greater diversification among economic sectors.
For more information about risks associated with the types of investments that
the Equity Funds purchase, please read "Fund Summaries: Investments, Risk &
Performance, Appendix A" and the Statement of Additional Information.
--------------------------------------------------------------------------------
Investment Policies
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
--
Each Fund may not:
1. Purchase an issuer's securities if as a result more than 5% (25% with
respect to the Technology Fund) of its total assets would be invested in
the securities of that issuer or the Fund (with the exception of the
Technology Fund) would own more than 10% of the outstanding voting
securities of that issuer. This does not include securities issued or
guaranteed by the United States, its agencies or instrumentalities, and
repurchase agreements involving these securities. This restriction applies
with respect to 75% (50% of the Technology Fund) of a Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. With respect to the Technology Fund, this restriction does not
apply to the technology sector. With respect to all Funds in this
prospectus, this does not include obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Make loans, except that a Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending.
One Group Equity Index Fund may not:
1. Invest more than 10% of its total assets in securities issued or guaranteed
by the United States, its agencies or instrumentalities. Repurchase
agreements held in margin deposits and segregated accounts for futures
contracts are not considered issued or guaranteed by the United States, its
agencies or instrumentalities for purposes of the 10% limitation.
Additional investment policies can be found in the Statement of Additional
Information.
--------------------------------------------------------------------------------
Portfolio Quality
Various rating organizations (like Standard & Poor's Corporation and Moody's
Investors Service) assign ratings to securities. Equity securities, which will
make up the bulk of the Funds' investments, are not rated by rating
organizations. Generally, ratings are divided into two main categories:
"Investment Grade Securities" and
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"Non-Investment Grade Securities." Although there is always a risk of default,
rating agencies believe that issuers of Investment Grade Securities have a high
probability of making payments on such securities. Non-Investment Grade
Securities include securities that, in the opinion of the rating agencies, are
more likely to default than Investment Grade Securities. The Funds only
purchase securities that meet the rating criteria described below. Banc One
Investment Advisors will look at a security's rating at the time of investment.
If the securities are unrated, Banc One Investment Advisors must determine that
they are of comparable quality to rated securities.
--
RATINGS OF THE FUNDS' SECURITIES
. If a Fund invests in municipal bonds, the bonds must be rated as investment
grade.
. Other municipal securities, such as tax-exempt commercial paper, notes and
variable rate demand obligations, must be rated in one of the two highest
investment grade categories at the time of investment.
. Corporate bonds generally will be rated in one of the three highest
investment grade categories.
. Banc One Investment Advisors reserves the right to invest in corporate bonds
which present attractive opportunities and are rated in the lowest
investment grade category. These corporate bonds are usually riskier than
higher rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
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Temporary Defensive Positions
To respond to unusual market conditions, the Funds may invest their assets in
cash and cash equivalents for temporary defensive purposes. These investments
may result in a lower yield than lower-quality or longer-term investments and
may prevent the Funds from meeting their investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high-quality instruments with maturities of
three months or less on the date they are purchased. They include securities
issued by the U.S. government, its agencies and instrumentalities, repurchase
agreements (other than equity repurchase agreements), certificates of deposit,
bankers' acceptances, commercial paper (rated in one of the two highest rating
categories), variable rate master demand notes, money market mutual funds, and
bank money market deposit accounts.
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The percentage of total assets that each Fund may invest in cash and cash
equivalents is as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND TOTAL ASSETS
----------------------------------------------
<S> <C>
Small Cap Growth Fund 100%
----------------------------------------------
Small Cap Value Fund 20%/1/
----------------------------------------------
Mid Cap Growth Fund 100%
----------------------------------------------
Mid Cap Value Fund 100%
----------------------------------------------
Diversified Mid Cap Fund 20%/1/
----------------------------------------------
Large Cap Growth Fund 100%
----------------------------------------------
Large Cap Value Fund 100%
----------------------------------------------
Equity Income Fund 100%
----------------------------------------------
Diversified Equity Fund 100%
----------------------------------------------
Balanced Fund 100%
----------------------------------------------
Equity Index Fund 10%/1/
----------------------------------------------
Market Expansion Index Fund 10%/1/
----------------------------------------------
Technology Fund 100%
----------------------------------------------
International Equity Index Fund 10%/1/
----------------------------------------------
Diversified International Fund 20%/1/
</TABLE>
/1/Assets held in margin deposits and segregated accounts for futures contracts
are not considered cash or cash equivalents for purposes of the percentage
limitation.
--------------------------------------------------------------------------------
Portfolio Turnover
The Funds may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Funds and may result in additional tax consequences to you. The
portfolio turnover rate for each Fund for the fiscal year ended June 30, 2000,
is shown on the Financial Highlights. The Technology Fund commenced operations
on July 28, 2000. Therefore, the Technology Fund's portfolio turnover rate is
not included in the Financial Highlights. However, the Technology Fund
anticipates a portfolio turnover rate well above that of other mutual funds
that do not concentrate their investments in the technology sector. It is not
uncommon for technology funds to have turnover rates of 200-300%.
To the extent portfolio turnover results in short-term capital gains, such
gains will generally be taxed at ordinary income tax rates.
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ONE GROUP(R)
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[GRAPHIC]
How to Do Business with One Group Mutual Funds
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Purchasing Fund Shares
Where Can I Buy Shares
You may purchase Fund shares:
. Directly from One Group through The One Group Services Company (the
"Distributor"), and
. From Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors or other intermediaries. Shares purchased this way will
be held for you by the Shareholder Servicing Agent.
When Can I Buy Shares?
. Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends and days on which the New
York Stock Exchange ("NYSE") is closed, including the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day.
. Purchase requests received before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close before 4 p.m. ET. When
that happens, purchase requests received after the NYSE closes will be
effective the following business day.
. If a Shareholder Servicing Agent holds your shares, it is the responsibility
of the Shareholder Servicing Agent to send your purchase or redemption order
to the Fund. Your Shareholder Servicing Agent may have an earlier cut-off
time for purchase and redemption requests.
. The Distributor can reject a purchase order if it does not think that it is
in the best interests of a Fund and/or its shareholders to accept the order.
. Shares are electronically recorded. Therefore, certificates will not be
issued.
What Kind Of Shares Can I Buy?
One Group offers the following classes of shares:
. Class A, Class B and Class C shares are available to the general public.
. Class I shares are available to institutional investors, such as
corporations, pension and profit sharing plans, and foundations; and any
organization authorized to act in a fiduciary, advisory, custodial or agency
capacity. We will refer to these entities as "Intermediaries."
. When deciding what class of shares to buy, you should consider the amount of
your investment, the length of time you intend to hold the shares, and the
sales charges and expenses applicable to each class of shares. If you intend
to hold your
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shares for seven or more years, Class A shares may be more appropriate for
you. If you intend to hold your shares for less than seven years, you may want
to consider Class B or Class C shares. Sales charges are discussed in the
section of this prospectus entitled Sales Charges.
. One Group Fund Direct IRA and 403(b). One Group offers retirement plans.
These plans allow participants to defer taxes while their retirement
savings grow. Call 1-800-480-4111 for an Adoption Agreement.
How Much Do Shares Cost?
. Shares are sold at net asset value ("NAV") plus a sales charge, if any.
. Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
. NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
. A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, NAV will be calculated as of the
time the NYSE closes.
How Do I Open An Account?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
. The minimum initial investment for all classes except Class I shares is
$1,000 per Fund ($100 for employees of Bank One Corporation and its
affiliates). The minimum initial investment for an IRA and 403(b) is $250.
. The minimum initial investment for Class I shares is $200,000 per Fund.
. You are required to maintain a minimum account balance equal to the minimum
initial investment in each Fund.
. Subsequent investments must be at least $25 per Fund.
. You may purchase no more than $249,999 of Class B shares. This is because
Class A shares offer a reduced sales charge on purchases of $250,000 or
more and have lower expenses. The section of this prospectus entitled "What
Kind of Shares Can I Buy?" provides information that can help you choose
the appropriate share class.
. These minimums may be waived.
3. Complete the Account Application Form. Be sure to sign up for all of the
account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
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4. Send the completed application and a personal check (unless you choose to
pay by wire) to:
ONE GROUP MUTUAL FUNDS
P. O. BOX 8528
BOSTON, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "One Group Mutual
Funds for the Benefit of (your name)."
If you choose to pay by wire, please call 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual or company and endorsed to
One Group Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
. One Group Mutual Funds; or
. the specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. If you redeem shares that were purchased by check, One Group will delay
forwarding your redemption proceeds until payment has been collected from
your bank. One Group generally receives payment within seven (7) business
days of purchase.
7. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
8. If you have any questions, contact your Shareholder Servicing Agent or call
1-800-480-4111.
Can I Purchase Shares Over The Telephone?
Yes. Simply select this option on your Account Application Form and then:
. Contact your Shareholder Servicing Agent or call 1-800-480-4111 to relay
your purchase instructions.
. Authorize a bank transfer or initiate a wire transfer to the following wire
address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP BALANCED FUND--A)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: JOHN SMITH & MARY SMITH, JTWROS)
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
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instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. You may revoke your right to make purchases over the telephone by sending a
letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
Can I Automatically Invest On A Systematic Basis?
Yes. You may purchase additional Class A, Class B and Class C shares by making
automatic monthly investments from your bank account. The minimum initial
investment is still $1,000 per Fund. To establish a Systematic Investment Plan:
. Select the "Systematic Investment Plan" option on the Account Application
Form.
. Provide the necessary information about the bank account from which your
investments will be made.
. Shares purchased under a Systematic Investment Plan may not be redeemed for
five (5) business days.
. One Group currently does not charge for this service, but may impose a
charge in the future. However, your bank may impose a charge for debiting
your bank account.
. You may revoke your election to make systematic investments by calling
1-800-480-4111 or by sending a letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
Conversion Feature
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
. After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares.
. You will not be assessed any sales charges or fees for conversion of shares,
nor will you be subject to any federal income tax.
. Because the share price of the Class A shares may be higher than that of the
Class B shares at the time of conversion, you may receive fewer Class A
shares; however, the dollar value will be the same.
. If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together.
--------------------------------------------------------------------------------
Sales Charges
The Distributor compensates Shareholder Servicing Agents who sell shares of One
Group. Compensation comes from sales charges, 12b-1 fees and payments by the
Distributor and the Funds' investment advisor from their own resources. The
tables below show the charges for each class of shares and the percentage of
your investment that is paid as a commission to a Shareholder Servicing Agent.
Please note: If you purchased Class A shares of One Group Technology Fund
during the subscription period and were not assessed any applicable sales
charge, you will be charged the equivalent of the lesser of 2% of the purchase
price or the current value of the redeemed shares if you redeem any or all of
the shares before July 30, 2001.
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<PAGE>
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SALES CHARGE SALES CHARGE COMMISSION
OF AS A PERCENTAGE OF THE AS A PERCENTAGE AS A PERCENTAGE
PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C>
less than $50,000 5.25% 5.54% 4.75%
---------------------------------------------------------------------------
$50,000-$99,999 4.50% 4.71% 4.05%
---------------------------------------------------------------------------
$100,000-$249,999 3.50% 3.63% 3.05%
---------------------------------------------------------------------------
$250,000-$499,999 2.50% 2.56% 2.05%
---------------------------------------------------------------------------
$500,000-$999,999 2.00% 2.04% 1.60%
---------------------------------------------------------------------------
$1,000,000* NONE NONE NONE
---------------------------------------------------------------------------
</TABLE>
* For Funds other than the Equity Index Fund and the Market Expansion Index
Funds, if you purchase $1 million or more of Class A shares and are not
assessed a sales charge at the time of purchase, you will be charged the
equivalent of 1% of the purchase price if you redeem any or all of the Class
A shares within one year of purchase and 0.50% of the purchase price if you
redeem within two years of purchase. If you purchase $1 million or more of
Class A shares of the Equity Index Fund or the Market Expansion Index Fund
and are not assessed a sales charge at the time of purchase, you will be
charged the equivalent of 0.50% of the purchase price if you redeem any or
all of the Class A shares within one year of purchase. These charges apply
unless the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent is waiving its commission.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
-----------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A PERCENTAGE
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
---------------------------------
1-2 4.00%
---------------------------------
2-3 3.00%
---------------------------------
3-4 3.00%
---------------------------------
4-5 2.00%
---------------------------------
5-6 1.00%
---------------------------------
MORE THAN 6 NONE
---------------------------------
</TABLE>
The Distributor pays a commission of 4.00% of the original purchase price to
Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
-----------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A PERCENTAGE
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 1.00%
--------------------------------------
AFTER FIRST YEAR NONE
--------------------------------------
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from the Distributor.
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69
<PAGE>
----------------
How the CDSC is Calculated
. The Fund assumes that all purchases made in a given month were made on the
first day of the month.
. The CDSC is based on the current market value or the original cost of the
shares, whichever is less.
. No CDSC is imposed on share appreciation, nor is a CDSC imposed on shares
acquired through reinvestment of dividends or capital gains distributions.
. To keep your CDSC as low as possible, the Fund first will redeem the shares
you have held for the longest time and thus have the lowest CDSC.
. If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of One Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including the
period of time you have held those shares) will be applied to One Group
shares you receive in the reorganization.
12B-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 fees. 12b-1 fees are paid by
One Group Mutual Funds to the Distributor as compensation for its services and
expenses. The Distributor in turn pays all or part of the 12b-1 fee to
Shareholder Servicing Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net assets of
the Fund, which is currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the average daily
net assets of the Fund. This will cause expenses for Class B and Class C
shares to be higher and dividends to be lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
12b-1 fees, together with the CDSC, help the Distributor sell Class B and Class
C shares without an "up-front" sales charge by defraying the costs of advancing
brokerage commissions and other expenses paid to Shareholder Servicing Agents.
. The Distributor may use up to .25% of the fees for shareholder servicing and
up to .75% for distribution. During the last fiscal year, the Distributor
received 12b-1 fees totaling .25%, 1.00%, and 1.00% of the average daily net
assets of Class A, Class B and Class C shares, respectively.
. The Distributor may pay 12b-1 fees to its affiliates and to Banc One
Investment Advisors and its affiliates (or any sub-advisor).
Because 12b-1 fees are paid out of Fund assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
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70
<PAGE>
--------------------------------------------------------------------------------
Sales Charge Reductions and Waivers
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the higher of the market value or
original purchase price of any Class A, Class B or Class C shares of a Fund
(except a money market fund) that you (and your spouse and minor children)
already own to the amount of your next Class A purchase for purposes of
calculating the sales charge. An Intermediary also may take advantage of
this option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more funds over the next 13 months and pay the
same sales charge that you would have paid if all shares were purchased at
once. A percentage of your investment will be held in escrow until the full
amount covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your investment
representative. To determine if you are eligible for the accumulation
privilege, contact 1-800-480-4111. These programs may be terminated or amended
at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge has
been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
. One Group.
. Bank One Corporation and its subsidiaries and affiliates.
. The Distributor and its subsidiaries and affiliates.
. State Street Bank and Trust Company and its subsidiaries and affiliates.
. Broker-dealers who have entered into dealer agreements with One Group and
their subsidiaries and affiliates.
. An investment sub-advisor of a fund of One Group and such sub-advisor's
subsidiaries and affiliates.
4. Bought by:
. Affiliates of Bank One Corporation and certain accounts (other than IRA
Accounts) for which an Intermediary acts in a fiduciary, advisory, agency,
custodial or accounts which participate in select affinity programs with
Bank One Corporation and its affiliates and subsidiaries.
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71
<PAGE>
----------------
. Accounts as to which a bank or broker-dealer charges an asset allocation
fee, provided the bank or broker-dealer has an agreement with the
Distributor.
. Certain retirement and deferred compensation plans and trusts used to fund
those plans, including, but not limited to, those defined in sections
401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi trusts."
. Shareholder Servicing Agents who have a dealer arrangement with the
Distributor, who place trades for their own accounts or for the accounts of
their clients and who charge a management, consulting or other fee for
their services, as well as clients of such Shareholder Servicing Agents who
place trades for their own accounts if the accounts are linked to the
master account of such Shareholder Servicing Agent.
5. Bought with proceeds from the sale of Class I shares of a One Group Fund or
acquired in an exchange of Class I shares of a Fund for Class A shares of
the same Fund, but only if the purchase is made within 60 days of the sale
or distribution. Appropriate documentation may be required.
6. Bought with proceeds from the sale of shares of a mutual fund, including
Class A shares of a One Group Fund, for which a sales charge was paid, but
only if the purchase is made within 60 days of the sale or distribution.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the sale
or distribution and, at the time of the distribution, the employee benefit
plan had plan assets invested in a One Group Fund.
8. Bought with assets of One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
10. Purchased during a Fund's special offering.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver. For information on the Systematic Withdrawal Plan, please see "Can
I Redeem on a Systematic Basis?"
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the Distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability.
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72
<PAGE>
----------------
3. That represent a minimum required distribution from your One Group IRA
Account or other One Group qualifying retirement plan, but only if you are
at least age 70 1/2. Only your One Group assets are considered when
calculating that portion of your minimum required distribution that
qualifies for the waiver.
4. Exchanged in connection with plans of reorganization of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class B shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the exchange.
Please read "Do I Pay a Sales Charge on an Exchange?".
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver. For information on the Systematic Withdrawal Plan, please see "Can
I Redeem on a Systematic Basis?"
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability.
3. That represent a minimum required distribution from your One Group IRA
Account or other One Group qualifying retirement plan, but only if you are
at least age 70 1/2. Only your One Group assets are considered when
calculating that portion of your minimum required distribution that
qualifies for the waiver.
4. Exchanged in connection with plans of reorganization of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the exchange.
Please read "Do I Pay a Sales Charge on an Exchange?".
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
------
73
<PAGE>
--------------------------------------------------------------------------------
Waiver Qualifications
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, call 1-800-480-4111 or contact
your Shareholder Servicing Agent. These waivers will not continue indefinitely
and may be discontinued at any time without notice.
--------------------------------------------------------------------------------
Exchanging Fund Shares
You may make the following exchanges:
. Class I shares of a Fund may be exchanged for Class A shares of that Fund or
for Class A or Class I shares of another One Group Fund.
. Class A shares of a Fund may be exchanged for Class I shares of that Fund or
for Class A or Class I shares of another One Group Fund, but only if you are
eligible to purchase those shares.
. Class B shares of a Fund may be exchanged for Class B shares of another One
Group Fund.
. Class C shares of a Fund may be exchanged for Class C shares of another One
Group Fund.
. Class A shares of One Group Technology Fund purchased during the subscription
period may not be exchanged for Class A shares of any other One Group Fund
until July 30, 2001.
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in the
Systematic Exchange Privilege, please select it on your account application. To
learn more about it, please call 1-800-480-4111.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days
written notice.
When Are Exchanges Processed?
Exchanges are processed the same business day they are received, provided:
. State Street Bank and Trust Company receives the request by 4:00 p.m., ET.
. You have provided One Group with all of the information necessary to process
the exchange.
. You have received a current prospectus of the Fund or Funds in which you wish
to invest.
. You have contacted your Shareholder Servicing Agent, if necessary.
Do I Pay A Sales Charge On An Exchange?
Generally, you will not pay a sales charge on an exchange. However:
. You will pay a sales charge if you own Class I shares of a Fund and you want
to exchange those shares for Class A shares, unless you qualify for a sales
charge waiver (see above).
. You will pay a sales charge if you bought Class A shares of a Fund:
------
74
<PAGE>
1. That does not charge a sales charge and you want to exchange them for shares
of a Fund that does, in which case you would pay the sales charge applicable
to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that Fund's
sales charge and all other sales charges you have already paid.
. If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you exchanged,
or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class B or Class C shares is
carried over to your new shares.
Are Exchanges Taxable?
Generally:
. An exchange between classes of shares of the same Fund is not taxable for
federal income tax purposes.
. An exchange between Funds is considered a sale and generally results in a
capital gain or loss for federal income tax purposes.
. You should talk to your tax advisor before making an exchange.
Are There Limits On Exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
. To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity. Exchange activity is excessive if it exceeds two
substantive exchange redemptions within 30 days of each other.
. Excessive exchange activity will result in revocation of your exchange
privilege.
. In addition, One Group reserves the right to reject any exchange request
(even those that are not excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or otherwise adversely
affect other shareholders.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to exchanges, your account
value falls below the minimum required balance. For information on minimum
required balances, please read, "How Do I Open An Account?"
--------------------------------------------------------------------------------
Redeeming Fund Shares
When can I redeem shares?
You may redeem all or some of your shares on any day that the Funds are open
for business.
. Redemption requests received before 4:00 p.m. ET (or when the NYSE closes)
will be effective that day.
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75
<PAGE>
. All required documentation in the proper form must accompany a redemption
request. One Group may refuse to honor incomplete redemption requests.
How do I redeem shares?
. You may use any of the following methods to redeem your shares:
1. You may send a written redemption request to your Shareholder Servicing
Agent, if applicable, or to State Street Bank and Trust Company at the
following address:
ONE GROUP MUTUAL FUNDS
C/O STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8528
BOSTON, MA 02266-8528
2. You may use the One Group website at www.onegroup.com; or
3. You may redeem over the telephone. Please see "Can I Redeem By Telephone?"
for more information.
. All requests for redemptions from IRA accounts must be in writing.
. You may request redemption forms by calling 1-800-480-4111 or visiting
www.onegroup.com.
. One Group may require that the signature on your redemption request be
guaranteed by a participant in the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for shares worth $50,000 or less; and
2. the redemption is payable to the shareholder of record; and
3. the redemption check is mailed to the shareholder at the record address or
the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
. On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
. One Group may charge you a wire redemption fee. The current charge is $7.00.
. Your redemption proceeds will be paid within seven days after receipt of the
redemption request.
What Will My Shares Be Worth?
. If you own Class A and Class I shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that
day's NAV.
. If you own Class B or Class C shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that
day's NAV, minus the amount of any applicable CDSC.
Can I Redeem By Telephone?
Yes, if you selected this option on your Account Application Form.
. Contact your Shareholder Servicing Agent or call 1-800-480-4111 to relay your
redemption request.
. Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
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76
<PAGE>
----------------
. State Street Bank and Trust Company may charge you a wire redemption fee. The
current charge is $7.00.
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. Redemptions from your IRA account may not be made by telephone.
Can I Redeem On A Systematic Basis?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each. This $10,000
minimum does not apply to minimum required distributions from your One Group
IRA or other qualifying retirement plan.
. Select the "Systematic Withdrawal Plan" option on the Account Application
Form.
. Specify the amount you wish to receive and the frequency of the payments.
. You may designate a person other than yourself as the payee.
. There is no charge for this service.
. If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A shares while
participating in a Systematic Withdrawal Plan. This is because Class A
shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated payee may
receive systematic payments. The applicable Class B or Class C sales
charge is waived provided your withdrawals do not exceed 10% of your
account value annually measured from the date you begin participating in
the Plan. Shares received from dividend and capital gains reinvestment are
included in calculating the 10%. Withdrawals in excess of 10% will subject
the entire annual withdrawal to the applicable sales load.
3. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from a One
Group IRA or other One Group qualifying retirement plan. Only One Group
assets are considered when calculating your minimum required distribution.
4. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
. Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more of a Fund's assets, the Fund reserves the right to pay
part or all of your redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the Fund will value the
securities selected in the same manner in which it computes its NAV. This
process minimizes the effect of large redemptions on the Fund and its
remaining shareholders.
. If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares
------
77
<PAGE>
and close the account if, due to redemptions, your account value falls below
the minimum required balance. The above provision does not apply to accounts
participating in the Systematic Withdrawal Plan. For information on minimum
required balances, please read, "How Do I Open An Account?"
No CDSC is charged on such redemptions.
. One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
. You generally will recognize a gain or loss on a redemption for federal
income tax purposes. You should talk to your tax advisor before making a
redemption.
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78
<PAGE>
ONE GROUP(R)
------------------
Shareholder Information
--------------------------------------------------------------------------------
Voting Rights
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each
Fund, and each class of shares within each Fund, vote separately on matters
relating solely to that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal voting rights on matters
that affect all shareholders equally.
--------------------------------------------------------------------------------
Dividend Policies
DIVIDENDS. Except for the Balanced Fund, the Equity Income Fund, the
International Equity Index Fund, the Diversified International Fund, and the
Technology Fund, the Funds generally declare dividends on the last business day
of each quarter. The Balanced Fund and the Equity Income Fund generally declare
dividends on the last business day of the month. The International Equity Index
Fund, the Diversified International Fund, and the Technology Fund generally
declare dividends on the last business day of each year. Dividends for the
Funds are distributed on the first business day of the next month after they
are declared. Capital gains, if any, for all Funds are distributed at least
annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payments in cash. The price of the shares
is the NAV determined immediately following the dividend record date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street. You also may call 1-800-480-4111 to
make this change.
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<PAGE>
SPECIAL DIVIDEND RULES FOR CLASS B SHARES. Class B shares received as dividends
and capital gains distributions will be accounted for separately. Each time any
Class B shares (other than those in the sub-account) convert to Class A shares,
a percentage of the Class B shares in the sub-account will also convert to
Class A shares. (See "Conversion Feature.")
--------------------------------------------------------------------------------
Tax Treatment of Shareholders
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange, or redemption of Fund
shares generally will produce either a taxable gain or a loss. You are
responsible for any tax liabilities generated by your transactions.
Taxation of Distributions
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses) and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) on at least an
annual basis. Dividends you receive from a Fund, whether reinvested or received
in cash, will be taxable to you. Dividends from a Fund's net investment income
will be taxable as ordinary income and distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
Taxation of Foreign Investments
With respect to the International Equity Index Fund and the Diversified
International Fund, the Funds' investments in foreign securities may be subject
to foreign withholding. In that case, the Funds' yield on those securities
would be reduced. You may, however, be entitled to claim a credit or deduction
with respect to foreign taxes. In addition, the Funds' investments in foreign
securities or foreign currencies may increase or accelerate the Funds'
recognition of ordinary income and may affect the timing or amount of the
Funds' distributions.
Taxation of Retirement Plans
Distributions by the Funds to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for tax-
exempt treatment or by an individual who has received shares as a distribution
from a retirement plan, the distributions will be taxable to the plan or
individual as described in "Taxation of Distributions." If you are considering
purchasing shares with qualified retirement plan assets, you should consult
your tax advisor for a more complete explanation of the federal, state, local
and (if applicable) foreign tax consequences of making such an investment.
Tax Information
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note
------
80
<PAGE>
that this tax discussion is general in nature; no attempt has been made to
present a complete explanation of the federal, state, local or foreign tax
treatment of the Funds or their shareholders.
--------------------------------------------------------------------------------
Shareholder Statements and Reports
One Group or your Shareholder Servicing Agent will send you transaction
confirmation statements and quarterly account statements. Please review these
statements carefully. One Group will correct errors if notified within one year
of the date printed on the transaction confirmation or account statement. Your
Shareholder Servicing Agent may have a different cut-off time.
To reduce expenses and conserve natural resources, One Group will deliver a
single copy of prospectuses and financial reports to individual investors who
share a residential address, provided they have the same last name or One Group
reasonably believes they are members of the same family. If you would like to
receive separate mailings, please call 1-800-480-4111 and One Group will begin
individual delivery within 30 days. If you would like to receive these
documents by e-mail, please visit www.onegroup.com and sign up for electronic
delivery.
If you are the record owner of your One Group shares (that is, you did not use
a Shareholder Servicing Agent to buy your shares), you may access your account
statements at www.onegroup.com.
In March and September, you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
If you have any questions or need additional information, please write to One
Group Mutual Funds at 1111 Polaris Parkway, Columbus, OH 43271-1235, call 1-
800-480-4111 or visit www.onegroup.com.
------
81
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
Management of One
Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor to
the Trust since its inception. In addition, Banc One Investment Advisors serves
as investment advisor to other mutual funds and individual corporate,
charitable and retirement accounts. As of June 30, 2000, Banc One Investment
Advisors, an indirect wholly- owned subsidiary of Bank One Corporation, managed
over $131 billion in assets.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each Fund. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Small Cap Growth Fund .74%
---------------------------------------------------------------------
One Group(R) Small Cap Value Fund .62%
---------------------------------------------------------------------
One Group(R) Mid Cap Growth Fund .73%
---------------------------------------------------------------------
One Group(R) Mid Cap Value Fund .71%
---------------------------------------------------------------------
One Group(R) Diversified Mid Cap Fund .60%
---------------------------------------------------------------------
One Group(R) Large Cap Growth Fund .69%
---------------------------------------------------------------------
One Group(R) Large Cap Value Fund .74%
---------------------------------------------------------------------
One Group(R) Equity Income Fund .67%
---------------------------------------------------------------------
One Group(R) Diversified Equity Fund .72%
---------------------------------------------------------------------
One Group(R) Balanced Fund .54%
---------------------------------------------------------------------
One Group(R) Equity Index Fund .15%
---------------------------------------------------------------------
One Group(R) Market Expansion Index Fund .08%
---------------------------------------------------------------------
One Group(R) Technology Fund/1/ NA
---------------------------------------------------------------------
One Group(R) International Equity Index
Fund/2/ .55%
---------------------------------------------------------------------
One Group(R) Diversified International Fund .77%
---------------------------------------------------------------------
</TABLE>
/1/The Fund began operations on July 28, 2000 and does not have a full fiscal
year of advisory fees. Under the investment advisory agreement with the Fund,
Banc One Investment Advisors is entitled to a fee, which is calculated daily
and paid monthly, equal to 1.00% of the assets of the Fund.
/2/Includes fees paid by Banc One Investment Advisors to Independence
International, the former sub-advisor to the International Equity Index Fund.
------
82
<PAGE>
--------------------------------------------------------------------------------
The Fund Managers
The Funds are managed by teams of Fund managers, research analysts and other
investment management professionals. For all the Funds, except the
International Equity Index Fund, the Equity Index Fund, and the Market
Expansion Index Fund, each team member makes recommendations about the
securities in the Funds. The research analysts provide in-depth industry
analysis and recommendations, while the portfolio managers determine strategy,
industry weightings, Fund holdings and cash positions.
------
83
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Small Cap Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------- SEVEN MONTHS ENDED YEAR ENDED
CLASS A 2000 1999 1998 1997 JUNE 30, 1996(A) NOVEMBER 30, 1995
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.61 $ 12.02 $ 10.94 $ 10.73 $ 11.50 $ 9.36
-------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.01) (0.02) (0.03) (0.04) (0.07) (0.04)
Net realized and
unrealized gains
(losses)
from investments 3.19 (0.20) 2.44 1.35 1.40 2.35
-------------------------------------------------------------------------------------------------
Total from Investment
Activities 3.18 (0.22) 2.41 1.31 1.33 2.31
-------------------------------------------------------------------------------------------------
Distributions:
Net realized gains (0.88) (1.19) (1.33) (1.10) (2.10) (0.17)
Total Distributions (0.88) (1.19) (1.33) (1.10) (2.10) (0.17)
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 12.91 $ 10.61 $ 12.02 $ 10.94 $ 10.73 $ 11.50
-------------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 31.79% (0.53%) 23.28% 13.52% 12.85%(B) 25.07%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $71,858 $22,081 $21,634 $17,299 $18,356 $95,467
Ratio of expenses to
average net assets 1.30% 1.31% 1.31% 1.27% 1.05%(C) 1.03%
Ratio of net investment
income to average
net assets (0.48%) (0.24%) (0.31%) (0.41%) 0.33%(C) (0.36)%
Ratio of expenses to
average net assets* 1.41% 1.44% 1.44% 1.45% 1.07%(C) 1.03%
Portfolio turnover(D) 163.03% 127.83% 83.77% 92.01% 59.57% 65.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Paragon Gulf
South Growth Fund became the Small Cap Growth Fund. Financial Highlights for
the periods prior to March 26, 1996 represents the Paragon Gulf South Growth
Fund. The per share data for the periods prior to March 26, 1996 have been
restated to reflect the impact of restatement of net asset value from $15.70
to $10.00 effective March 26, 1996. (B) Not annualized. (C) Annualized. (D)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------- SEVEN MONTHS ENDED YEAR ENDED
CLASS B 2000 1999 1998 1997 JUNE 30, 1996 (A) NOVEMBER 30, 1995
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.26 $ 11.79 $10.84 $10.72 $11.56 $ 9.47
-----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.01) (0.06) (0.03) (0.10) (0.06) (0.07)
Net realized and
unrealized gains
(losses) from
investments 2.99 (0.28) 2.31 1.32 1.35 2.33
-----------------------------------------------------------------------------------------------
Total from Investment
Activities 2.98 (0.34) 2.28 1.22 1.29 2.26
-----------------------------------------------------------------------------------------------
Distributions:
Net realized gains (0.88) (1.19) (1.33) (1.10) (2.13) (0.17)
Total Distributions (0.88) (1.19) (1.33) (1.10) (2.13) (0.17)
-----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 12.36 $ 10.26 $11.79 $10.84 $10.72 $11.56
-----------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 30.89% (1.69%) 22.24% 12.74% 12.47%(B) 24.21%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $27,843 $10,278 $8,567 $3,835 $2,545 $1,814
Ratio of expenses to
average net assets 2.05% 2.06% 2.06% 2.02% 1.87%(C) 1.78%
Ratio of net investment
income to average net
assets (1.23%) (1.00%) (1.02%) (1.16%) (1.10%)(C) (1.16%)
Ratio of expenses to
average net assets* 2.06% 2.09% 2.09% 2.12% 1.92%(C) 1.78%
Portfolio turnover(D) 163.03% 127.83% 83.77% 92.01% 59.57% 65.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Paragon Gulf
South Growth Fund became the Small Cap Growth Fund. Financial Highlights for
the periods prior to March 26, 1996 represents the Paragon Gulf South Growth
Fund. The per share data for the periods prior to March 26, 1996 have been
restated to reflect the impact of restatement of net asset value from $15.70
to $10.00 effective March 26, 1996. (B) Not annualized. (C) Annualized. (D)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
84
<PAGE>
------------------
Small Cap Growth Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE NOVEMBER 4,
30, 1997 TO
---------------- JUNE 30,
CLASS C 2000 1999 1998(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.43 $ 11.97 $13.03
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) - (0.08) (0.02)
Net realized and unrealized gains (losses) from
investments 3.07 (0.27) 0.29
-------------------------------------------------------------------------------
Total from Investment Activities 3.07 (0.35) 0.27
-------------------------------------------------------------------------------
Distributions:
Net realized gains (0.88) (1.19) (1.33)
Total Distributions (0.88) (1.19) (1.33)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.62 $ 10.43 $11.97
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 31.27% (1.75%) 3.08%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 770 $ 129 $ 90
Ratio of expenses to average net assets 2.05% 2.06% 2.05%(C)
Ratio of net investment income to average net
assets (1.24%) (1.02%) (0.85%)(C)
Ratio of expenses to average net assets* 2.06% 2.09% 2.07%(C)
Portfolio turnover(D) 163.03% 127.83% 83.77%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
MARCH 26,
YEAR ENDED JUNE 30, 1996 TO
------------------------------------- JUNE 30,
CLASS I 2000 1999 1998 1997 1996(A)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.62 $ 12.05 $ 10.94 $ 10.75 $ 10.00
------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.03) - - (0.02) -
Net realized and
unrealized gains
(losses) from
investments 3.26 (0.24) 2.44 1.31 0.78
------------------------------------------------------------------------------
Total from Investment
Activities 3.23 (0.24) 2.44 1.29 0.78
------------------------------------------------------------------------------
Distributions:
Net realized gains (0.88) (1.19) (1.33) (1.10) (0.03)
Total Distributions (0.88) (1.19) (1.33) (1.10) (0.03)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 12.97 $ 10.62 $ 12.05 $ 10.94 $ 10.75
------------------------------------------------------------------------------
Total Return 32.26% (0.72%) 23.58% 13.44% 13.39%(B)(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $253,626 $130,974 $114,951 $78,318 $83,371
Ratio of expenses to
average net assets 1.05% 1.06% 1.06% 1.02% 0.96%(D)
Ratio of net investment
income to average net
assets (0.23%) 0.00% (0.05%) (0.16%) (0.16%)(D)
Ratio of expenses to
average net assets* 1.06% 1.09% 1.09% 1.12% 1.05%(D)
Portfolio turnover(E) 163.03% 127.83% 83.77% 92.01% 59.57%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from date reorganized as a fund of One Group Mutual Funds. (B)
Not annualized. (C) Represents total return for Class A Shares from December
1, 1995 through March 25, 1996 plus total return for Class I Shares for the
period from March 26, 1996 through June 30, 1996. (D) Annualized. (E)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
85
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Small Cap Value Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER JANUARY 27,
31, 1995 TO
YEAR ENDED SIX MONTHS ENDED ------------------------ DECEMBER 31,
CLASS A JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995(B)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.04 $ 14.81 $ 16.03 $ 13.70 $12.20 $10.00
----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.03 (0.05) (0.10) (0.06) (0.02) 0.02
Net realized and
unrealized gains
(losses) from
investments (0.45) (0.64) (0.59) 4.16 3.02 2.45
----------------------------------------------------------------------------------------------
Total from Investment
Activities (0.42) (0.69) (0.69) 4.10 3.00 2.47
----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.10) - - - - (0.02)
Net realized gains - (0.08) (0.46) (1.77) (1.50) (0.25)
In excess of net
realized gains - - (0.07) - - -
Total Distributions (0.10) (0.08) (0.53) (1.77) (1.50) (0.27)
----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 13.52 $ 14.04 $ 14.81 $ 16.03 $13.70 $12.20
----------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) (2.94%) (4.61%)(C) (4.29%) 30.16% 24.59% 24.80%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $14,725 $26,592 $32,217 $21,836 $6,697 $ 672
Ratio of expenses to
average net assets 1.18% 1.17%(D) 1.19% 1.18% 1.13% 1.25%(D)
Ratio of net investment
income to average net
assets 0.60% (0.58%)(D) (0.73%) (0.68%) (0.29%) 0.19%(D)
Ratio of expenses to
average net assets* 1.40% 1.29%(D) 1.19% 1.18% 1.24% 2.56%(D)
Portfolio turnover(E) 146.46% 50.90% 42.39% 58.29% 93.82% 38.89%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Small
Cap Opportunity Fund became the Small Cap Value Fund. The Financial
Highlights for the periods prior to March 22, 1999 represent the Pegasus
Small Cap Opportunity Fund. (B) Period from commencement of operations. (C)
Not annualized. (D) Annualized. (E) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
------
86
<PAGE>
------------------
Small Cap Value Fund
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER JANUARY 27,
31, 1995 TO
YEAR ENDED SIX MONTHS ENDED ---------------------- DECEMBER 31,
CLASS B JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995(B)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.63 $14.41 $15.74 $13.58 $12.12 $10.00
---------------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.06) (0.11) (0.17) (0.07) (0.04) (0.03)
Net realized and
unrealized gains
(losses) from
investments (0.44) (0.59) (0.63) 4.00 3.00 2.40
---------------------------------------------------------------------------------------------
Total from Investment
Activities (0.50) (0.70) (0.80) 3.93 2.96 2.37
---------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.06) - - - - -
Net realized gains - (0.08) (0.46) (1.77) (1.50) (0.25)
In excess of net
realized gains - - (0.07) - - -
Total Distributions (0.06) (0.08) (0.53) (1.77) (1.50) (0.25)
---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 13.07 $13.63 $14.41 $15.74 $13.58 $12.12
---------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) (3.67%) (4.81%)(C) (5.11%) 29.17% 24.42% 23.76%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $ 2,531 $3,320 $4,014 $1,799 $ 110 $ 15
Ratio of expenses to
average net assets 1.93% 1.94%(D) 1.94% 1.93% 1.88% 2.00%(D)
Ratio of net investment
income to average net
assets (0.14%) (1.34%)(D) (1.48%) (1.43%) (1.04%) (0.51%)(D)
Ratio of expenses to
average net assets* 2.05% 2.02%(D) 1.94% 1.93% 3.04% 9.52%(D)
Portfolio turnover(E) 146.46% 50.90% 42.39% 58.29% 93.82% 38.89%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Small
Cap Opportunity Fund became the Small Cap Value Fund. The Financial
Highlights for the periods prior to March 22, 1999 represent the Pegasus
Small Cap Opportunity Fund. (B) Period from commencement of operations. (C)
Not annualized. (D) Annualized. (E) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
MARCH 22,
YEAR ENDED 1999 TO
JUNE 30, JUNE 30,
CLASS C 2000 1999(A)
----------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.60 $12.07
----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.06 -
Net realized and unrealized gains (losses) from
investments (0.55) 1.53
----------------------------------------------------------------------------
Total from Investment Activities (0.49) 1.53
----------------------------------------------------------------------------
Distributions:
Net investment income (0.06) -
Total Distributions (0.06) -
----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.05 $13.60
----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (3.57%) 12.68%(B)
ratios/supplementary data:
Net assets at end of period (000) $ 50 $ 19
Ratio of expenses to average net assets 1.94% 1.94%(C)
Ratio of net investment income to average net assets 0.21% (1.13%)(C)
Ratio of expenses to average net assets* 2.06% 2.11%(C)
Portfolio turnover(D) 146.46% 50.90%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
87
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Small Cap Value Fund
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, YEAR ENDED DECEMBER 31, JANUARY 27,
DECEMBER 31, SIX MONTHS ENDED ---------------------------- 1995 TO
CLASS I 2000 JUNE 30, 1999(A) 1998 1997 1996 1995(B)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.26 $ 15.02 $ 16.22 $ 13.80 $ 12.19 $ 10.00
-------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.13 (0.02) (0.07) (0.05) (0.01) 0.06
Net realized and
unrealized gains
(losses) from
investments (0.53) (0.66) (0.60) 4.24 3.13 2.44
-------------------------------------------------------------------------------------------------
Total from Investment
Activities (0.40) (0.68) (0.67) 4.19 3.12 2.50
-------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.12) - - - - (0.06)
In excess of net
investment income - - - - (0.01) -
Net realized gains - (0.08) (0.46) (1.77) (1.50) (0.25)
In excess of net
realized gains - - (0.07) - - -
Total Distributions (0.12) (0.08) (0.53) (1.77) (1.51) (0.31)
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 13.74 $ 14.26 $ 15.02 $ 16.22 $ 13.80 $ 12.19
-------------------------------------------------------------------------------------------------
Total Return (2.78%) (4.48%)(C) (4.11%) 30.60% 25.63% 25.08%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $179,923 $246,712 $276,754 $217,908 $125,840 $92,926
Ratio of expenses to
average net assets 0.93% 0.94%(D) 0.94% 0.93% 0.88% 0.85%(D)
Ratio of net investment
income to average net
assets 0.83% (0.35%)(D) (0.48%) (0.43%) (0.04%) 0.59%(D)
Ratio of expenses to
average net assets* 1.05% 1.03%(D) 0.94% 0.93% 1.02% 1.09%(D)
Portfolio turnover(E) 146.46% 50.90% 42.39% 58.29% 93.82% 38.89%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Small
Cap Opportunity Fund became the Small Cap Value Fund. The Financial
Highlights for the periods prior to March 22, 1999 represent the Pegasus
Small Cap Opportunity Fund. (B) Period from commencement of operations. (C)
Not annualized. (D) Annualized. (E) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
------
88
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Mid Cap Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------
CLASS A 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 25.02 $ 22.36 $ 19.37 $ 18.76 $ 18.36
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.11) (0.10) (0.08) 0.21 0.17
Net realized and unrealized
gains (losses) from
investments 8.40 5.46 5.65 3.58 3.80
------------------------------------------------------------------------------
Total from Investment
Activities 8.29 5.36 5.57 3.79 3.97
------------------------------------------------------------------------------
Distributions:
Net investment income - - - (0.24) (0.15)
In excess of net investment
income - - - (0.02) -
Net realized gains (4.08) (2.70) (2.58) (2.92) (3.42)
Total Distributions (4.08) (2.70) (2.58) (3.18) (3.57)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 29.23 $ 25.02 $ 22.36 $ 19.37 $ 18.76
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 36.25% 27.87% 30.95% 22.52% 24.32%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $343,284 $159,292 $95,647 $43,370 $28,052
Ratio of expenses to average
net assets 1.24% 1.24% 1.25% 1.25% 1.25%
Ratio of net investment income
to average net assets (0.64%) (0.60%) (0.60%) 0.92% 0.90%
Ratio of expenses to average
net assets* 1.34% 1.34% 1.35% 1.34% 1.36%
Portfolio turnover(A) 181.78% 141.46% 158.43% 301.35% 435.30%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------
CLASS B 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 23.67 $ 21.44 $ 18.82 $ 18.43 $ 18.14
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.12) (0.18) (0.15) 0.11 0.09
Net realized and unrealized
gains (losses) from
investments 7.70 5.11 5.35 3.44 3.69
------------------------------------------------------------------------------
Total from Investment
Activities 7.58 4.93 5.20 3.55 3.78
------------------------------------------------------------------------------
Distributions:
Net investment income - - - (0.22) (0.07)
In excess of net investment
income - - - (0.02) -
Net realized gains (4.08) (2.70) (2.58) (2.92) (3.42)
Total Distributions (4.08) (2.70) (2.58) (3.16) (3.49)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.17 $ 23.67 $ 21.44 $ 18.82 $ 18.43
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 35.23% 26.96% 29.79% 21.73% 23.53%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $316,729 $147,600 $90,930 $37,409 $12,910
Ratio of expenses to average
net assets 1.99% 1.99% 2.00% 2.00% 2.00%
Ratio of net investment income
to average net assets (1.39%) (1.35%) (1.35%) 0.01% 0.15%
Ratio of expenses to average
net assets* 1.99% 1.99% 2.00% 2.00% 2.01%
Portfolio turnover(A) 181.78% 141.46% 158.43% 301.35% 435.30%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
89
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Mid Cap Growth Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE
30, NOVEMBER 4,
---------------- 1997 TO JUNE 30,
CLASS C 2000 1999 1998(A)
------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.04 $ 22.42 $ 21.47
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.20) (0.15) (0.04)
Net realized and unrealized gains (losses)
from investments 8.33 5.47 2.77
------------------------------------------------------------------------------
Total from Investment Activities 8.13 5.32 2.73
------------------------------------------------------------------------------
Distributions:
Net realized gains (4.08) (2.70) (1.78)
Total Distributions (4.08) (2.70) (1.78)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 29.09 $ 25.04 $ 22.42
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 35.50% 27.57% 14.27%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $64,422 $16,597 $ 1,088
Ratio of expenses to average net assets 1.99% 1.99% 2.01%(C)
Ratio of net investment income to average
net assets (1.40%) (1.32%) (1.31%)(C)
Portfolio turnover (D) 181.78% 141.46% 158.43%
</TABLE>
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 25.32 $ 22.51 $ 19.46 $ 18.81 $ 18.40
------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.10) (0.07) (0.07) 0.25 0.20
Net realized and
unrealized gains
(losses) from
investments 8.59 5.58 5.70 3.59 3.83
------------------------------------------------------------------------------
Total from Investment
Activities 8.49 5.51 5.63 3.84 4.03
------------------------------------------------------------------------------
Distributions:
Net investment income - - - (0.25) (0.20)
In excess of net
investment income - - - (0.02) -
Net realized gains (4.08) (2.70) (2.58) (2.92) (3.42)
Total Distributions (4.08) (2.70) (2.58) (3.19) (3.62)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 29.73 $ 25.32 $ 22.51 $ 19.46 $ 18.81
------------------------------------------------------------------------------
Total Return 36.65% 28.39% 31.11% 22.75% 24.63%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,624,824 $1,164,884 $868,901 $623,911 $532,525
Ratio of expenses to
average net assets 0.99% 0.99% 1.00% 0.99% 1.00%
Ratio of net investment
income to average net
assets (0.38%) (0.35%) (0.36%) 1.32% 1.15%
Ratio of expenses to
average net assets* 0.99% 0.99% 1.00% 0.99% 1.01%
Portfolio turnover(A) 181.78% 141.46% 158.43% 301.35% 435.30%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
90
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Mid Cap Value Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------
CLASS A 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.93 $ 16.93 $ 15.68 $ 14.72 $ 13.22
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.09 0.09 0.10 0.19 0.25
Net realized and unrealized
gains (losses) from investments (0.15) 0.26 3.99 2.57 2.28
-------------------------------------------------------------------------------
Total from Investment Activities (0.06) 0.35 4.09 2.76 2.53
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.09) (0.09) (0.10) (0.19) (0.25)
Net realized gains (1.30) (2.26) (2.74) (1.61) (0.78)
Total Distributions (1.39) (2.35) (2.84) (1.80) (1.03)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.48 $ 14.93 $ 16.93 $ 15.68 $ 14.72
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 0.05% 3.70% 27.90% 20.21% 19.80%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $88,721 $122,392 $29,443 $23,909 $20,838
Ratio of expenses to average net
assets 1.22% 1.21% 1.21% 1.23% 1.24%
Ratio of net investment income
to average net assets 0.67% 0.28% 0.60% 1.26% 1.79%
Ratio of expenses to average net
assets* 1.34% 1.31% 1.31% 1.31% 1.35%
Portfolio turnover(A) 110.43% 115.65% 106.41% 92.66% 90.55%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS B 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.80 $ 16.85 $ 15.64 $ 14.69 $ 13.19
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.01) - (0.02) 0.08 0.15
Net realized and unrealized gains
(losses) from investments (0.14) 0.22 3.98 2.55 2.27
-------------------------------------------------------------------------------
Total from Investment Activities (0.15) 0.22 3.96 2.63 2.42
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.01) (0.01) (0.01) (0.07) (0.14)
Net realized gains (1.30) (2.26) (2.74) (1.61) (0.78)
Total Distributions (1.31) (2.27) (2.75) (1.68) (0.92)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.34 $ 14.80 $ 16.85 $ 15.64 $ 14.69
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) (0.61%) 2.76% 26.97% 19.19% 18.93%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $33,734 $41,380 $30,094 $20,499 $16,305
Ratio of expenses to average net
assets 1.97% 1.95% 1.96% 1.98% 1.99%
Ratio of net investment income to
average net assets (0.07%) (0.25%) (0.15%) 0.51% 1.04%
Ratio of expenses to average net
assets* 1.99% 1.96% 1.96% 1.98% 2.00%
Portfolio turnover(A) 110.43% 115.65% 106.41% 92.66% 90.55%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
91
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Mid Cap Value Fund
<TABLE>
<CAPTION>
MARCH 22, 1999
YEAR ENDED TO
CLASS C JUNE 30, 2000 JUNE 30, 1999(A)
-------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.80 $ 13.34
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.03 -
Net realized and unrealized gains (losses) from
investments (0.15) 1.46
-------------------------------------------------------------------------------
Total from Investment Activities (0.12) 1.46
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.03) -
Net realized gains (1.30) -
Total Distributions (1.33) -
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.35 $ 14.80
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (0.40%) 10.98%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 169 $ 48
Ratio of expenses to average net assets 1.97% 1.95%(C)
Ratio of net investment income to average net
assets (0.10%) (0.44%)(C)
Ratio of expenses to average net assets* 2.00% 1.96%(C)
Portfolio turnover(D) 110.43% 115.65%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 14.88 $ 16.90 $ 15.65 $ 14.69 $ 13.20
-------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.12 0.13 0.14 0.22 0.29
Net realized and
unrealized gains (losses)
from investments (0.14) 0.24 3.99 2.57 2.27
-------------------------------------------------------------------------------
Total from Investment
Activities (0.02) 0.37 4.13 2.79 2.56
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.12) (0.13) (0.14) (0.22) (0.29)
Net realized gains (1.30) (2.26) (2.74) (1.61) (0.78)
Total Distributions (1.42) (2.39) (2.88) (1.83) (1.07)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 13.44 $ 14.88 $ 16.90 $ 15.65 $ 14.69
-------------------------------------------------------------------------------
Total Return 0.38% 3.82% 28.27% 20.56% 20.10%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000) $963,410 $1,057,827 $634,672 $562,302 $522,474
Ratio of expenses to
average net assets 0.97% 0.95% 0.96% 0.98% 0.99%
Ratio of net investment
income to average net
assets 0.93% 0.94% 0.85% 1.52% 2.04%
Ratio of expenses to
average net assets* 0.99% 0.96% 0.96% 0.98% 1.00%
Portfolio turnover(A) 110.43% 115.65% 106.41% 92.66% 90.55%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
92
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Diversified Mid Cap Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED --------------------------------------
CLASS A JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.96 $ 20.35 $ 20.89 $ 17.61 $ 15.15 $ 13.34
-----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.01) (0.04) (0.07) (0.03) 0.02 0.06
Net realized and
unrealized gains
(losses)
from investments 2.58 1.70 0.92 4.87 3.74 2.57
-----------------------------------------------------------------------------------------------
Total from Investment
Activities 2.57 1.66 0.85 4.84 3.76 2.63
-----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.02) - - - (0.02) (0.06)
Net realized gains (3.01) (0.05) (1.39) (1.56) (1.28) (0.76)
Total Distributions (3.03) (0.05) (1.39) (1.56) (1.30) (0.82)
-----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 21.50 $ 21.96 $ 20.35 $ 20.89 $ 17.61 $ 15.15
-----------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 13.74% 8.21%(B) 4.30% 27.56% 24.91% 19.88%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $217,623 $242,528 $278,279 $234,020 $91,516 $71,858
Ratio of expenses to
average net assets 1.11% 1.10%(C) 1.15% 1.09% 0.93% 0.89%
Ratio of net investment
income to average net
assets (0.01)% (0.30)%(C) (0.33)% (0.20)% 0.12% 0.37%
Ratio of expenses to
average net assets* 1.35% 1.22%(C) 1.15% 1.09% 0.93% 0.89%
Portfolio turnover(D) 70.01% 23.53% 26.89% 37.54%(E) 34.87% 53.55%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Mid
Cap Opportunity Fund became the Diversified Mid Cap Fund. The Financial
Highlights for the periods prior to March 22, 1999, represent the Pegasus
Mid Cap Opportunity Fund. (B) Not annualized. (C) Annualized. (D) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (E) The Portfolio
Turnover Percentage was adjusted for Redemptions In-Kind for shareholders
that took place during 1997. The Fund's securities sales were appropriately
reduced by the fair market value of the Redemptions In-Kind. The Redemptions
In-Kind for the Fund was approximately $4 million.
------
93
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Diversified Mid Cap Fund
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 23,
DECEMBER 31, 1996 TO
YEAR ENDED SIX MONTHS ENDED -------------- DECEMBER 31,
CLASS B JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996(A)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.23 $ 9.55 $10.58 $ 9.57 $10.00
---------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.02) (0.07) (0.09) (0.03) -
Net realized and
unrealized gains
(losses) from
investments 0.91 0.80 0.45 2.60 0.79
---------------------------------------------------------------------------------------
Total from Investment
Activities 0.89 0.73 0.36 2.57 0.79
---------------------------------------------------------------------------------------
Distributions:
Net investment income (0.01) - - - (0.01)
Net realized gains (3.01) (0.05) (1.39) (1.56) (1.21)
Total Distributions (3.02) (0.05) (1.39) (1.56) (1.22)
---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 8.10 $10.23 $ 9.55 $10.58 $ 9.57
---------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 13.01% 7.76%(C) 3.79% 27.10% 7.94%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $6,771 $6,283 $7,108 $3,965 $ 154
Ratio of expenses to
average net assets 1.86% 1.88%(D) 1.90% 1.84% 1.81%(D)
Ratio of net investment
income to average net
assets (0.75%) (1.08%)(D) (1.08%) (0.95%) (0.59%)(D)
Ratio of expenses to
average net assets* 2.00% 1.95%(D) 1.90% 1.84% 1.81%(D)
Portfolio turnover(E) 70.01% 23.53% 26.89% 37.54%(F) 34.87%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Mid
Cap Opportunity Fund became the Diversified Mid Cap Fund. The Financial
Highlights for the periods prior to March 22, 1999 represent the Pegasus Mid
Cap Opportunity Fund. (B) Period from commencement of operations. (C) Not
annualized. (D) Annualized. (E) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued. (F) The Portfolio Turnover Percentage was adjusted for
Redemptions In-Kind for shareholders that took place during 1997. The Fund's
securities sales were appropriately reduced by the fair market value of the
Redemptions In-Kind. The Redemptions In-Kind for the Fund was approximately
$4 million.
<TABLE>
<CAPTION>
MARCH 22,
YEAR ENDED 1999 TO
CLASS C JUNE 30, 2000 JUNE 30, 1999(A)
-------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.23 $ 8.93
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.07) -
Net realized and unrealized gains (losses) from
investments 0.95 1.30
-------------------------------------------------------------------------------
Total from Investment Activities 0.88 1.30
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.01) -
Net realized gains (3.01) -
Total Distributions (3.02) -
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.09 $ 10.23
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 12.83% 14.56%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 109 $ 15
Ratio of expenses to average net assets 1.86% 1.88%(C)
Ratio of net investment income to average net
assets (0.72%) (1.20%)(C)
Ratio of expenses to average net assets* 2.00% 1.99%(C)
Portfolio turnover(D) 70.01% 23.53%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
94
<PAGE>
------------------
Diversified Mid Cap Fund
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED ----------------------------------------
CLASS I JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 22.10 $ 20.46 $ 20.93 $ 17.61 $ 15.15 $ 13.34
-------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.06 (0.01) (0.01) 0.01 0.04 0.06
Net realized and
unrealized gains
(losses)
from investments 2.59 1.70 0.93 4.88 3.74 2.57
-------------------------------------------------------------------------------------------------
Total from Investment
Activities 2.65 1.69 0.92 4.89 3.78 2.63
-------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.05) - - (0.01) (0.04) (0.06)
Net realized gains (3.01) (0.05) (1.39) (1.56) (1.28) (0.76)
Total Distributions (3.06) (0.05) (1.39) (1.57) (1.32) (0.82)
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 21.69 $ 22.10 $ 20.46 $ 20.93 $ 17.61 $ 15.15
-------------------------------------------------------------------------------------------------
Total Return 14.03% 8.32%(B) 4.61% 27.91% 25.03% 19.88%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $832,959 $987,059 $987,256 $803,670 $677,608 $579,094
Ratio of expenses to
average net assets 0.86% 0.90%(C) 0.90% 0.84% 0.81% 0.89%
Ratio of net investment
income to average net
assets 0.24% (0.09%)(C) (0.08%) 0.05% 0.24% 0.37%
Ratio of expenses to
average net assets* 1.00% 0.97%(C) 0.90% 0.84% 0.81% 0.89%
Portfolio turnover(D) 70.01% 23.53% 26.89% 37.54%(E) 34.87% 53.55%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Mid
Cap Opportunity Fund became the Diversified Mid Cap Fund. The Financial
Highlights for the periods prior to March 22, 1999 represent the Pegasus Mid
Cap Opportunity Fund. (B) Not annualized. (C) Annualized. (D) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (E) The Portfolio
Turnover Percentage was adjusted for Redemptions In-Kind for shareholders
that took place during 1997. The Fund's securities sales were appropriately
reduced by the fair market value of the Redemptions In-Kind. The Redemptions
In-Kind for the Fund was approximately $4 million.
------
95
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Large Cap Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
CLASS A 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 26.86 $ 23.32 $ 19.92 $ 15.83 $ 13.83
--------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.07) (0.07) (0.01) 0.08 0.14
Net realized and unrealized
gains (losses) from
investments 3.97 5.97 6.30 4.88 2.17
--------------------------------------------------------------------------------
Total from Investment
Activities 3.90 5.90 6.29 4.96 2.31
--------------------------------------------------------------------------------
Distributions:
Net investment income - - - (0.07) (0.14)
In excess of net investment
income - - (0.01) - -
Net realized gains (3.34) (2.36) (2.88) (0.80) (0.17)
Total Distributions (3.34) (2.36) (2.89) (0.87) (0.31)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.42 $ 26.86 $ 23.32 $ 19.92 $ 15.83
--------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 14.99% 28.43% 35.43% 32.57% 16.85%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $662,088 $447,209 $199,052 $125,910 $75,114
Ratio of expenses to average
net assets 1.19% 1.21% 1.24% 1.24% 1.21%
Ratio of net investment
income to average net assets (0.38)% (0.43)% (0.04)% 0.44% 0.95%
Ratio of expenses to average
net assets* 1.29% 1.31% 1.34% 1.32% 1.34%
Portfolio turnover(A) 123.21% 86.34% 117.34% 57.17% 35.51%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
96
<PAGE>
------------------
Large Cap Growth Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
CLASS B 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 25.92 $ 22.73 $ 19.61 $ 15.63 $ 13.63
--------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.15) (0.09) (0.10) (0.04) 0.05
Net realized and unrealized
gains (losses) from
investments 3.71 5.64 6.10 4.82 2.17
--------------------------------------------------------------------------------
Total from Investment
Activities 3.56 5.55 6.00 4.78 2.22
--------------------------------------------------------------------------------
Distributions:
Net investment income - - - - (0.05)
Net realized gains (3.34) (2.36) (2.88) (0.80) (0.17)
Total Distributions (3.34) (2.36) (2.88) (0.80) (0.22)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 26.14 $ 25.92 $ 22.73 $ 19.61 $ 15.63
--------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 14.16% 27.54% 34.39% 31.74% 16.41%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $978,576 $617,672 $280,563 $132,268 $56,261
Ratio of expenses to average
net assets 1.94% 1.96% 1.99% 2.00% 1.96%
Ratio of net investment
income to average net assets (1.13%) (0.98%) (0.80%) (0.33%) 0.20%
Ratio of expenses to average
net assets* 1.94% 1.96% 1.99% 2.00% 1.99%
Portfolio turnover(A) 123.21% 86.34% 117.34% 57.17% 35.51%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 4,
JUNE 30, 1997 TO
--------------- JUNE 30,
CLASS C 2000 1999 1998(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.71 $22.57 $ 18.98
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.10) (0.04) (0.06)
Net realized and unrealized gains (losses) from
investments 3.64 5.54 4.99
-------------------------------------------------------------------------------
Total from Investment Activities 3.54 5.50 4.93
-------------------------------------------------------------------------------
Distributions:
Net realized gains (3.34) (2.36) (1.34)
Total Distributions (3.34) (2.36) (1.34)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.91 $25.71 $ 22.57
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 14.20% 27.52% 27.63%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $55,682 $8,328 $ 492
Ratio of expenses to average net assets 1.95% 1.95% 1.98%(C)
Ratio of net investment income to average net
assets (1.17%) (0.94%) (0.87%)(C)
Portfolio turnover(D) 123.21% 86.34% 117.34%
</TABLE>
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
------
97
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Large Cap Growth Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 26.15 $ 22.71 $ 19.44 $ 15.44 $ 13.47
----------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.03) - 0.04 0.12 0.18
Net realized and
unrealized gains
(losses) from
investments 3.90 5.80 6.13 4.79 2.14
----------------------------------------------------------------------------------
Total from Investment
Activities 3.87 5.80 6.17 4.91 2.32
----------------------------------------------------------------------------------
Distributions:
Net investment income - - (0.02) (0.11) (0.18)
Net realized gains (3.34) (2.36) (2.88) (0.80) (0.17)
Total Distributions (3.34) (2.36) (2.90) (0.91) (0.35)
----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 26.68 $ 26.15 $ 22.71 $ 19.44 $ 15.44
----------------------------------------------------------------------------------
Total Return 15.30% 28.78% 35.75% 33.11% 17.36%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $3,118,107 $3,052,729 $1,510,521 $1,142,864 $745,986
Ratio of expenses to
average net assets 0.94% 0.96% 0.99% 0.99% 0.96%
Ratio of net investment
income to average net
assets (0.12)% 0.07% 0.21% 0.69% 1.20%
Ratio of expenses to
average net assets* 0.94% 0.96% 0.99% 0.99% 0.99%
Portfolio turnover(A) 123.21% 86.34% 117.34% 57.17% 35.51%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
98
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Large Cap Value Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------
CLASS A 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 18.24 $ 16.77 $ 14.85 $ 12.87 $ 12.89
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.09 0.14 0.18 0.23 0.27
Net realized and unrealized
gains (losses) from
investments (1.14) 2.52 2.84 3.04 1.22
------------------------------------------------------------------------------
Total from Investment
Activities (1.05) 2.66 3.02 3.27 1.49
------------------------------------------------------------------------------
Distributions:
Net investment income (0.09) (0.14) (0.17) (0.23) (0.27)
Net realized gains (1.49) (1.05) (0.93) (1.06) (1.24)
Total Distributions (1.58) (1.19) (1.10) (1.29) (1.51)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.61 $ 18.24 $ 16.77 $ 14.85 $ 12.87
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) (6.06%) 17.39% 21.14% 26.90% 12.40%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $ 45,190 $28,448 $15,699 $14,832 $ 9,380
Ratio of expenses to average
net assets 1.21% 1.20% 1.20% 1.22% 1.22%
Ratio of net investment income
to average net assets 0.56% 0.90% 1.10% 1.72% 2.18%
Ratio of expenses to average
net assets* 1.31% 1.30% 1.30% 1.31% 1.33%
Portfolio turnover(A) 131.95% 40.69% 47.35% 77.05% 186.84%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------
CLASS B 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 18.25 $ 16.84 $ 14.95 $ 12.98 $ 12.96
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.02) 0.03 0.07 0.14 0.18
Net realized and unrealized
gains (losses) from
investments (1.12) 2.48 2.84 3.04 1.26
------------------------------------------------------------------------------
Total from Investment
Activities (1.14) 2.51 2.91 3.18 1.44
------------------------------------------------------------------------------
Distributions:
Net investment income (0.01) (0.05) (0.09) (0.15) (0.18)
Net realized gains (1.49) (1.05) (0.93) (1.06) (1.24)
Total Distributions (1.50) (1.10) (1.02) (1.21) (1.42)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.61 $ 18.25 $ 16.84 $ 14.95 $ 12.98
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) (6.56)% 16.30% 20.18% 25.86% 11.95%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $ 25,795 $24,877 $17,154 $ 9,288 $ 4,135
Ratio of expenses to average
net assets 1.96% 1.95% 1.95% 1.97% 1.97%
Ratio of net investment income
to average net assets (0.18)% 0.15% 0.33% 0.96% 1.43%
Ratio of expenses to average
net assets* 1.96% 1.95% 1.95% 1.97% 1.98%
Portfolio turnover(A) 131.95% 40.69% 47.35% 77.05% 186.84%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
99
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Large Cap Value Fund
<TABLE>
<CAPTION>
MARCH 22,
YEAR ENDED 1999 TO
JUNE 30, JUNE 30,
CLASS C 2000 1999(A)
----------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.24 $ 16.96
----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.01) 0.03
Net realized and unrealized gains (losses) from
investments (1.15) 1.28
----------------------------------------------------------------------------
Total from Investment Activities (1.16) 1.31
----------------------------------------------------------------------------
Distributions:
Net investment income (0.01) (0.03)
Net realized gains (1.49) -
Total Distributions (1.50) (0.03)
----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.58 $ 18.24
----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (6.63)% 7.74%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 2,536 $ 135
Ratio of expenses to average net assets 1.96% 1.95%(C)
Ratio of net investment income to average net assets (0.16)% 0.34%(C)
Portfolio turnover(D) 131.95% 40.69%
</TABLE>
(A) Period from commencement of operations. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 18.09 $ 16.70 $ 14.79 $ 12.83 $ 12.87
------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.13 0.18 0.21 0.27 0.31
Net realized and
unrealized gains
(losses) from
investments (1.10) 2.44 2.84 3.01 1.20
------------------------------------------------------------------------------
Total from Investment
Activities (0.97) 2.62 3.05 3.28 1.51
------------------------------------------------------------------------------
Distributions:
Net investment income (0.13) (0.18) (0.21) (0.26) (0.31)
Net realized gains (1.49) (1.05) (0.93) (1.06) (1.24)
Total Distributions (1.62) (1.23) (1.14) (1.32) (1.55)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 15.50 $ 18.09 $ 16.70 $ 14.79 $ 12.83
------------------------------------------------------------------------------
Total Return (5.64%) 17.26% 21.46% 27.10% 12.71%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,474,666 $1,095,686 $792,649 $686,156 $584,527
Ratio of expenses to
average net assets 0.96% 0.95% 0.95% 0.97% 0.97%
Ratio of net investment
income to average net
assets 0.82% 1.15% 1.34% 1.99% 2.43%
Ratio of expenses to
average net assets* 0.96% 0.95% 0.95% 0.97% 0.98%
Portfolio turnover(A) 131.95% 40.69% 47.35% 77.05% 186.84%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
100
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Equity Income Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------
CLASS A 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 24.45 $ 24.04 $ 21.90 $ 17.64 $ 15.11
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.25 0.27 0.25 0.31 0.38
Net realized and unrealized
gains (losses) from
investments (2.31) 2.08 4.37 4.87 3.20
-------------------------------------------------------------------------------
Total from Investment
Activities (2.06) 2.35 4.62 5.18 3.58
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.26) (0.26) (0.25) (0.31) (0.35)
Net realized gains (0.94) (1.68) (2.23) (0.61) (0.70)
Total Distributions (1.20) (1.94) (2.48) (0.92) (1.05)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.19 $ 24.45 $ 24.04 $ 21.90 $ 17.64
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) (8.61%) 10.94% 22.91% 30.39% 24.23%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $102,783 $135,420 $117,682 $78,976 $44,284
Ratio of expenses to average
net assets 1.16% 1.18% 1.25% 1.25% 1.23%
Ratio of net investment income
to average net assets 1.17% 1.17% 1.15% 1.65% 2.19%
Ratio of expenses to average
net assets* 1.35% 1.34% 1.35% 1.34% 1.36%
Portfolio turnover(A) 15.82% 16.22% 14.64% 28.18% 14.92%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------
CLASS B 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 24.50 $ 24.08 $ 21.95 $ 17.68 $ 15.14
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.09 0.09 0.26 0.17 0.24
Net realized and unrealized
gains (losses) from
investments (2.30) 2.10 4.36 4.89 3.23
-------------------------------------------------------------------------------
Total from Investment
Activities (2.21) 2.19 4.62 5.06 3.47
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.12) (0.09) (0.26) (0.18) (0.23)
Net realized gains (0.94) (1.68) (2.23) (0.61) (0.70)
Total Distributions (1.06) (1.77) (2.49) (0.79) (0.93)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.23 $ 24.50 $ 24.08 $ 21.95 $ 17.68
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) (9.22%) 10.18% 21.97% 29.48% 23.41%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $142,259 $197,016 $165,813 $79,518 $29,169
Ratio of expenses to average
net assets 1.91% 1.93% 1.99% 2.00% 1.98%
Ratio of net investment income
to average net assets 0.43% 0.40% 0.39% 0.89% 1.44%
Ratio of expenses to average
net assets* 2.00% 1.99% 1.99% 2.00% 2.01%
Portfolio turnover(A) 15.82% 16.22% 14.64% 28.18% 14.92%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
101
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Equity Income Fund
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, NOVEMBER 4, 1997
---------------- TO
CLASS C 2000 1999 JUNE 30, 1998(A)
------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.51 $ 24.08 $ 21.40
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.09 0.10 0.06
Net realized and unrealized gains (losses)
from investments (2.27) 2.11 3.39
------------------------------------------------------------------------------
Total from Investment Activities (2.18) 2.21 3.45
------------------------------------------------------------------------------
Distributions:
Net investment income (0.13) (0.10) (0.07)
Net realized gains (0.94) (1.68) (0.70)
Total Distributions (1.07) (1.78) (0.77)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.26 $ 24.51 $ 24.08
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (9.10%) 10.24% 16.57%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 1,215 $ 658 $ 795
Ratio of expenses to average net assets 1.94% 1.94% 1.98%(C)
Ratio of net investment income to average
net assets 0.37% 0.36% 0.38%(C)
Ratio of expenses to average net assets* 2.01% 1.99% 1.98%(C)
Portfolio turnover(D) 15.82% 16.22% 14.64%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 24.50 $ 24.07 $ 21.93 $ 17.65 $ 15.13
-------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.33 0.31 0.32 0.36 0.40
Net realized and
unrealized gains (losses)
from investments (2.32) 2.11 4.36 4.89 3.22
-------------------------------------------------------------------------------
Total from Investment
Activities (1.99) 2.42 4.68 5.25 3.62
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.32) (0.31) (0.31) (0.36) (0.40)
Net realized gains (0.94) (1.68) (2.23) (0.61) (0.70)
Total Distributions (1.26) (1.99) (2.54) (0.97) (1.10)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 21.25 $ 24.50 $ 24.07 $ 21.93 $ 17.65
-------------------------------------------------------------------------------
Total Return (8.34)% 11.29% 23.18% 30.90% 24.53%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000) $584,810 $1,120,181 $691,878 $649,007 $321,827
Ratio of expenses to
average net assets 0.91% 0.91% 1.00% 1.00% 0.98%
Ratio of net investment
income to average net
assets 1.44% 1.40% 1.39% 1.91% 2.44%
Ratio of expenses to
average net assets* 1.01% 0.98% 1.00% 1.00% 1.01%
Portfolio turnover(A) 15.82% 16.22% 14.64% 28.18% 14.92%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
102
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Diversified Equity Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED JUNE 30, ENDED YEAR ENDED
--------------------------- JUNE 30, NOVEMBER 30,
CLASS A 2000 1999 1998 1997 1996(A) 1995
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 15.16 $ 13.50 $ 11.50 $ 10.39 $ 11.15 $ 9.00
-----------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) - 0.02 0.05 0.09 0.94 0.12
Net realized and
unrealized gains
(losses) from
investments 0.72 2.51 3.36 2.83 0.08 2.44
-----------------------------------------------------------------------------------------
Total from Investment
Activities 0.72 2.53 3.41 2.92 1.02 2.56
-----------------------------------------------------------------------------------------
Distributions:
Net investment income (0.01) (0.03) (0.05) (0.08) (0.94) (0.12)
In excess of net
investment income - - - - (0.01) -
Net realized gains (0.87) (0.84) (1.36) (1.73) (0.83) (0.29)
Total Distributions (0.88) (0.87) (1.41) (1.81) (1.78) (0.41)
-----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 15.00 $ 15.16 $ 13.50 $ 11.50 $ 10.39 $ 11.15
-----------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 4.97% 20.36% 31.96% 31.53% 10.40%(B) 29.57%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $298,378 $340,736 $80,500 $47,306 $35,984 $217,978
Ratio of expenses to
average net assets 1.20% 1.20% 1.23% 1.23% 0.97%(C) 0.95%
Ratio of net investment
income to average net
assets (0.05)% 0.10% 0.40% 0.83% 0.85%(C) 1.25%
Ratio of expenses to
average net assets* 1.30% 1.30% 1.33% 1.34% 1.05%(C) 0.95%
Portfolio turnover(D) 37.98% 50.82% 62.37% 113.17% 65.21% 77.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Paragon Value
Growth Fund became the Diversified Equity Fund. Financial Highlights for the
periods prior to March 26, 1996 represent the Paragon Value Growth Fund. The
per share data for the periods prior to March 26, 1996 have been restated to
reflect the impact of restatement of net asset value from $15.26 to $10.00
effective March 26, 1996. (B) Not annualized. (C) Annualized. (D) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED JUNE 30, ENDED YEAR ENDED
------------------------- JUNE 30, NOVEMBER 30,
CLASS B 2000 1999 1998 1997 1996(A) 1995
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.97 $ 13.40 $ 11.47 $ 10.39 $11.16 $ 9.01
--------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.10) (0.07) (0.02) 0.01 0.91 0.05
Net realized and
unrealized gains
(losses) from
investments 0.70 2.48 3.31 2.82 0.07 2.46
--------------------------------------------------------------------------------------
Total from Investment
Activities 0.60 2.41 3.29 2.83 0.98 2.51
--------------------------------------------------------------------------------------
Distributions:
Net investment income - - - (0.02) (0.91) (0.07)
In excess of net
investment income - - - - (0.01) -
Net realized gains (0.87) (0.84) (1.36) (1.73) (0.83) (0.29)
Total Distributions (0.87) (0.84) (1.36) (1.75) (1.75) (0.36)
--------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 14.70 $ 14.97 $ 13.40 $ 11.47 $10.39 $11.16
--------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 4.23% 19.52% 30.89% 30.52% 9.96%(B) 28.74%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $55,227 $52,004 $25,501 $10,517 $4,673 $2,923
Ratio of expenses to
average net assets 1.95% 1.96% 1.98% 1.98% 1.86%(C) 1.70%
Ratio of net investment
income to average net
assets (0.80)% (0.80)% (0.35)% 0.07% 0.13%(C) 0.38%
Ratio of expenses to
average net assets* 1.95% 1.96% 1.98% 2.00% 1.94%(C) 1.70%
Portfolio turnover(D) 37.98% 50.82% 62.37% 113.17% 65.21% 77.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Paragon Value
Growth Fund became the Diversified Equity Fund. Financial Highlights for the
periods prior to March 26, 1996 represent the Paragon Value Growth Fund. The
per share data for the periods prior to March 26, 1996 have been restated to
reflect the impact of restatement of net asset value from $15.21 to $10.00
effective March 26, 1996. (B) Not annualized. (C) Annualized. (D) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
103
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Diversified Equity Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE NOVEMBER 4,
30, 1997 TO
---------------- JUNE 30,
CLASS C 2000 1999 1998(A)
------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.06 $ 13.47 $ 11.76
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.08) (0.03) -
Net realized and unrealized gains (losses)
from investments 0.69 2.46 2.35
------------------------------------------------------------------------------
Total from Investment Activities 0.61 2.43 2.35
------------------------------------------------------------------------------
Distributions:
Net investment income - - (0.01)
Net realized gains (0.87) (0.84) (0.63)
Total Distributions (0.87) (0.84) (0.64)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.80 $ 15.06 $ 13.47
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 4.27% 19.57% 20.87%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $16,780 $ 8,058 $ 1,234
Ratio of expenses to average net assets 1.95% 1.96% 1.99%(C)
Ratio of net investment income to average net
assets (0.82%) (0.57%) (0.43%)(C)
Portfolio turnover(D) 37.98% 50.82% 62.37%
</TABLE>
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
MARCH 26,
YEAR ENDED JUNE 30, 1996 TO
------------------------------------------ JUNE 30,
CLASS I 2000 1999 1998 1997 1996(A)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 15.19 $ 13.51 $ 11.51 $ 10.39 $ 10.00
-----------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.03 0.05 0.08 0.11 0.03
Net realized and
unrealized gains
(losses) from
investments 0.72 2.52 3.36 2.85 0.39
-----------------------------------------------------------------------------------
Total from Investment
Activities 0.75 2.57 3.44 2.96 0.42
-----------------------------------------------------------------------------------
Distributions:
Net investment income (0.02) (0.05) (0.08) (0.11) (0.03)
Net realized gains (0.87) (0.84) (1.36) (1.73) -
Total Distributions (0.89) (0.89) (1.44) (1.84) (0.03)
-----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 15.05 $ 15.19 $ 13.51 $ 11.51 $ 10.39
-----------------------------------------------------------------------------------
Total Return 5.23% 20.72% 32.26% 31.97% 10.49%(B)(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,895,968 $2,089,940 $630,340 $430,837 $191,212
Ratio of expenses to
average net assets 0.95% 0.95% 0.98% 0.98% 0.95%(D)
Ratio of net investment
income to average net
assets 0.20% 0.42% 0.66% 1.06% 1.13%(D)
Ratio of expenses to
average net assets* 0.95% 0.95% 0.98% 1.00% 1.04%(D)
Portfolio turnover(E) 37.98% 50.82% 62.37% 113.17% 65.21%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from date reorganized as a fund of One Group Mutual Funds. (B)
Represents total return for Class A Shares from December 1, 1995 through
March 25, 1996 plus total return for Class I Shares for the period from
March 26, 1996 through June 30, 1996. (C) Not annualized. (D) Annualized.
(E) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
104
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Balanced Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------
CLASS A 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.14 $ 13.81 $ 13.00 $ 11.72 $ 10.74
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.34 0.31 0.36 0.39 0.37
Net realized and unrealized
gains (losses) from investments 0.40 1.28 2.24 1.83 1.16
-------------------------------------------------------------------------------
Total from Investment Activities 0.74 1.59 2.60 2.22 1.53
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.35) (0.31) (0.36) (0.40) (0.37)
Net realized gains (0.53) (0.95) (1.43) (0.54) (0.18)
Total Distributions (0.88) (1.26) (1.79) (0.94) (0.55)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.00 $ 14.14 $ 13.81 $ 13.00 $ 11.72
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 5.48% 12.45% 21.71% 19.85% 14.48%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $135,367 $80,819 $50,456 $31,379 $17,849
Ratio of expenses to average net
assets 1.13% 1.10% 1.10% 1.05% 1.19%
Ratio of net investment income
to average net assets 2.53% 2.33% 2.77% 3.30% 3.33%
Ratio of expenses to average net
assets* 1.34% 1.30% 1.38% 1.34% 1.54%
Portfolio turnover(A) 57.08% 85.81% 46.04% 80.96% 73.38%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.20 $ 13.87 $ 13.04 $ 11.76 $ 10.76
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.25 0.21 0.26 0.30 0.28
Net realized and unrealized
gains (losses) from
investments 0.39 1.28 2.26 1.83 1.18
-------------------------------------------------------------------------------
Total from Investment
Activities 0.64 1.49 2.52 2.13 1.46
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.25) (0.21) (0.26) (0.31) (0.28)
Net realized gains (0.53) (0.95) (1.43) (0.54) (0.18)
Total Distributions (0.78) (1.16) (1.69) (0.85) (0.46)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.06 $ 14.20 $ 13.87 $ 13.04 $ 11.76
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 4.67% 11.59% 20.95% 18.90% 13.79%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $298,355 $238,490 $114,957 $43,900 $18,575
Ratio of expenses to average
net assets 1.88% 1.85% 1.85% 1.81% 1.94%
Ratio of net investment income
to average net assets 1.79% 1.58% 2.01% 2.54% 2.58%
Ratio of expenses to average
net assets* 1.99% 1.95% 2.03% 2.01% 2.19%
Portfolio turnover(A) 57.08% 85.81% 46.04% 80.96% 73.38%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
105
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Balanced Fund
<TABLE>
<CAPTION>
MAY 30, 2000 TO
CLASS C JUNE 30, 2000(A)
-----------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.75
-----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.01
Net realized and unrealized gains (losses) from investments 0.33
-----------------------------------------------------------------------------
Total from Investment Activities 0.34
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.03)
Total Distributions (0.03)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.06
-----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 2.44%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 763
Ratio of expenses to average net assets 1.89%(C)
Ratio of net investment income to average net assets 1.25%(C)
Ratio of expenses to average net assets* 2.01%(C)
Portfolio turnover(D) 57.08%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------
CLASS I 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.13 $ 13.80 $ 12.98 $ 11.71 $ 10.73
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.40 0.34 0.40 0.43 0.41
Net realized and unrealized
gains (losses) from
investments 0.38 1.28 2.24 1.81 1.16
-------------------------------------------------------------------------------
Total from Investment
Activities 0.78 1.62 2.64 2.24 1.57
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.39) (0.34) (0.39) (0.43) (0.41)
Net realized gains (0.53) (0.95) (1.43) (0.54) (0.18)
Total Distributions (0.92) (1.29) (1.82) (0.97) (0.59)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.99 $ 14.13 $ 13.80 $ 12.98 $ 11.71
-------------------------------------------------------------------------------
Total Return 5.74% 12.74% 22.12% 20.16% 14.87%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $139,496 $229,008 $105,243 $94,971 $50,323
Ratio of expenses to average
net assets 0.88% 0.85% 0.85% 0.80% 0.94%
Ratio of net investment income
to average net assets 2.81% 2.59% 3.03% 3.55% 3.58%
Ratio of expenses to average
net assets* 0.98% 0.95% 1.03% 1.00% 1.19%
Portfolio turnover(A) 57.08% 85.81% 46.04% 80.96% 73.38%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
106
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Equity Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------
CLASS A 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 31.78 $ 27.15 $ 21.81 $ 16.67 $ 14.02
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.22 0.22 0.26 0.29 0.27
Net realized and unrealized
gains (losses) from
investments 1.87 5.56 5.97 5.28 3.18
-------------------------------------------------------------------------------
Total from Investment
Activities 2.09 5.78 6.23 5.57 3.45
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.22) (0.23) (0.26) (0.28) (0.27)
In excess of net investment
income - - - - (0.01)
Net realized gains (0.45) (0.92) (0.63) (0.15) (0.52)
Total Distributions (0.67) (1.15) (0.89) (0.43) (0.80)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 33.20 $ 31.78 $ 27.15 $ 21.81 $ 16.67
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 6.61% 22.22% 29.33% 33.94% 25.16%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $903,371 $732,325 $218,518 $98,338 $32,186
Ratio of expenses to average
net assets 0.60% 0.60% 0.60% 0.55% 0.55%
Ratio of net investment income
to average net assets 0.69% 0.79% 1.11% 1.59% 1.93%
Ratio of expenses to average
net assets* 0.92% 0.92% 0.96% 0.95% 0.94%
Portfolio turnover(A) 7.89% 5.37% 4.32% 5.81% 9.08%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
CLASS B 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 31.72 $ 27.13 $ 21.80 $ 16.68 $ 14.05
--------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.01) 0.04 0.10 0.16 0.16
Net realized and unrealized
gains (losses) from
investments 1.84 5.53 5.97 5.27 3.16
--------------------------------------------------------------------------------
Total from Investment
Activities 1.83 5.57 6.07 5.43 3.32
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.01) (0.06) (0.11) (0.16) (0.16)
In excess of net investment
income - - - - (0.01)
Net realized gains (0.45) (0.92) (0.63) (0.15) (0.52)
Total Distributions (0.46) (0.98) (0.74) (0.31) (0.69)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 33.09 $ 31.72 $ 27.13 $ 21.80 $ 16.68
--------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 5.80% 21.32% 28.47% 32.93% 24.05%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $691,700 $534,777 $351,624 $168,699 $38,538
Ratio of expenses to average
net assets 1.35% 1.35% 1.35% 1.30% 1.30%
Ratio of net investment
income to average net assets (0.06%) 0.12% 0.36% 0.83% 1.18%
Ratio of expenses to average
net assets* 1.57% 1.57% 1.61% 1.61% 1.59%
Portfolio turnover(A) 7.89% 5.37% 4.32% 5.81% 9.08%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
107
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Equity Index Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE NOVEMBER 4,
30, 1997
----------------- TO JUNE 30,
CLASS C 2000 1999 1998(A)
------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 31.76 $ 27.14 $22.60
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.01 0.07 0.07
Net realized and unrealized gains (losses)
from investments 1.84 5.55 4.67
------------------------------------------------------------------------------
Total from Investment Activities 1.85 5.62 4.74
------------------------------------------------------------------------------
Distributions:
Net investment income (0.02) (0.08) (0.08)
Net realized gains (0.45) (0.92) (0.12)
Total Distributions (0.47) (1.00) (0.20)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 33.14 $ 31.76 $27.14
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.84% 21.52% 21.07%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $133,030 $59,042 $3,214
Ratio of expenses to average net assets 1.35% 1.35% 1.35%(C)
Ratio of net investment income to average net
assets (0.06)% 0.11% 0.27%(C)
Ratio of expenses to average net assets* 1.57% 1.57% 1.60%(C)
Portfolio turnover(D) 7.89% 5.37% 4.32%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 31.79 $ 27.16 $ 21.80 $ 16.66 $ 14.03
------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.31 0.31 0.33 0.35 0.33
Net realized and
unrealized gains
(losses) from
investments 1.86 5.54 5.98 5.27 3.16
------------------------------------------------------------------------------
Total from Investment
Activities 2.17 5.85 6.31 5.62 3.49
------------------------------------------------------------------------------
Distributions:
Net investment income (0.30) (0.30) (0.32) (0.33) (0.33)
In excess of net
investment income - - - - (0.01)
Net realized gains (0.45) (0.92) (0.63) (0.15) (0.52)
Total Distributions (0.75) (1.22) (0.95) (0.48) (0.86)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 33.21 $ 31.79 $ 27.16 $ 21.80 $ 16.66
------------------------------------------------------------------------------
Total Return 6.86% 22.50% 29.73% 34.30% 25.47%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,987,505 $1,855,947 $671,422 $480,819 $321,058
Ratio of expenses to
average net assets 0.35% 0.35% 0.35% 0.30% 0.30%
Ratio of net investment
income to average net
assets 0.95% 1.14% 1.37% 1.87% 2.18%
Ratio of expenses to
average net assets* 0.57% 0.57% 0.62% 0.61% 0.59%
Portfolio turnover(A) 7.89% 5.37% 4.32% 5.81% 9.08%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
108
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Market Expansion Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED JULY 31, 1998 TO
CLASS A JUNE 30, 2000 JUNE 30, 1999(A) DECEMBER 31, 1998(B)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.63 $10.53 $10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.05 0.03 -
Net realized and
unrealized gains (losses)
from investments 1.14 0.39 0.95
Capital contributions from
Investment Advisor 0.02 - -
-------------------------------------------------------------------------------
Total from Investment
Activities 1.21 0.42 0.95
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.05) (0.03) (0.01)
Net realized gains (2.73) (0.29) (0.41)
Total Distributions (2.78) (0.32) (0.42)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.06 $10.63 $10.53
-------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 13.93% 4.39%(C) 9.30%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000) $2,066 $ 277 $ 30
Ratio of expenses to
average net assets 0.82% 0.85%(D) 0.77%(D)
Ratio of net investment
income to average net
assets 0.51% 0.43%(D) 0.47%(D)
Ratio of expenses to
average net assets* 1.28% 1.42%(D) 1.24%(D)
Portfolio turnover(E) 64.29% 36.50% 20.18%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus
Market Expansion Index Fund became the Market Expansion Index Fund. The
Financial Highlights for the periods prior to March 22, 1999 represent the
Pegasus Market Expansion Index Fund. (B) Period from commencement of
operations. (C) Not annualized. (D) Annualized. (E) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED JULY 31, 1998 TO
CLASS B JUNE 30, 2000 JUNE 30, 1999(A) DECEMBER 31, 1998(B)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.74 $ 10.49 $ 10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.01) 0.02 (0.02)
Net realized and
unrealized gains (losses)
from investments 1.13 0.54 0.92
Capital contributions from
Investment Advisor 0.02 - -
-------------------------------------------------------------------------------
Total from Investment
Activities 1.14 0.56 0.90
-------------------------------------------------------------------------------
Distributions:
Net investment income - (0.02) -
Net realized gains (2.73) (0.29) (0.41)
Total Distributions (2.73) (0.31) (0.41)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.15 $ 10.74 $ 10.49
-------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 13.06% 5.75%(C) 9.85%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000) $ 2,495 $ 309 $ - (D)
Ratio of expenses to
average net assets 1.57% 1.60%(E) 1.87%(E)
Ratio of net investment
income to average net
assets (0.23)% (0.34)%(E) (0.59)%(E)
Ratio of expenses to
average net assets* 1.93% 2.13%(E) 2.14%(E)
Portfolio turnover(F) 64.29% 36.50% 20.18%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus
Market Expansion Index Fund became the Market Expansion Index Fund. The
Financial Highlights for the periods prior to March 22, 1999 represent the
Pegasus Market Expansion Index Fund. (B) Period from commencement of
operations. (C) Not annualized. (D) Amount is less than $1,000. (E)
Annualized. (F) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
109
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Market Expansion Index Fund
<TABLE>
<CAPTION>
YEAR ENDED MARCH 22, 1999 TO
CLASS C JUNE 30, 2000 JUNE 30, 1999(A)
-------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.57 $ 9.32
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.05) 0.02
Net realized and unrealized gains (losses)
from investments 1.15 1.25
Capital contributions from Investment Advisor 0.02 -
-------------------------------------------------------------------------------
Total from Investment Activities 1.12 1.27
-------------------------------------------------------------------------------
Distributions:
Net investment income - (B) (0.02)
Net realized gains (2.73) -
Total Distributions (2.73) (0.02)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.96 $ 10.57
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 13.11% 13.64%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 180 $ 18
Ratio of expenses to average net assets 1.57% 1.58%(D)
Ratio of net investment income to average net
assets (0.24)% (0.33)%(D)
Ratio of expenses to average net assets* 1.93% 2.17%(D)
Portfolio turnover(E) 64.29% 36.50%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Amount is less than $0.01.
(C) Not annualized. (D) Annualized. (E) Portfolio turnover is calculated on
the basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED JULY 31, 1998 TO
CLASS I JUNE 30, 2000 JUNE 30, 1999(A) DECEMBER 31, 1998(B)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.63 $ 10.52 $ 10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.07 0.03 0.03
Net realized and
unrealized gains (losses)
from investments 1.15 0.40 0.93
Capital contributions from
Investment Advisor 0.02 - -
-------------------------------------------------------------------------------
Total from Investment
Activities 1.24 0.43 0.96
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.07) (0.03) (0.03)
Net realized gains (2.73) (0.29) (0.41)
Total Distributions (2.80) (0.32) (0.44)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.07 $ 10.63 $ 10.52
-------------------------------------------------------------------------------
Total Return 14.30% 4.54%(C) 9.91%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000) $28,699 $28,871 $27,483
Ratio of expenses to
average net assets 0.57% 0.57%(D) 0.56%(D)
Ratio of net investment
income to average net
assets 0.72% 0.68%(D) 0.75%(D)
Ratio of expenses to
average net assets* 0.95% 0.97%(D) 1.12%(D)
Portfolio turnover(E) 64.29% 36.50% 20.18%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Market
Expansion Index Fund became the Market Expansion Index Fund. The Financial
Highlights for the periods prior to March 22, 1999 represent the Pegasus
Market Expansion Index Fund. (B) Period from commencement of operations. (C)
Not annualized. (D) Annualized. (E) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
------
110
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
International Equity Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------
CLASS A 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 18.68 $ 17.99 $ 16.92 $ 15.16 $ 13.92
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.11 0.29 0.19 0.11 0.14
Net realized and unrealized
gains (losses) from
investments 3.16 1.60 1.31 2.03 1.40
------------------------------------------------------------------------------
Total from Investment
Activities 3.27 1.89 1.50 2.14 1.54
------------------------------------------------------------------------------
Distributions:
Net investment income - (A) (0.35) - (0.13) (0.16)
In excess of net investment
income - - - (0.10) (0.02)
Net realized gains (0.29) (0.85) (0.43) (0.15) (0.12)
Total Distributions (0.29) (1.20) (0.43) (0.38) (0.30)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.66 $ 18.68 $ 17.99 $ 16.92 $ 15.16
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 17.58% 11.21% 9.34% 14.31% 11.20%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $67,967 $55,691 $24,060 $12,562 $10,789
Ratio of expenses to average
net assets 1.11% 1.10% 1.13% 1.11% 1.22%
Ratio of net investment income
to average net assets 0.51% 1.06% 1.11% 0.73% 0.79%
Ratio of expenses to average
net assets* 1.21% 1.20% 1.23% 1.19% 1.35%
Portfolio turnover(B) 13.85% 33.99% 9.90% 9.61% 6.28%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Amount is less than $0.01. (B) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------
CLASS B 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 17.89 $ 17.33 $ 16.44 $ 14.79 $13.73
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.04 0.10 0.08 0.09 0.03
Net realized and unrealized gains
(losses) from investments 2.99 1.55 1.24 1.86 1.32
-------------------------------------------------------------------------------
Total from Investment Activities 3.03 1.65 1.32 1.95 1.35
-------------------------------------------------------------------------------
Distributions:
Net investment income - (0.24) - (0.08) (0.15)
In excess of net investment income - - - (0.07) (0.02)
Net realized gains (0.29) (0.85) (0.43) (0.15) (0.12)
Total Distributions (0.29) (1.09) (0.43) (0.30) (0.29)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.63 $ 17.89 $ 17.33 $ 16.44 $14.79
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 16.99% 10.15% 8.48% 13.37% 9.97%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $29,007 $18,489 $13,307 $10,033 $5,856
Ratio of expenses to average net
assets 1.86% 1.83% 1.88% 1.86% 1.97%
Ratio of net investment income to
average net assets (0.25)% 0.10% 0.26% 0.08% 0.04%
Ratio of expenses to average net
assets* 1.86% 1.83% 1.88% 1.86% 2.00%
Portfolio turnover(A) 13.85% 33.99% 9.90% 9.61% 6.28%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
111
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
International Equity Index Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE
30,
---------------- NOVEMBER 4, 1997 TO
CLASS C 2000 1999 JUNE 30, 1998(A)
------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.55 $ 17.91 $ 15.70
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.01) 0.30 0.06
Net realized and unrealized gains
(losses) from investments 3.14 1.51 2.45
------------------------------------------------------------------------------
Total from Investment Activities 3.13 1.81 2.51
------------------------------------------------------------------------------
Distributions:
Net investment income - (0.32) -
Net realized gains (0.29) (0.85) (0.30)
Total Distributions (0.29) (1.17) (0.30)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.39 $ 18.55 $ 17.91
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 16.92% 10.78% 16.34%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $11,442 $ 2,339 $ 119
Ratio of expenses to average net assets 1.86% 1.86% 1.87%(C)
Ratio of net investment income to
average net assets (0.17%) 0.73% 2.88%(C)
Portfolio turnover(D) 13.85% 33.99% 9.90%
</TABLE>
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 18.63 $ 17.97 $ 16.89 $ 15.17 $ 13.93
--------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.14 0.19 0.21 0.15 0.11
Net realized and unrealized
gains (losses) from
investments 3.22 1.71 1.32 2.02 1.43
--------------------------------------------------------------------------------
Total from Investment
Activities 3.36 1.90 1.53 2.17 1.54
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.05) (0.39) (0.02) (0.17) (0.16)
In excess of net investment
income - - - (0.13) (0.02)
Net realized gains (0.29) (0.85) (0.43) (0.15) (0.12)
Total Distributions (0.34) (1.24) (0.45) (0.45) (0.30)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 21.65 $ 18.63 $ 17.97 $ 16.89 $ 15.17
--------------------------------------------------------------------------------
Total Return 18.09% 11.27% 9.54% 14.64% 11.22%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $795,657 $657,902 $586,741 $449,949 $347,790
Ratio of expenses to average
net assets 0.86% 0.85% 0.88% 0.86% 0.97%
Ratio of net investment
income to average net
assets 0.66% 1.03% 1.29% 1.00% 1.04%
Ratio of expenses to average
net assets* 0.86% 0.85% 0.88% 0.86% 1.00%
Portfolio turnover(A) 13.85% 33.99% 9.90% 9.61% 6.28%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
112
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Diversified International Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED ---------------------------------
CLASS A JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 15.08 $ 13.89 $ 12.11 $ 11.77 $ 11.05 $10.01
------------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.05 0.08 0.11 0.07 0.10 0.10
Net realized and
unrealized gains
(losses)
from investments 3.07 1.11 1.84 0.36 0.72 1.05
------------------------------------------------------------------------------------------
Total from Investment
Activities 3.12 1.19 1.95 0.43 0.82 1.15
------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.12) - (0.13) (0.09) (0.10) (0.11)
In excess of net
investment income - - (0.04) - - -
Net realized gains (0.18) - - - - -
Total Distributions (0.30) - (0.17) (0.09) (0.10) (0.11)
------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 17.90 $ 15.08 $ 13.89 $ 12.11 $ 11.77 $11.05
------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 20.66% 8.57%(B) 16.12% 3.69% 7.50% 11.47%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $35,605 $34,900 $44,232 $26,703 $10,836 $ 988
Ratio of expenses to
average net assets 1.30% 1.29%(C) 1.34% 1.35% 1.23% 1.16%
Ratio of net investment
income to average net
assets 0.29% 1.25%(C) 0.79% 0.80% 0.88% 1.43%
Ratio of expenses to
average net assets* 1.43% 1.37%(C) 1.34% 1.35% 1.23% 1.24%
Portfolio turnover(D) 17.05% 2.96% 8.50% 3.56% 6.37% 2.09%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus
International Equity Fund became the Diversified International Fund. The
Financial Highlights for the periods prior to March 22, 1999 represent the
Pegasus International Equity Fund. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED --------------- AUGUST 26, 1996 TO
CLASS B JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 DECEMBER 31, 1996(B)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.08 $13.01 $ 11.37 $11.08 $10.84
---------------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.07 0.03 0.01 0.01 0.04
Net realized and
unrealized gains
(losses)
from investments 2.71 1.04 1.74 0.34 0.24
---------------------------------------------------------------------------------------------
Total from Investment
Activities 2.78 1.07 1.75 0.35 0.28
---------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.08) - (0.08) (0.06) (0.04)
In excess of net
investment income - - (0.03) - -
Net realized gains (0.18) - - - -
Total Distributions (0.26) - (0.11) (0.06) (0.04)
---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 16.60 $14.08 $ 13.01 $11.37 $11.08
---------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 19.77% 8.22%(C) 15.43% 2.90% 2.62%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $ 7,269 $2,478 $ 2,545 $1,763 $1,131
Ratio of expenses to
average net assets 2.05% 2.05%(D) 2.09% 2.10% 2.05%(D)
Ratio of net investment
income to average net
assets (0.21%) 0.57%(D) 0.04% 0.05% 0.75%(D)
Ratio of expenses to
average net assets* 2.08% 2.08%(D) 2.09% 2.10% 2.05%(D)
Portfolio turnover(E) 17.05% 2.96% 8.50% 3.56% 6.37%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus
International Equity Fund became the Diversified International Fund. The
Financial Highlights for the periods prior to March 22, 1999 represent the
Pegasus International Equity Fund. (B) Period from commencement of
operations. (C) Not annualized. (D) Annualized. (E) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
------
113
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Diversified International Fund
<TABLE>
<CAPTION>
YEAR ENDED MARCH 22, 1999 TO
CLASS C JUNE 30, 2000 JUNE 30, 1999(A)
------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.08 $13.47
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.11 -
Net realized and unrealized gains (losses)
from investments 2.67 0.61
------------------------------------------------------------------------------
Total from Investment Activities 2.78 0.61
------------------------------------------------------------------------------
Distributions:
Net investment income (0.11) -
Net realized gains (0.18) -
Total Distributions (0.29) -
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.57 $14.08
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 19.76% 4.53%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 729 $ 5
Ratio of expenses to average net assets 2.06% 2.00%(C)
Ratio of net investment income to average net
assets 0.30% 1.58%(C)
Ratio of expenses to average net assets* 2.09% 2.00%(C)
Portfolio turnover(D) 17.05% 2.96%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED --------------------------------------
CLASS I JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 15.13 $ 13.93 $ 12.14 $ 11.79 $ 11.05 $ 10.01
-------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.11 0.11 0.14 0.10 0.11 0.10
Net realized and
unrealized gains
(losses)
from investments 3.06 1.09 1.85 0.37 0.74 1.05
-------------------------------------------------------------------------------------------------
Total from Investment
Activities 3.17 1.20 1.99 0.47 0.85 1.15
-------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.15) - (0.15) (0.12) (0.11) (0.11)
Net realized gains (0.18) - (0.05) - - -
Total Distributions (0.33) - (0.20) (0.12) (0.11) (0.11)
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 17.97 $ 15.13 $ 13.93 $ 12.14 $ 11.79 $ 11.05
-------------------------------------------------------------------------------------------------
Total Return 20.97% 8.61%(B) 16.43% 3.98% 7.90% 11.47%(B)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $851,758 $599,310 $569,522 $487,986 $389,997 $106,300
Ratio of expenses to
average net assets 1.05% 1.06%(C) 1.09% 1.10% 1.10% 1.16%(C)
Ratio of net investment
income to average
net assets 0.62% 1.59%(C) 1.04% 1.05% 1.01% 1.43%(C)
Ratio of expenses to
average net assets* 1.08% 1.09%(C) 1.09% 1.10% 1.10% 1.24%(C)
Portfolio turnover(D) 17.05% 2.96% 8.50% 3.56% 6.37% 2.09%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus
International Equity Fund became the Diversified International Fund. The
Financial Highlights for the periods prior to March 22, 1999 represent the
Pegasus International Equity Fund. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
114
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Funds, as well
as the risks inherent in their use. Equity securities are subject mainly to
market risk. Fixed income securities are primarily influenced by market, credit
and prepayment risks, although certain securities may be subject to additional
risks. For a more complete discussion, see the Statement of Additional
Information. Following the table is a more complete discussion of risk.
------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
--------------------------------------
<S> <C>
One Group(R) Small Cap
Growth Fund 1
--------------------------------------
One Group(R) Small Cap
Value Fund 2
--------------------------------------
One Group(R) Mid Cap Growth
Fund 3
--------------------------------------
One Group(R) Mid Cap Value
Fund 4
--------------------------------------
One Group(R) Diversified
Mid Cap Fund 5
--------------------------------------
One Group(R) Large Cap
Growth Fund 6
--------------------------------------
One Group(R) Large Cap
Value Fund 7
--------------------------------------
One Group(R) Equity Income
Fund 8
--------------------------------------
One Group(R) Diversified
Equity Fund 9
--------------------------------------
One Group(R) Balanced Fund 10
--------------------------------------
One Group(R) Equity Index
Fund 11
--------------------------------------
One Group(R) Market
Expansion Index Fund 12
--------------------------------------
One Group(R) Technology
Fund 13
--------------------------------------
One Group(R) International
Equity Index Fund 14
--------------------------------------
One Group(R) Diversified
International Fund 15
--------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-----------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS and 1-15 Market
CUBES.
-----------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs and CATS. 1-15 Market
-----------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by 1-15 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae and Freddie Mac.
-----------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a stated 1-15 Market
maturity. Credit
Liquidity
-----------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in 1-15 Liquidity
exchange for the deposit of funds. Credit
Market
-----------------------------------------------------------------------------
</TABLE>
------
115
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Common Stock: Shares of ownership of a company. 1-15 Market
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security and the 1-15 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
-------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a security and the 1-15 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Fund.
-------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% of the Fund's 1-15 Credit
total assets. In return, the Fund will receive cash, other Market
securities and/or letters of credit as collateral. Leverage
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase or 1-15 Market
contract to purchase securities at a fixed price for delivery Leverage
at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other mutual funds, 1-15 Market
including One Group money market funds and shares of other
money market funds for which Banc One Investment Advisors or
its affiliates serve as investment advisor or administrator.
Banc One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment advisor.
-------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock that can 1-15 Market
convert to common stock. Credit
-------------------------------------------------------------------------------
Call and Put Options: A call option gives the buyer the right 1-15 Management
to buy, and obligates the seller of the option to sell, a Liquidity
security at a specified price at a future date. A put option Credit
gives the buyer the right to sell, and obligates the seller of Market
the option to buy, a security at a specified price at a future Leverage
date. The Funds will sell only covered call and secured put
options.
-------------------------------------------------------------------------------
Futures and Related Options: A contract providing for the 1-15 Management
future sale and purchase of a specified amount of a specified Market
security, class of securities, or an index at a specified time Credit
in the future and at a specified price. Liquidity
Leverage
-------------------------------------------------------------------------------
Real Estate Investment Trusts ("REITS"): Pooled investment 1-15 Liquidity
vehicles which invest primarily in income producing real Management
estate or real estate related loans or interest. Market
Regulatory
Tax
Prepayment
-------------------------------------------------------------------------------
</TABLE>
------
116
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Bankers' Acceptances: Bills of exchange or time 1-15 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1-15 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
-------------------------------------------------------------------------------
Foreign Securities: Stocks issued by foreign 1-15 Market
companies, as well as commercial paper of foreign Political
issuers and obligations of foreign banks, overseas Liquidity
branches of U.S. banks and supranational entities. Foreign
Includes American Depositary Receipts Global Investment
Depositary Receipts, European Depositary Receipts
and American Depositary Securities.
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered 1-15 Liquidity
under the Securities Act of 1933, such as Market
privately placed commercial paper and Rule 144A
securities.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: 1-15 Credit
Obligations with interest rates which are reset Liquidity
daily, weekly, quarterly or some other period and Market
which may be payable to the Fund on demand.
-------------------------------------------------------------------------------
Rights and Warrants: Securities, typically issued 1, 2, 5-7, Market
with preferred stock or bonds, that give the 9-15 Credit
holder the right to buy a proportionate amount of
common stock at a specified price.
-------------------------------------------------------------------------------
Preferred Stock: A class of stock that generally 1-15 Market
pays a dividend at a specified rate and has
preference over common stock in the payment of
dividends and in liquidation.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations 2, 5, 10, 13, 15 Prepayment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs") and Real Estate Mortgage Investment Regulatory
Conduits ("REMICs").
-------------------------------------------------------------------------------
Corporate Debt Securities: Corporate bonds and 6, 10,13 Market
non- convertible debt securities. Credit
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to 10 Market
puts and standby commitments to purchase the Liquidity
securities at a fixed price (usually with accrued Management
interest) within a fixed period of time following
demand by a Fund.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by 2, 5, 10, 15 Prepayment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
-------------------------------------------------------------------------------
</TABLE>
------
117
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Mortgage Dollar Rolls: A transaction in which a Fund 2, 5, 10, 15 Prepayment
sells securities for delivery in a current month and Market
simultaneously contracts with the same party to Regulatory
repurchase similar but not identical securities on a
specified future date.
-------------------------------------------------------------------------------
Adjustable Rate Mortgage Loans ("ARMS"): Loans in a 10 Prepayment
mortgage pool which provide for a fixed initial Market
mortgage interest rate for a specified period of time, Credit
after which the rate may be subject to periodic Regulatory
adjustments.
-------------------------------------------------------------------------------
Swaps, Caps and Floors: A Fund may enter into these 1-15 Management
transactions to manage its exposure to changing Credit
interest rates and other factors. Swaps involve an Liquidity
exchange of obligations by two parties. Caps and Market
floors entitle a purchaser to a principal amount from
the seller of the cap or floor to the extent that a
specified index exceeds or falls below a predetermined
interest rate or amount.
-------------------------------------------------------------------------------
New Financial Products: New options and futures 1-15 Management
contracts and other financial products continue to be Credit
developed and the Funds may invest in such options, Market
contracts and products. Liquidity
-------------------------------------------------------------------------------
Structured Instruments: Debt securities issued by 1-10, Market
agencies and instrumentalities of the U.S. government, 12, 14, 15 Liquidity
banks, municipalities, corporations and other Management
businesses whose interest and/or principal payments Credit
are indexed to foreign currency exchange rates, Foreign
interest rates, or one or more other referenced Investment
indices.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state or 10 Market
political subdivision to obtain funds for various Credit
public purposes. Municipal securities include private Political
activity bonds and industrial development bonds, as Tax
well as General Obligation Notes, Tax Anticipation Regulatory
Notes, Bond Anticipation Notes, Revenue Anticipation
Notes, Project Notes, other short-term tax-exempt
obligations, municipal leases and obligations of
municipal housing authorities and single family
revenue bonds.
-------------------------------------------------------------------------------
Obligations of Supranational Agencies: Obligations of 2, 5, 10, Credit
supranational agencies which are chartered to promote 14, 15 Foreign
economic development and are supported by various Investment
governments and governmental agencies.
-------------------------------------------------------------------------------
</TABLE>
------
118
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Currency Futures and Related Options: The Funds may 14, 15 Management
engage in transactions in financial futures and Liquidity
related options, which are generally described above. Credit
The Funds will enter into these transactions in Market
foreign currencies for hedging purposes only. Political
Leverage
Foreign
Investment
-------------------------------------------------------------------------------
Forward Foreign Exchange Transactions: Contractual 14, 15 Management
agreement to purchase or sell one specified currency Liquidity
for another currency at a specified future date and Credit
price. The Funds will enter into forward foreign Market
exchange transactions for hedging purposes only. Political
Leverage
Foreign
Investment
-------------------------------------------------------------------------------
Index Shares: Ownership interests in unit investment 1-15 Market
trusts and other pooled investment vehicles that hold
a portfolio of securities or stocks designed to track
the price performance and dividend yield of a
particular index such as Standard & Poor's Depository
Receipts ("SPDRs") and Nasdaq 100's. The Equity Index
Fund invests only in SPDRs.
-------------------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other debt 2, 5, 10, 15 Credit
that pay no interest, but are issued at a discount Market
from their value at maturity. When held to maturity, Zero Coupon
their entire return equals the difference between
their issue price and their maturity value.
-------------------------------------------------------------------------------
Zero-Fixed-Coupon Debt Securities: Zero coupon debt 10 Credit
securities which convert on a specified date to Market
interest bearing debt securities. Zero Coupon
-------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative 10 Prepayment
multi-class mortgage securities usually structured Market
with two classes of shares that receive different Credit
proportions of the interest and principal from a pool Regulatory
of mortgage-backed obligations. These include IOs and
POs.
-------------------------------------------------------------------------------
Inverse Floating Rate Instruments: Floating rate debt 10 Market
instruments with interest rates that reset in the Leverage
opposite direction from the market rate of interest Credit
to which the inverse floater is indexed.
-------------------------------------------------------------------------------
Loan Participations and Assignments: Participations 10 Credit
in, or assignments of all or a portion of loans to Political
corporations or to governments, including governments Liquidity
of the less developed countries ("LDCs"). Foreign
Investment
Market
-------------------------------------------------------------------------------
</TABLE>
------
119
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-----------------------------------------------------------------------------
<S> <C> <C>
Fixed Rate Mortgage Loans: Investment in fixed rate mortgage 10 Credit
loans or mortgage pools which bear simple interest at fixed Prepayment
annual rates and have short- to long-term final maturities. Regulatory
Market
-----------------------------------------------------------------------------
Short-Term Funding Agreements: Funding agreements issued by 10 Credit
banks and highly rated U.S. insurance companies such as Liquidity
Guaranteed Investment Contracts ("GICs") and Bank Investment Market
Contracts ("BICs").
-----------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to actual
default as its credit status deteriorates and the probability of default
rises.
. Leverage Risk. The risk associated with securities or practices that multiply
small index or market movements into large changes in value. Leverage is
often associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
Fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching between
the derivative and underlying security, and there can be no assurance that a
Fund's hedging transactions will be effective.
Speculative. To the extent that a derivative is not used as a hedge, the
Fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater than
the derivative's original cost.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
. Management Risk. The risk that a strategy used by a Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
------
120
<PAGE>
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. There is
also the risk that the current interest rate may not accurately reflect
existing market rates. For fixed income securities, market risk is largely,
but not exclusively, influenced by changes in interest rates. A rise in
interest rates typically causes a fall in values, while a fall in rates
typically causes a rise in values. Finally, key information about a security
or market may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
. Foreign Investment Risk. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S.
dollar denominated debt, thereby increasing credit risk.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other obligations are prepaid, a Fund may have to reinvest
in securities with a lower yield. Further, with early prepayment, a Fund may
fail to recover any premium paid, resulting in an unexpected capital loss.
. Tax Risk. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which could cause
adverse tax consequences. Also, the risk that the tax treatment of municipal
or other securities could be changed by Congress thereby affecting the value
of outstanding securities.
. Regulatory Risk. The risk associated with federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
. Zero Coupon Risk. The market prices of securities structured as zero coupon
or pay-in-kind securities are generally affected to a greater extent by
interest rate changes. These securities tend to be more volatile than
securities which pay interest periodically.
------
121
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Funds, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
How can I get more information? You can get a free copy of the semi-
annual/annual reports or the SAI, request other information or discuss your
questions about the Fund by calling 1 800-480-4111, or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
OR VISITING
WWW.ONEGROUP.COM
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information may be
obtained, after paying a copying charge, by electronic request at the following
e-mail address: [email protected] or by writing the Public Reference Section
of SEC, Washington, D.C. 20549-0102.
(Investment Company Act File No. 811-4236)
TOG-F-120
[LOGO OF ONE GROUP MUTUAL FUNDS]
<PAGE>
Bond Funds
Prospectus
November 1, 2000
[LOGO OF ONE GROUP MUTUAL FUNDS]
One Group(R) Ultra Short-Term Bond Fund
One Group(R) Short-Term Bond Fund
One Group(R) Intermediate Bond Fund
One Group(R) Bond Fund
One Group(R) Income Bond Fund
One Group(R) Government Bond Fund
One Group(R) Treasury & Agency Fund
One Group(R) High Yield Bond Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SHARES OF ANY OF THE FUNDS AS AN INVESTMENT OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING
A CRIME.
<PAGE>
Table of
CONTENTS
<TABLE>
<CAPTION>
Fund Summaries: Investments, Risk & Performance
<S> <C>
One Group Ultra Short-Term Bond Fund 2
---
One Group Short-Term Bond Fund 6
---
One Group Intermediate Bond Fund 10
---
One Group Bond Fund 14
---
One Group Income Bond Fund 18
---
One Group Government Bond Fund 22
---
One Group Treasury & Agency Fund 26
---
One Group High Yield Bond Fund 30
---
</TABLE>
<TABLE>
<CAPTION>
More About the Funds
<S> <C>
Principal Investment Strategies 34
---
Investment Risks 37
---
Investment Policies 40
---
Portfolio Quality 40
---
Temporary Defensive Positions 42
---
Portfolio Turnover 42
---
</TABLE>
<TABLE>
<CAPTION>
How to do Business with One Group Mutual Funds
<S> <C>
Purchasing Fund Shares 43
-------
Sales Charges 46
-------
Sales Charge Reductions and Waivers 49
-------
Exchanging Fund Shares 52
-------
Redeeming Fund Shares 54
-------
</TABLE>
<TABLE>
<CAPTION>
Shareholder Information
<S> <C>
Voting Rights 57
---
Dividend Policies 57
---
Tax Treatment of Shareholders 58
---
Shareholder Statements and Reports 59
---
</TABLE>
<TABLE>
<CAPTION>
Management of One Group Mutual Funds
<S> <C>
The Advisor 60
---
The Sub-Advisor 60
---
Advisory Fees 60
---
The Fund Managers 61
---
Banc One High Yield Partners--Prior Performance of Pacholder Associates, Inc. 61
---
</TABLE>
Financial Highlights 63
----
Appendix A: Investment Practices 79
----
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Ultra Short-Term Bond Fund
What is the goal of the Ultra Short-Term Bond Fund?
The Fund seeks a high level of current income consistent with low volatility of
principal by investing in a diversified portfolio of short-term investment
grade securities.
What are the Ultra Short-Term Bond Fund's main investment strategies?
The Fund mainly invests in all types of debt securities, including money market
instruments and taxable and tax-exempt municipal securities. As part of its
main investment strategy, the Fund invests in adjustable rate mortgage pass-
through securities and other securities representing an interest in or secured
by mortgages with periodic interest rate resets. Banc One Investment Advisors
selects securities for the Fund by analyzing both individual securities and
different market sectors. Banc One Investment Advisors looks for market sectors
and individual securities that it believes will perform well over time. Banc
One Investment Advisors selects individual securities after performing a
risk/reward analysis that includes an evaluation of interest rate risk, credit
risk, and the complex legal and technical nature of the transaction. For more
information about the Ultra Short-Term Bond Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
What is a bond?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and mortgage-
backed securities, asset-backed securities, stripped government securities and
zero coupon obligations.
What are the main risks of investing in the Ultra Short-Term Bond Fund?
The main risks of investing in the Ultra Short-Term Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Ultra Short-Term Bond Fund and its yield will change
every day in response to interest rates and other market conditions. You may
lose money if you invest in the Ultra Short-Term Bond Fund. For additional
information on risk, please read "Investment Risks."
------
2
<PAGE>
------------------
----------------
Ultra Short-Term Bond Fund
MAIN RISKS
Interest Rate Risk. The Fund mainly invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a Fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. Your investment will decline in value if the value of the
Fund's investments decreases. Securities with greater interest rate sensitivity
and longer maturities tend to produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of fixed income securities
will not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of a Fund. Lower credit quality also may affect a
security's liquidity and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment strategy, the Fund
invests in mortgage-backed and asset-backed securities. The issuers of these
securities and other callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in prepayment rates can
affect return on investment and yield of mortgage- and asset-backed securities.
When mortgages and other obligations are prepaid and when securities are
called, the Fund may have to reinvest in securities with a lower yield. The
Fund also may fail to recover additional amounts (i.e., premiums) paid for
securities with higher interest rates, resulting in an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may be considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and are
riskier in terms of both liquidity and value than traditional investments. The
Fund also uses investment management hedging techniques that may expose the
Fund to additional risks.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
3
<PAGE>
ONE GROUP(R)
------------------
-----------------
FUND SUMMARY
Ultra Short-Term Bond Fund
How has the Ultra Short-Term Bond Fund performed?
By showing the variability of the Ultra Short-Term Bond Fund's performance from
year to year, the chart and the table below help show the risk of investing in
the Fund. Please remember that the past performance of the Ultra Short-Term
Bond Fund is not necessarily an indication of how the Fund will perform in the
future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1994 1.94
1995 6.98
1996 6.14
1997 6.64
1998 5.33
1999 4.54
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.18%.
--------------------------------------------------------------------------------
Best Quarter: 2.16% 1Q1995 Worst Quarter: 0.18% 2Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF CLASS SINCE 2/2/93
<S> <C> <C> <C> <C>
Class A 3/10/93 1.19% 5.04% 4.38%
------------------------------------------------------------------
Class B 1/14/94 0.80% 5.11% 4.24%
------------------------------------------------------------------
Class I 2/2/93 4.54% 5.92% 5.09%
------------------------------------------------------------------
Merrill Lynch 1 Year
Treasury Bill Index/2/ 4.03% 5.85% 5.04%
------------------------------------------------------------------
Lipper Ultra Short Fund
Index/3/ 4.50% * *
</TABLE>
/1/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.
/2/The Merrill Lynch 1 Year Treasury Bill Index is an unmanaged index which
reflects the total return of a hypothetical Treasury bill with a discount
rate equal to the average rate established at each of the auctions during a
given year. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on Class B Shares.
/3/The Lipper Ultra Short Fund Index is typically comprised of the 30 largest
mutual funds that invest at least 65% of their assets in investment grade
debt issues, or better, and maintain a portfolio dollar-weighted average
maturity between 91 and 365 days.
* Index did not exist.
------
4
<PAGE>
------------------
Ultra Short-Term Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 3.00% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 3.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .55% .55% .55% .55%
------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------
Other Expenses .22% .22% .22% .22%
------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.12% 1.77% 1.77% .77%
------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.42%) (.57%) (.57%) (.32%)
------------------------------------------------------------------
Net Expenses .70% 1.20% 1.20% .45%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .70% for Class A shares, 1.20% for Class B
shares, 1.20% for Class C shares and .45% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 369 $ 422 $ 122 $ 222 $ 122 $ 46
------------------------------------------------------------------------------
3 Years 605 702 502 502 502 214
------------------------------------------------------------------------------
5 Years 859 906 906 906 906 396
------------------------------------------------------------------------------
10 Years 1,586 1,707 1,707 1,707 2,037 924
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year
expenses would be as follows:
<TABLE>
<S> <C>
Class A $411
Class B (with
redemption) $480
Class B (no
redemption) $180
Class C (with
redemption) $280
Class C (no
redemption) $180
Class I $79
</TABLE>
/2/Class B shares automatically convert to
Class A shares after six (6) years.
Therefore, the number in the "10 years"
example for Class B shares represents a
combination of Class A and Class B
operating expenses.
------
5
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Short-Term Bond Fund
What is the goal of the Short-Term Bond Fund?
The Fund seeks current income consistent with preservation of capital through
investment in high- and medium-grade fixed income securities.
What are the Short-Term Bond Fund's main investment strategies?
The Fund mainly invests in debt securities with short to intermediate remaining
maturities. These include mortgage-backed and asset-backed securities. Banc One
Investment Advisors selects securities for the Fund by analyzing both
individual securities and different market sectors. Banc One Investment
Advisors looks for market sectors and individual securities that it believes
will perform well over time. Banc One Investment Advisors selects individual
securities after performing a risk/reward analysis that includes an evaluation
of interest rate risk, credit risk, and the complex legal and technical
structure of the transaction. For more information about the Short-Term Bond
Fund's investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What is a bond?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and mortgage-
backed securities, asset-backed securities, stripped government securities and
zero coupon obligations.
What are the main risks of investing in the Short-Term Bond Fund?
The main risks of investing in the Short-Term Bond Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Short-Term Bond Fund and its yield will change every day in response to
interest rates and other market conditions. You may lose money if you invest in
the Short-Term Bond Fund. For additional information on risk, please read
"Investment Risks."
------
6
<PAGE>
------------------
----------------
Short-Term Bond Fund
MAIN RISKS
Interest Rate Risk. The Fund mainly invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a Fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. Your investment will decline in value if the value of the
Fund's investments decreases. Securities with greater interest rate sensitivity
and longer maturities tend to produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of fixed income securities
will not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of a Fund. Lower credit quality also may affect a
security's liquidity and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment strategy, the Fund
invests in mortgage-backed and asset-backed securities. The issuers of these
securities and other callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in prepayment rates can
affect return on investment and yield of mortgage- and asset-backed securities.
When mortgages and other obligations are prepaid and when securities are
called, the Fund may have to reinvest in securities with a lower yield. The
Fund also may fail to recover premiums paid for the securities, resulting in an
unexpected capital loss.
Derivative Risk. The Fund invests in securities that may be considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
7
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Short-Term Bond Fund
How has the Short-Term Bond Fund Performed?
By showing the variability of the Short-Term Bond Fund's performance from year
to year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Short-Term Bond Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1991 13.43%
1992 6.03%
1993 6.84%
1994 -0.33%
1995 11.85%
1996 4.31%
1997 6.29%
1998 6.80%
1999 3.05%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.20%.
--------------------------------------------------------------------------------
Best Quarter: 4.43% 4Q1991 Worst Quarter: -0.86% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF CLASS SINCE 9/4/90
<S> <C> <C> <C> <C>
Class A 2/18/92 -0.32% 5.51% 5.96%
-------------------------------------------------------------------
Class B 1/14/94 -0.60% 5.65% 5.78%
-------------------------------------------------------------------
Class I 9/4/90 3.05% 6.42% 6.59%
-------------------------------------------------------------------
Lehman Brothers 1-3 Year
Government/Credit
Index/2/ 3.15% 6.55% 6.49%
-------------------------------------------------------------------
Lehman Brothers 1-3 Year
Government Index/3/ 2.97% 6.47% 6.41%
-------------------------------------------------------------------
Lipper Short U.S.
Government
Fund Index/4/ 2.55% 6.12% 6.03%
</TABLE>
/1/For periods prior to the commencement of the 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.
/2/The Lehman Brothers 1-3 Year Government/Credit Index is an unmanaged index
with a broad measure of the performance of short-term government and
corporate fixed-rate debt issues. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses as well as the deduction of sales
charges on Class A shares and applicable contingent deferred sales charges
on Class B shares. The benchmark for the Short-Term Bond Fund has been
changed from the Lehman Brothers 1-3 Year Government Index to the Lehman
Brothers 1-3 Year Government/Credit Index in order to better represent the
investment policies for comparison purposes.
/3/The Lehman Brothers 1-3 Year Government Index is an unmanaged index
comprised of U.S. government and agency securities with maturities of one to
three years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on Class B Shares.
/4/The Lipper Short U.S. Government Fund Index consists of the equally weighted
average monthly return of the largest funds within the universe of all funds
in the category.
------
8
<PAGE>
------------------
Short-Term Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 3.00% NONE NONE NONE
-------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 3.00% 1.00% NONE
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------
Other Expenses .21% .21% .21% .21%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.16% 1.81% 1.81% .81%
-------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.36%) (.51%) (.51%) (.26%)
-------------------------------------------------------------------
Net Expenses .80% 1.30% 1.30% .55%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .80% for Class A shares, 1.30% for Class B
shares, 1.30% for Class C shares and .55% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 379 $ 432 $ 132 $ 232 $ 132 $ 56
------------------------------------------------------------------------------
3 Years 623 720 520 520 520 233
------------------------------------------------------------------------------
5 Years 885 932 932 932 932 424
------------------------------------------------------------------------------
10 Years 1,636 1,756 1,756 2,085 2,085 977
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $415
Class B (with
redemption) $484
Class B (no
redemption) $184
Class C (with
redemption) $284
Class C (no
redemption) $184
Class I $83
</TABLE>
/2/Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
9
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Intermediate Bond Fund
What is the goal of the Intermediate Bond Fund?
The Fund seeks current income consistent with the preservation of capital by
investing in high- and medium-grade fixed income securities with intermediate
maturities.
What are the Intermediate Bond Fund's main investment Strategies?
The Fund mainly invests in debt securities of all types, including bonds,
notes, U.S. government obligations, and taxable and tax-exempt municipal
securities with intermediate maturities. These include mortgage-backed and
asset-backed securities. Banc One Investment Advisors selects securities for
the Fund by analyzing both individual securities and different market sectors.
Banc One Investment Advisors looks for market sectors and individual securities
that it believes will perform well over time. Banc One Investment Advisors
selects individual securities after performing a risk/reward analysis that
includes an evaluation of interest rate risk, credit risk, and the complex
legal and technical structure of the transaction. For more information about
the Intermediate Bond Fund's investment strategies, please read "More About the
Funds" and "Principal Investment Strategies."
What is a bond?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and mortgage-
backed securities, asset-backed securities, stripped government securities and
zero coupon obligations.
What are the main risks of investing in the Intermediate Bond Fund?
The main risks of investing in the Intermediate Bond Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Intermediate Bond Fund and its yield will change every day in response
to interest rates and other market conditions. You may lose money if you invest
in the Intermediate Bond Fund. For additional information on risk, please read
"Investment Risks."
------
10
<PAGE>
------------------
----------------
Intermediate Bond Fund
MAIN RISKS
Interest Rate Risk. The Fund mainly invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a Fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. Your investment will decline in value if the value of the
Fund's investments decreases. Securities with greater interest rate sensitivity
and longer maturities tend to produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of fixed income securities
will not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of a Fund. Lower credit quality also may affect a
security's liquidity and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment strategy, the Fund
invests in mortgage-backed and asset-backed securities. The issuers of these
securities and other callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in prepayment rates can
affect return on investment and yield of mortgage-and asset-backed securities.
When mortgages and other obligations are prepaid and when securities are
called, the Fund may have to reinvest in securities with a lower yield. The
Fund also may fail to recover premiums paid for the securities, resulting in an
unexpected capital loss.
Derivative Risk. The Fund invests in securities that may be considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other governmental agency.
How has the Intermediate Bond Fund performed?
How has the Intermediate Bond Fund performed?
By showing the variability of the Intermediate Bond Fund's performance from
year to year, the chart and table below help show the risk of investing in the
Fund. Please remember that the past performance of the Intermediate Bond Fund
is not necessarily an indication of how the Fund will perform in the future.
------
11
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Intermediate Bond Fund
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 9.24%
1991 14.78%
1992 6.06%
1993 8.40%
1994 -6.30%
1995 19.47%
1996 5.74%
1997 8.38%
1998 7.57%
1999 0.62%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 6.08%. The performance information for One Group
Intermediate Bond Fund for periods prior to March 22, 1999, reflects the
performance of a common trust fund, the predecessor to the Pegasus
Intermediate Bond Fund, and the Pegasus Intermediate Bond Fund. The
predecessor to the Pegasus Intermediate Bond Fund commenced operations on
June 1, 1991, subsequent to the transfer of assets from a common trust fund
with materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for periods prior to the commencement
of operations of the predecessor to the Pegasus Intermediate Bond Fund as
adjusted to reflect the expenses associated with the Fund. The common trust
fund was not registered with the SEC and was not subject to the investment
restrictions, limitations and diversification requirements imposed by law on
registered mutual funds. If the common trust fund had been registered, its
return may have been lower. One Group Intermediate Bond Fund consolidated
with the Pegasus Intermediate Bond Fund on March 22, 1999. For financial
reporting purposes, the Pegasus Intermediate Bond Fund was considered the
accounting survivor.
--------------------------------------------------------------------------------
Best Quarter: 6.10% 2Q1995 Worst Quarter: -2.32% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 12/31/83
<S> <C> <C> <C> <C> <C>
Class A 5/1/92 -4.14% 7.01% 6.52% 7.72%
-----------------------------------------------------------------------
Class B 9/23/96 -4.94% 6.82% 6.14% 7.21%
-----------------------------------------------------------------------
Class C 3/22/99 -1.17% 7.07% 6.12% 7.21%
-----------------------------------------------------------------------
Class I 6/1/91 0.62% 8.19% 7.19% 8.29%
-----------------------------------------------------------------------
Lehman Brothers
Intermediate
Government/Credit
Bond Index/2/ 0.39% 7.10% 7.26% 8.77%
-----------------------------------------------------------------------
Lipper Short
Intermediate
U.S. Government
Index/3/ 0.82% 6.04% 6.29% *
</TABLE>
/1/The performance information for One Group Intermediate Bond Fund for periods
prior to March 22, 1999, reflects the performance of a common trust fund, the
predecessor to the Pegasus Intermediate Bond Fund, and the Pegasus
Intermediate Bond Fund. The predecessor to the Pegasus Intermediate Bond Fund
commenced operations on June 1, 1991, subsequent to the transfer of assets
from a common trust fund with materially equivalent investment objectives,
policies, guidelines and restrictions as the Fund. The quoted performance of
the Fund includes the performance of the common trust fund for periods prior
to the commencement of operations of the predecessor to the Pegasus
Intermediate Bond Fund as adjusted to reflect the expenses associated with
the Fund. The common trust fund was not registered with the SEC and was not
subject to the investment restrictions, limitations, and diversification
requirements imposed by law on registered mutual funds. If the common trust
fund had been registered, its return may have been lower. One Group
Intermediate Bond Fund consolidated with the Pegasus Intermediate Bond Fund
on March 22, 1999. For financial reporting purposes, the Pegasus Intermediate
Bond Fund was considered the accounting survivor. For periods prior to the
commencement 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, 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.
/2/The Lehman Brothers Intermediate Government/Credit Bond Index is an
unmanaged index comprised of U.S. government agency and Treasury securities
and investment grade corporate bonds. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Fund reflects
the deduction of these expenses as well as the deduction of sales fees on
Class A Shares and applicable contingent deferred sales charges on Class B
and Class C shares.
/3/The Lipper Short Intermediate U.S. Government Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
* Index did not exist.
------
12
<PAGE>
------------------
Intermediate Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
----------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
----------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
----------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------
(expenses that are deducted
from Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
---------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
---------------------------------------------------------------
Other Expenses .21% .21% .21% .21%
---------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.16% 1.81% 1.81% .81%
---------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.33%) (.33%) (.33%) (.23%)
---------------------------------------------------------------
Net Expenses .83% 1.48% 1.48% .58%
---------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .83% for Class A shares, 1.48% for Class B
shares, 1.48% for Class C shares and .58% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 531 $ 651 $ 151 $ 251 $ 151 $ 59
------------------------------------------------------------------------------
3 Years 771 837 537 537 537 236
------------------------------------------------------------------------------
5 Years 1,029 1,149 949 949 949 427
------------------------------------------------------------------------------
10 Years 1,767 1,928 1,928 2,100 2,100 980
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $563
Class B (with
redemption) $684
Class B (no
redemption) $184
Class C (with
redemption) $284
Class C (no
redemption) $184
Class I $83
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
13
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Bond Fund
----------------
What is the goal of the Bond Fund?
The Fund seeks to maximize total return by investing primarily in a diversified
portfolio of intermediate- and long-term debt securities.
What are the Bond Fund's main investment strategies?
The Fund invests mainly in investment grade bonds and debt securities. These
include mortgage-backed and asset-backed securities. Banc One Investment
Advisors analyzes four major factors in managing and constructing the Fund:
duration, market sector, maturity concentrations and individual securities.
Banc One Investment Advisors looks for market sectors and individual securities
that it believes will perform well over time. Banc One Investment Advisors
selects individual securities after performing a risk/reward analysis that
includes an evaluation of interest rate risk, credit risk, and the complex
legal and technical structure of the transaction. For more information about
the Bond Fund's investment strategies, please read "More About the Funds" and
"Principal Investment Strategies."
What is a bond?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and mortgage-
backed securities, asset-backed securities, stripped government securities and
zero coupon obligations.
What are the main risks of investing in the Bond Fund?
The main risks of investing in the Bond Fund and the circumstances likely to
adversely affect your investment are described below. The share price of the
Bond Fund and its yield will change every day in response to interest rates and
other market conditions. You may lose money if you invest in the Bond Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Interest Rate Risk. The Fund mainly invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a Fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. Your investment will decline in value if the value of the
Fund's investments decreases. Securities with greater interest rate sensitivity
and longer maturities tend to produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of fixed income securities
will not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of a Fund. Lower credit quality also may affect a
security's liquidity and make it difficult for the Fund to sell the security.
------
14
<PAGE>
------------------
Bond Fund
Prepayment and Call Risk. As part of its main investment strategy, the Fund
invests in mortgage-backed and asset-backed securities. The issuers of these
securities and other callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in prepayment rates can
affect the return on investment and yield of mortgage- and asset-backed
securities. When mortgages and other obligations are prepaid and when
securities are called, the Fund may have to reinvest in securities with a lower
yield. The Fund also may fail to recover additional amounts (i.e., premiums)
paid for the securities with higher interest rates, resulting in an unexpected
capital loss.
Derivative Risk. The Fund invests in securities that may be considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
15
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Bond Fund
How has the Bond Fund Performed?
By showing the variability of the Bond Fund's performance from year to year,
the chart and table below help show the risk of investing in the Fund. Please
remember that the past performance of the Bond Fund is not necessarily an
indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 9.25%
1991 15.67%
1992 6.57%
1993 11.33%
1994 -6.91%
1995 23.68%
1996 5.08%
1997 9.92%
1998 8.19%
1999 -0.87%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 6.95%. The above quoted performance data also includes the
performance of a common trust fund, the predecessor to the Pegasus Bond
Fund, and the Pegasus Bond Fund for the period prior to the consolidation
with the One Group Bond Fund on March 22, 1999. The predecessor to the
Pegasus Bond Fund commenced operations on June 1, 1991, subsequent to the
transfer of assets from a common trust fund with materially equivalent
investment objectives, policies, guidelines and restrictions as the Fund.
The quoted performance of the Fund includes the performance of the common
trust fund for periods prior to the commencement of operations of the
predecessor to the Pegasus Bond Fund as adjusted to reflect the expenses
associated with the Fund. The common trust fund was not registered with the
SEC and was not subject to the investment restrictions, limitations and
diversification requirements imposed by law on registered mutual funds. If
the common trust fund had been registered, its return may have been lower.
--------------------------------------------------------------------------------
Best Quarter: 7.61% 2Q1995 Worst Quarter: -2.66% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 12/31/83
<S> <C> <C> <C> <C> <C>
Class A 5/1/92 -5.57% 7.73% 7.22% 8.72%
---------------------------------------------------------------------------------------------
Class B 8/26/96 -6.44% 7.63% 6.87% 8.22%
---------------------------------------------------------------------------------------------
Class C 3/22/99 -2.20% 7.83% 6.84% 8.25%
---------------------------------------------------------------------------------------------
Class I 6/1/91 -0.87% 8.91% 7.90% 9.28%
---------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index/2/ -0.82% 7.73% 7.70% 9.58%
---------------------------------------------------------------------------------------------
Lipper
Intermediate
U.S. Government
Index/3/ -1.39% 6.63% 6.59% *
</TABLE>
/1/The above quoted performance data also includes the performance of a common
trust fund, the predecessor to the Pegasus Bond Fund, and the Pegasus Bond
Fund for the period prior to the consolidation with the One Group Bond Fund
on March 22, 1999. The predecessor to the Pegasus Bond Fund commenced
operations on June 1, 1991, subsequent to the transfer of assets from a
common trust fund with materially equivalent investment objectives,
policies, guidelines and restrictions as the Fund. The quoted performance of
the Fund includes the performance of the common trust fund for periods prior
to the commencement of operations of the predecessor to the Pegasus Bond
Fund as adjusted to reflect the expenses associated with the Fund. The
common trust fund was not registered with the SEC and was not subject to the
investment restrictions, limitations and diversification requirements
imposed by law on registered mutual funds. If the common trust fund had been
registered, its return may have been lower. 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 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.
/2/The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole. The performance of the index
does not reflect the deduction of expenses associated with a mutual fund,
such as investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses as well as the deduction of sales
charges on Class A Shares and applicable contingent deferred sales charges
on Class B and Class C shares.
/3/The Lipper Intermediate U.S. Government Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
* Index did not exist.
------
16
<PAGE>
------------------
Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------------------
(fees paid directly from your investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
-------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------
(expenses that are deducted from Fund
assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
-------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------
Other Expenses .23% .23% .23% .23%
-------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.18% 1.83% 1.83% .83%
-------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/4/ (.33%) (.33%) (.33%) (.23%)
-------------------------------------------------------------------------------
Net Expenses .85% 1.50% 1.50% .60%
-------------------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .85% for Class A shares, 1.50% for Class B
shares, 1.50% for Class C shares and .60% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if either you redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 533 $ 653 $ 153 $ 253 $ 153 $ 61
------------------------------------------------------------------------------
3 Years $ 777 $ 844 $ 544 $ 544 $ 544 $ 242
------------------------------------------------------------------------------
5 Years $1,039 $1,160 $ 960 $ 960 $ 960 $ 438
------------------------------------------------------------------------------
10 Years $1,789 $1,950 $1,950 $2,121 $2,121 $1,004
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $565
Class B (with
redemption) $686
Class B (no
redemption) $186
Class C (with
redemption) $286
Class C (no
redemption) $186
Class I $85
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
17
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
----------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Income Bond Fund
What is the goal of the Income Bond Fund?
The Fund seeks a high level of current income by investing primarily in a
diversified portfolio of high-, medium- and low-grade debt securities.
What are the Income Bond Fund's Main Investment Strategies?
What are the Income Bond Fund's main investment strategies?
The Fund mainly invests in investment grade debt securities (or unrated debt
securities that are determined to be of comparable quality by Banc One
Investment Advisors). In addition, the Fund also may invest in convertible
securities, preferred stock, loan participations and debt securities rated
below investment grade (i.e., junk bonds.) (The Fund may not invest more than
30% of its total assets in these securities.) The Fund also invests in
mortgage-backed and asset-backed securities. The Fund invests in securities
with short to long maturities. Banc One Investment Advisors selects securities
for the Fund by analyzing both individual securities and different market
sectors. Banc One Investment Advisors looks for market sectors and individual
securities that it believes will perform well over time. Banc One Investment
Advisors selects individual securities after performing a risk/reward analysis
that includes an evaluation of interest rate risk, credit risk, and the complex
legal and technical structure of the transaction. For more information about
the Income Bond Fund's investment strategies, please read "More About the
Funds" and "Principal Investment Strategies."
What is a bond?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and mortgage-
backed securities, asset-backed securities, stripped government securities and
zero coupon obligations. A "junk bond" is a debt security that is rated below
investment grade. (Junk bonds also include unrated securities that Banc One
Investment Advisors believes to be of comparable quality to debt securities
that are rated below investment grade.) Junk bonds are also called "high yield
bonds" and "non-investment grade bonds." These securities generally are rated
in the fifth or lower rating categories (for example, BB or lower by Standard &
Poor's Corporation and Ba or lower by Moody's Investors Service, Inc.). These
securities generally offer a higher yield than investment grade securities, but
involve a high degree of risk.
What are the main risks of investing in the Income Bond Fund?
The main risks of investing in the Income Bond Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Income Bond Fund and its yield will change every day in response to
interest rates and other market conditions. You may lose money if you invest in
the Income Bond Fund. For additional information on risk, please read
"Investment Risks."
MAIN RISKS
Interest Rate Risk. The Fund mainly invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a Fund's investments generally
declines. On the other hand, if
------
18
<PAGE>
------------------
Income Bond Fund
rates fall, the value of the investments generally increases. Your investment
will decline in value if the value of the Fund's investments decreases.
Securities with greater interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater fluctuations in value.
Usually, changes in the value of fixed income securities will not affect cash
income generated, but may affect the value of your investment.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of a Fund. Lower credit quality also may affect a
security's liquidity and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment strategy, the Fund
invests in mortgage-backed and asset-backed securities. The issuers of these
securities and other callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in prepayment rates can
affect return on investment and yield of mortgage- and asset-backed securities.
When mortgages and other obligations are prepaid and when securities are
called, the Fund may have to reinvest in securities with a lower yield. The
Fund also may fail to recover premiums paid for the securities, resulting in an
unexpected capital loss.
Portfolio Quality. The Fund may invest in securities that are rated in the
lowest investment grade. Issuers of such securities are more vulnerable to
changes in economic conditions than issuers of higher grade securities. The
Fund also may invest in securities that are rated below investment grade. These
securities are considered to be speculative and may be issued by companies
which are highly leveraged, less creditworthy or financially distressed.
Derivative Risk. The Fund invests in securities that may be considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
19
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Income Bond Fund
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
How has the Income Bond Fund Performed?
By showing the variability of the Income Bond Fund's performance from year to
year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Income Bond Fund is not
necessarily an indication of how the Fund will perform in the future.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1994 -0.95%
1995 17.53%
1996 3.14%
1997 8.88%
1998 7.77%
1999 -1.15%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 6.52%. 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.
Therefore, all 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.
--------------------------------------------------------------------------------
Best Quarter: 5.88% 2Q1995 Worst Quarter: -1.63% 1Q1996
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF CLASS SINCE
3/5/93
<S> <C> <C> <C> <C>
Class A 3/5/93 -5.71% 5.77% 4.62%
-------------------------------------------------------------------
Class B 5/31/95 -6.66% 5.74% 4.82%
-------------------------------------------------------------------
Class C 5/30/00 -3.13% 5.96% 4.72%
-------------------------------------------------------------------
Class I 3/5/93 -1.15% 7.05% 5.54%
-------------------------------------------------------------------
Lehman Brothers Aggregate
Bond Index/2/ -0.82% 7.73% 6.03%
-------------------------------------------------------------------
Lipper Intermediate
Investment Grade
Index/3/ -0.98% 7.08% 5.50%
</TABLE>
/1/One Group Income Bond Fund consolidated with the Pegasus Multi-Sector Bond
Fund on March 22, 1999. For financial reporting purposes, the Pegasus Multi-
Sector Bond Fund was the accounting survivor. The performance information
for One Group Income Bond Fund for periods prior to March 22, 1999, reflects
the performance of the Pegasus Multi-Sector Bond Fund. 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.
/2/The Lehman Brothers Aggregate Bond Index is an unmanaged index comprised of
U.S. government, mortgage, corporate and asset-backed securities. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on Class B and Class C shares.
/3/The Lipper Intermediate Investment Grade Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
------
20
<PAGE>
------------------
Income Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
-------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------
Other Expenses .22% .22% .22% .22%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.17% 1.82% 1.82% .82%
-------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.25%) (.25%) (.25%) (.15%)
-------------------------------------------------------------------
Net Expenses .92% 1.57% 1.57% .67%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .92% for Class A shares, 1.57% for Class B
shares, 1.57% for Class C shares and .67% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 540 $ 660 $ 160 $ 260 $ 160 $ 68
------------------------------------------------------------------------------
3 Years 781 848 548 548 548 247
------------------------------------------------------------------------------
5 Years 1,042 1,162 962 962 962 440
------------------------------------------------------------------------------
10 Years 1,785 1,946 1,946 2,117 2,117 1,000
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $564
Class B (with
redemption) $685
Class B (no
redemption) $185
Class C (with
redemption) $285
Class C (no
redemption) $185
Class I $84
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
21
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Government Bond Fund
----------------
What is the goal of the Government Bond Fund?
The Fund seeks a high level of current income with liquidity and safety of
principal.
What are the Government Bond Fund's main investment strategies?
The Fund limits its investments to securities issued by the U.S. government and
its agencies and instrumentalities (i.e., government bonds) or related to
securities issued by the U.S. government and its agencies and
instrumentalities. The Fund mainly invests in government bonds with
intermediate to long remaining maturities. These include mortgage-backed
securities. Banc One Investment Advisors looks for individual securities that
it believes will perform well over market cycles. The Government Bond Fund
spreads its holdings across various security types within the government market
sector. Banc One Investment Advisors selects individual securities after
performing a risk/reward analysis that includes an evaluation of interest rate
risk and the complex legal and technical structure of the transaction. For more
information about the Government Bond Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
What is a government bond?
A "government bond" is a debt instrument with principal and interest guaranteed
by the U.S. government and its agencies and instrumentalities, as well as
stripped government securities and mortgage-related and mortgage-backed
securities.
What are the main risks of investing in the Government Bond Fund?
The main risks of investing in the Government Bond Fund and the circumstances
likely to adversely affect your investment are described below. Like all non-
money market mutual funds, the share price of the Government Bond Fund and its
yield will change every day in response market conditions. You may lose money
if you invest in the Government Bond Fund. For additional information on risk,
please read "Investment Risks."
MAIN RISKS
Interest Rate Risk. The Fund mainly invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a Fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. Your investment will decline in value if the value of the
Fund's investments decreases. Securities with greater interest rate sensitivity
and longer maturities tend to produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of fixed income securities
will not affect cash income generated, but may affect the value of your
investment.
Prepayment and Call Risk. As part of its main investment strategies, the Fund
invests in mortgage-backed securities. The issuers of these securities and
other callable securities may be able to repay principal in advance, especially
when interest rates fall. Changes in prepayment rates can affect the return on
investment and yield of
------
22
<PAGE>
------------------
Government Bond Fund
mortgage-backed securities. When mortgages and other obligations are prepaid
and when securities are called, the Fund may have to reinvest in securities
with a lower yield. The Fund also may fail to recover premiums paid for the
securities, resulting in an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may be considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
23
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Government Bond Fund
How has the Government Bond Fund performed?
By showing the variability of the Government Bond Fund's performance from year
to year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Government Bond Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1994 -2.97%
1995 18.11%
1996 2.59%
1997 9.76%
1998 8.23%
1999 -1.76%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 7.14%.
--------------------------------------------------------------------------------
Best Quarter: 5.70% 2Q1995 Worst Quarter: -2.29% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF CLASS SINCE 2/8/93
<S> <C> <C> <C> <C>
Class A 3/5/93 -6.40% 5.92% 4.42%
------------------------------------------------------------------
Class B 1/14/94 -7.27% 5.92% 4.40%
------------------------------------------------------------------
Class C 3/22/99 -3.45% 6.19% 4.35%
------------------------------------------------------------------
Class I 2/8/93 -1.76% 7.18% 5.37%
------------------------------------------------------------------
Lehman Brothers
Government Bond
Index/2/ -2.23% 7.44% 5.79%
------------------------------------------------------------------
Salomon Brothers 3-7
Year Treasury Index/3/ -0.78% 7.26% 5.56%
------------------------------------------------------------------
Lipper General U.S.
Government Fund
Index/4/ -2.66% 6.47% 4.70%
</TABLE>
/1/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 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.
/2/The Lehman Brothers Government Bond Index is an unmanaged index comprised of
securities issued by the U.S. government. The performance of the index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses as well as the deduction of sales
charges on Class A shares and applicable contingent deferred sales charges
on Class B and Class C shares. The benchmark index for the Government Bond
Fund has changed from the Salomon Brothers 3-7 Year Treasury Index to the
Lehman Brothers Government Bond Index to better represent the investment
policies for comparison purposes.
/3/The Salomon Brothers 3-7 Year Treasury Index is an unmanaged index comprised
of US government agency and Treasury securities and mortgage-backed
securities. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on Class B and Class C shares.
/4/ The Lipper General U.S. Government Fund Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
------
24
<PAGE>
------------------
Government Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
-------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------
Other Expenses .22% .22% .22% .22%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.02% 1.67% 1.67% .67%
-------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.12%) (.12%) (.12%) (.02%)
-------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .90% for Class A shares, 1.55% for Class B
shares, 1.55% for Class C share, and .65% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown.
There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 538 $ 658 $ 158 $ 258 $ 158 $ 66
------------------------------------------------------------------------------
3 Years 749 815 515 515 515 212
------------------------------------------------------------------------------
5 Years 977 1,096 896 896 896 371
------------------------------------------------------------------------------
10 Years 1,631 1,793 1,793 1,966 1,966 833
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $549
Class B (with
redemption) $670
Class B (no
redemption) $170
Class C (with
redemption) $270
Class C (no
redemption) $170
Class I $68
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
25
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Treasury & Agency Fund
----------------
What is the goal of the Treasury & Agency Fund?
The Fund seeks a high level of current income by investing in U.S. Treasury and
other U.S. agency obligations with a primary, but not exclusive, focus on
issues that produce income exempt from state income taxes.
What are the Treasury & Agency Fund's main investment strategies?
The Fund invests exclusively in U.S. Treasury and other U.S. agency obligations
including fixed income and mortgage-related securities and repurchase
agreements. Mortgage-related securities include government mortgage-backed
securities and adjustable rate mortgage loans known as ARMs. Banc One
Investment Advisors selects securities for the Fund by analyzing both
individual securities and different market sectors. Banc One Investment
Advisors looks for individual securities that it believes will perform well
over time. The Treasury and Agency Fund spreads its holdings across various
security types and concentrates on issues with short or intermediate remaining
maturities. Banc One Investment Advisors selects individual securities after
performing a risk/reward analysis that includes an evaluation of interest rate
risk, credit risk, and the complex legal and technical structure of the
transaction. For more information about the Treasury & Agency Fund's investment
strategies, please read "More About the Funds" and "Principal Investment
Strategies."
What is a bond?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and mortgage-
backed securities, asset-backed securities, stripped government securities and
zero coupon obligations.
What are the main risks of investing in the Treasury & Agency Fund?
The main risks of investing in the Treasury & Agency Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Treasury & Agency Fund and its yield will change every day in response
to interest rates and other market conditions. You may lose money if you invest
in the Treasury & Agency Fund. For additional information on risk, please read
"Investment Risks."
MAIN RISKS
Interest Rate Risk. The Fund mainly invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a Fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. Your investment will decline in value if the value of the
Fund's investments decreases. Securities with greater interest rate sensitivity
and longer maturities tend to produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of fixed income securities
will not affect cash income generated, but may affect the value of your
investment.
------
26
<PAGE>
------------------
Treasury & Agency Fund
Prepayment and Call Risk. As part of its main investment strategy, the Fund
invests in mortgage-backed and asset-backed securities. The issuers of these
securities and other callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in prepayment rates can
affect the return on investment and yield of mortgage- and asset-backed
securities. When mortgages and other obligations are prepaid and when
securities are called, the Fund may have to reinvest in securities with a lower
yield. The Fund also may fail to recover premiums paid for the securities,
resulting in an unexpected capital loss.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
27
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Treasury & Agency Fund
How has the Treasury & Agency Fund Performed?
By showing the variability of the Treasury & Agency Fund's performance from
year to year, the chart and table below help show the risk of investing in the
Fund. Please remember that the past performance of the Treasury & Agency Fund
is not necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 8.94%
1991 11.49%
1992 5.89%
1993 5.06%
1994 1.20%
1995 15.22%
1996 3.30%
1997 7.30%
1998 8.00%
1999 0.01%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 6.11%. The Treasury & Agency Fund commenced operations on
January 20, 1997, subsequent to the transfer of assets from a common trust
fund with materially equivalent investment objectives, policies, guidelines
and restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for periods prior to the Fund's
commencement of operations as adjusted to reflect the expenses associated
with each class of the Fund. The common trust fund was not registered with
the SEC and was not subject to the investment restrictions, limitations and
diversification requirements imposed by law on registered mutual funds. If
the common trust fund had been registered, its return may have been lower.
--------------------------------------------------------------------------------
Best Quarter: 5.24% 2Q1995 Worst Quarter: -1.24% 1Q1996
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include sales charges and recurring account fees.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 4/30/88
<S> <C> <C> <C> <C> <C>
Class A 1/20/97 -3.37% 5.86% 6.03% 6.33%
---------------------------------------------------------------------
Class B 1/20/97 -3.66% 5.95% 5.80% 6.06%
---------------------------------------------------------------------
Class I 1/20/97 0.01% 6.65% 6.55% 6.82%
---------------------------------------------------------------------
Lehman Brothers
Intermediate
Treasury
Index/2/ 0.41% 6.92% 7.09% 7.44%
---------------------------------------------------------------------
Lipper Short
U.S. Government
Fund Index/3/ 2.55% 6.12% 6.03% *
</TABLE>
/1/The Treasury & Agency Fund commenced operations on January 20, 1997,
subsequent to the transfer of assets from a common trust fund with materially
equivalent investment objectives, policies, guidelines and restrictions as
the Fund. The quoted performance of the Fund includes the performance of the
common trust fund for periods prior to the Fund's commencement of operations
as adjusted to reflect the expenses associated with each class of the Fund.
The common trust fund was not registered with the SEC and was not subject to
the investment restrictions, limitations and diversification requirements
imposed by law on registered mutual funds. If the common trust fund had been
registered, its return may have been lower.
/2/The Lehman Brothers Intermediate Treasury Index is an unmanaged index
comprised of U.S. Treasury-issued securities with maturities of one to ten
years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
services as well as the deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on Class B Shares.
/3/The Lipper Short U.S. Government Fund Index consists of the equally weighted
average month returns of the largest funds within the universe of all funds
in the category.
* Index did not exist.
------
28
<PAGE>
------------------
Treasury & Agency Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 3.00% NONE NONE NONE
--------------------------------------------------------------------
(as a percentage of offering
price)
--------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) NONE/2/ 3.00% 1.00% NONE
--------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
--------------------------------------------------------------------
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .40% .40% .40% .40%
--------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
--------------------------------------------------------------------
Other Expenses .22% .22% .22% .22%
--------------------------------------------------------------------
Total Annual Fund Operating
Expenses .97% 1.62% 1.62% .62%
--------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.27%) (.42%) (.42%) (.17%)
--------------------------------------------------------------------
Net Expenses .70% 1.20% 1.20% .45%
--------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .70% for Class A shares, 1.20% for Class B
shares, 1.20% for Class C shares and .45% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 369 $ 422 $ 122 $ 222 $ 122 $ 48
------------------------------------------------------------------------------
3 Years 574 670 470 470 470 183
------------------------------------------------------------------------------
5 Years 795 842 842 842 842 331
------------------------------------------------------------------------------
10 Years 1,430 1,552 1,552 1,887 1,887 760
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $396
Class B (with
redemption) $465
Class B (no
redemption) $165
Class C (with
redemption) $265
Class C (no
redemption) $165
Class I $63
</TABLE>
/2/Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
29
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
High Yield Bond Fund
What is the goal of the High Yield Bond Fund?
The Fund seeks a high level of current income by investing primarily in a
diversified portfolio of debt securities which are rated below investment grade
or unrated. Capital appreciation is a secondary objective.
What are the High Yield Bond Fund's main investment strategies?
The Fund invests in all types of high-yield, high-risk debt securities. The
Fund also may invest in convertible securities, preferred stock, common stock
and loan participations. The Fund's investments generally will be rated below
investment grade or unrated. Such securities are also known as junk bonds. The
Fund's sub-advisor, Banc One High Yield Partners, LLC focuses on value in
choosing securities for the Fund by looking at individual securities against
the context of broader market factors. Banc One High Yield Partners monitors
investments on an ongoing basis by staying abreast of positive and negative
credit developments and having regular discussions with senior management of
issuers of the Fund's investments. For more information about the High Yield
Bond Fund's investment strategies, please read "More About the Funds" and
"Principal Investment Strategies."
What is a bond?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and mortgage-
backed securities, asset-backed securities, stripped government securities and
zero coupon obligations.
What is a junk bond?
A "junk bond" is a debt security that is rated below investment grade. (Junk
bonds also include unrated securities that Banc One Investment Advisors or Banc
One High Yield Partners believes to be of comparable quality to debt securities
that are rated below investment grade.) Junk bonds are also called "high yield
bonds" and "non-investment grade bonds." These securities generally are rated
in the fifth or lower rating categories (for example, BB or lower by Standard &
Poor's Corporation and Ba or lower by Moody's Investors Service, Inc.). These
securities generally offer a higher yield than investment grade securities, but
involve a high degree of risk.
What are the main risks of investing in the High Yield Bond Fund?
The main risks of investing in the High Yield Bond Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the High Yield Bond Fund and its yield will change every day in response to
interest rates and other market conditions. You may lose money if you invest in
the High Yield Bond Fund. For additional information on risk, please read
"Investment Risks."
------
30
<PAGE>
------------------
----------------
High Yield Bond Fund
MAIN RISKS
Junk Bond Risk. The Fund's main investment strategy is to invest in securities
which are considered to be speculative. These investments may be issued by
companies which are highly leveraged, less creditworthy or financially
distressed. While these investments generally provide a higher yield than
higher rated debt securities, the high degree of risk involved in these
investments can result in substantial or total losses. The market price of
these securities can change suddenly and unexpectedly. As a result, the Fund is
intended as a long-term investment program for investors who are able and
willing to assume a high degree of risk.
MAIN RISKS
Smaller Companies. As part of its high yield strategy, the Fund invests in debt
securities of smaller, newer companies. These investments may be riskier than
investments in larger, more established companies. Securities of smaller
companies tend to be less liquid than securities of larger companies. In
addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in the value of their
debt securities. This may cause unexpected decreases in the value of your
investment in the Fund.
Sensitivity to Interest Rates and Economic Changes. The income and market value
of the Fund's securities may fluctuate more than higher rated securities.
Although non-investment grade securities tend to be less sensitive to interest
rate changes than investment grade securities, non-investment grade securities
are more sensitive to short-term corporate, economic and market developments.
During periods of economic uncertainty and change, the market price of the
Fund's investments and the Fund's net asset value may be volatile.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
31
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
High Yield Bond Fund
How has the High Yield Bond Fund Performed?
By showing the variability of the High Yield Bond Fund's performance from year
to year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the High Yield Bond Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1999 3.26%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 0.30%.
--------------------------------------------------------------------------------
Best Quarter: 3.26% 1Q1999 Worst Quarter: -1.50% 3Q1999
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include sales charges and recurring account fees.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 11/13/98
<S> <C> <C> <C>
Class A 11/13/98 -1.51% -0.45%
--------------------------------------------------------------------
Class B 11/13/98 -2.23% -0.29%
--------------------------------------------------------------------
Class C 3/22/99 1.59% 3.08%
--------------------------------------------------------------------
Class I 11/13/98 3.26% 3.94%
--------------------------------------------------------------------
CSFB Global High Yield Index/2/ 3.28% 2.80%
--------------------------------------------------------------------
CSFB Domestic Plus High Yield
Index/3/ 2.26% *
--------------------------------------------------------------------
Lipper High Yield Bond Fund
Index/4/ 4.78% 4.11%
</TABLE>
/1/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
difference in expenses and sales charges.
/2/The Credit Suisse First Boston (CSFB) Global High Yield Index is an
unmanaged index comprised of securities that are selected primarily on the
basis of size, liquidity and diversification to be representative of the high
yield bond market. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management fees. By contrast, the performance of the Fund reflects the
deduction of these expenses as well as the deduction of sales charges on
Class A shares and applicable contingent deferred charges on Class B and
Class C shares. The CSFB Global High Yield Index was formerly named the CSFB
High Yield Index.
/3/The Credit Suisse First Boston (CSFB) Domestic Plus High Yield Index is an
unmanaged index comprised of high yield securities, within developed nations,
that are selected primarily on the basis of size, liquidity and
diversification to be representative of the high yield market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
applicable contingent deferred sales charges on Class B and Class C shares.
/4/The Lipper High Yield Bond Fund Index is an unmanaged index typically
comprised of the 30 largest mutual funds aimed at high current yields from
fixed income securities. These funds have no quality or maturity restrictions
and tend to invest in lower grade debt issues.
* Index did not exist.
------
32
<PAGE>
------------------
High Yield Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
-------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .75% .75% .75% .75%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------
Other Expenses .28% .28% .28% .28%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.38% 2.03% 2.03% 1.03%
-------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/4/ (.23%) (.23%) (.23%) (.13%)
-------------------------------------------------------------------
Net Expenses 1.15% 1.80% 1.80% .90%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.15% for Class A shares, 1.80% for Class
B shares, 1.80% for Class C shares and .90% for Class I shares for the
period beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 562 $ 683 $ 183 $ 283 $ 183 $ 92
------------------------------------------------------------------------------
3 Years 846 914 614 614 614 315
------------------------------------------------------------------------------
5 Years 1,150 1,272 1,072 1,072 1,072 556
------------------------------------------------------------------------------
10 Years 2,014 2,173 2,173 2,340 2,340 1,248
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $584
Class B (with
redemption) $706
Class B (no
redemption) $206
Class C (with
redemption) $306
Class C (no
redemption) $206
Class I $105
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
33
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
More About the Funds
Each of the eight funds described in this prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of One Group Mutual Funds" and the Statement of Additional
Information.
--------------------------------------------------------------------------------
Principal
Investment
Strategies
This prospectus describes eight mutual funds with a variety of investment
objectives, including total return, capital appreciation and current income.
Banc One Investment Advisors selects securities for the Funds by analyzing both
individual securities and different industry sectors. Banc One Investment
Advisors looks for sectors and securities that it believes will perform
consistently well over time as measured by total return. The Portfolios attempt
to enhance total return by selecting market sectors that offer risk/reward
advantages based on structural risks and credit trends. Individual securities
that are purchased by the Funds are subject to a disciplined risk/reward
analysis both at the time of purchase and on an ongoing basis. This analysis
includes an evaluation of interest rate risk, credit risk and risks associated
with the complex legal and technical structure of the investment (e.g., asset-
backed securities). In addition, the principal investment strategies that are
used to meet each Fund's investment objective are described in "Fund Summaries:
Investments, Risk & Performance" in the front of this prospectus. They are also
described below.
FUNDAMENTAL POLICIES
Each Fund's investment strategy may involve "fundamental policies." A policy
is fundamental if it cannot be changed without the consent of a majority of
the outstanding shares of the Fund.
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund also may use strategies that are not
described below, but which are described in the Statement of Additional
Information.
--
ONE GROUP ULTRA SHORT-TERM BOND FUND. The Fund invests in all types of debt
securities including money market instruments, adjustable rate mortgage-backed
securities and taxable and tax-exempt municipal securities. The Fund will
maintain a maximum interest rate sensitivity approximately equal to that of a
two-year U.S. Treasury security, although the Fund's actual interest rate
sensitivity is expected to be approximately equal to that of a one-year U.S.
Treasury security.
. The Fund normally invests at least 80% of its total assets in debt
securities. Debt securities include bonds, notes and other obligations.
. Up to 20% of the Fund's total assets may be invested in preferred stock.
------
34
<PAGE>
. The Fund will invest in adjustable rate mortgage pass-through securities and
other securities representing an interest in or secured by mortgages with
periodic interest rate resets (some of which may be subject to repurchase
agreements). These securities often are issued or guaranteed by the U.S.
government, its agencies or instrumentalities. However, the Fund also may
purchase mortgage-backed securities and asset-backed securities that are
issued by non-governmental entities. Such securities may or may not have
private insurer guarantees of timely payments.
--
ONE GROUP SHORT-TERM BOND FUND. The Fund invests in all types of debt
securities with short to intermediate maturities.
. The Fund invests at least 80% of its total assets in debt securities with
short to intermediate maturities.
. At least 65% of the Fund's total assets will consist of bonds.
. Up to 20% of the Fund's total assets may be invested in preferred stock.
. The Fund also may purchase taxable or tax-exempt municipal securities.
. The Fund's effective average weighted maturity ordinarily will be three
years or less taking into account expected amortization and prepayment of
principal on certain investments.
--
ONE GROUP INTERMEDIATE BOND FUND. The Fund invests in debt securities of all
types including bonds, notes, U.S government obligations, and taxable and tax-
exempt municipal securities, rated as investment grade at the time of
investment, (or, if unrated, determined by Banc One Investment Advisors, to be
of comparable quality).
. The Fund normally invests at least 80% of its total assets in debt
securities. Debt securities include bonds, notes and other obligations.
. As a matter of fundamental policy, at least 65% of the Fund's total assets
will consist of bonds and at least 50% of total assets will consist of
obligations issued by the U.S. government or its agencies and
instrumentalities, some of which may be subject to repurchase agreements.
. Up to 20% of the Fund's total assets may be invested in preferred stock.
. The Fund's average weighted maturity will ordinarily range between three and
ten years, taking into account expected prepayment of principal on certain
investments. The Fund may shorten that weighted average maturity to as
little as one year for temporary defensive purposes.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the
average of all the current
maturities (that is, the term of
the securities) of the individual
securities in a fund calculated so
as to count most heavily those
securities with the highest dollar
value. Average maturity is
important to bond investors as an
indication of a fund's sensitivity
to changes in interest rates.
Usually, the longer the average
maturity, the more fluctuation in
share price you can expect. The
terms "Intermediate" and "Short-
Term" in a fund's name refer to
the average maturity the fund
maintains.
------
35
<PAGE>
--
ONE GROUP BOND FUND. The Fund invests in all types of debt securities rated as
investment grade, as well as convertible securities, preferred stock and loan
participations.
. The Fund invests at least 65% of its total assets in debt securities of all
types with intermediate to long maturities.
. As a matter of fundamental policy, at least 65% of the Fund's total assets
will consist of bonds.
. The Fund also may purchase taxable or tax-exempt municipal securities.
. The Fund may invest in debt securities that are rated in the lowest
investment grade category.
. The Fund's average weighted maturity will ordinarily range between four and
twelve years, although the Fund may shorten its weighted average maturity if
deemed appropriate for temporary defensive purposes.
--
ONE GROUP INCOME BOND FUND. The Fund invests in all types of debt securities
rated as investment grade or below investment grade, as well as convertible
securities, preferred stock and loan participations.
. The Fund invests at least 70% of its total assets in debt securities of all
types rated as investment grade at the time of investment or, if unrated,
determined to be of comparable quality by Banc One Investment Advisors.
. Up to 30% of the Fund's total assets may be invested in convertible
securities, preferred stock, loan participations and debt securities rated
below investment grade or, if unrated, determined by Banc One Investment
Advisors to be of comparable quality.
. The Fund will not invest more than 20% of its total assets in securities
rated below the fifth rating category.
. As a matter of fundamental policy, at least 65% of the Fund's total assets
will consist of bonds.
. The Fund also may purchase taxable or tax-exempt municipal securities.
. The Fund's average weighted maturity will ordinarily range between five and
twenty years, although the Fund may shorten its weighted average maturity to
as little as two years if deemed appropriate for temporary defensive
purposes.
--
ONE GROUP GOVERNMENT BOND FUND. The Fund limits its investments to securities
issued by the U.S. government and its agencies and instrumentalities or related
to securities issued by the U.S. government and its agencies and
instrumentalities.
. At least 65% of the Fund's total assets will be invested in debt instruments
with principal and interest guaranteed by the U.S. government or its
agencies and instrumentalities, some of which may be subject to repurchase
agreements, and other securities representing an interest in or secured by
mortgages that are issued or guaranteed by certain U.S. government agencies
or instrumentalities.
. The Fund's average weighted maturity will ordinarily range between three and
fifteen years, taking into account expected prepayment of principal on
certain investments. However, the Fund's average weighted remaining maturity
may be outside this range if warranted by market conditions.
------
36
<PAGE>
--
ONE GROUP TREASURY & AGENCY FUND. The Fund invests in U.S. Treasury and other
U.S. agency obligations including fixed income securities and mortgage-related
securities. At least 65% of the Fund's total assets will be invested in
Treasury & Agency Obligations.
WHAT IS A TREASURY & AGENCY
OBLIGATION?
For purposes of the Treasury &
Agency Fund, a Treasury & Agency
obligation includes U.S. Treasury
bills, notes and other obligations
issued or guaranteed by U.S.
government agencies and
instrumentalities, Separately
Traded Registered Interest and
Principal Securities known as
STRIPS and Coupons Under Book Entry
Safekeeping known as CUBES.
. The Fund also invests in other government-only investment companies,
including money market funds of One Group. The Fund indirectly pays a
portion of the expenses incurred by the underlying funds. The Fund also may
invest in government mortgage-backed securities and government adjustable
rate mortgage loans known as ARMS, as well as engage in securities lending.
. Normally, the Fund's average weighted maturity will range between two and
five years.
--
ONE GROUP HIGH YIELD BOND FUND. The Fund's sub-advisor, Banc One High Yield
Partners, LLC focuses on value in choosing securities for the Fund by using a
"bottom-up" research methodology.
WHAT IS A BOTTOM-UP RESEARCH
METHODOLOGY?
When Banc One High Yield Partners
uses a bottom-up research
methodology, it looks primarily at
individual companies against the
context of broader market factors.
For each issuer, Banc One High Yield Partners performs an in-depth analysis of
the issuer including, business prospects, management, capital requirements,
capital structure, enterprise value, and security structure and covenants. In
addition, Banc One High Yield Partners monitors investments on an ongoing basis
by staying abreast of positive and negative credit developments, expediting the
review of the Fund's investments which are considered to be the most risky and
having regular discussions with senior management of issuers of the Fund's
investments.
. The Fund invests at least 80% of its total assets in debt securities, loan
participations, convertible securities and preferred stock which are rated
below investment grade or unrated. The Fund may invest up to 100% of the
Fund's total assets in such securities.
. Up to 20% of the Fund's total assets may be invested in other securities,
including investment grade debt securities.
. As a matter of fundamental policy, at least 65% of the Fund's total assets
will consist of bonds.
. The Fund's average weighted maturity will ordinarily range between five and
ten years, although the Fund may shorten its weighted average maturity to as
little as two years if deemed appropriate for temporary defensive purposes.
--------------------------------------------------------------------------------
Investment Risks
The risks associated with investing in the Bond Funds are described below and
in "Fund Summaries: Investments, Risk & Performance" at the front of this
prospectus.
------
37
<PAGE>
--
FIXED INCOME SECURITIES. Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates.
If rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases.
The value of your investment in a Fund will increase and decrease as the value
of a Fund's investments increase and decrease. While securities with longer
duration and maturities tend to produce higher yields, they also are subject to
greater fluctuations in value when interest rates change. Usually, changes in
the value of fixed income securities will not affect cash income generated, but
may affect the value of your investment. Fixed income securities also are
subject to the risk that the issuer of the security will be unable to meet its
repayment obligation.
--
DERIVATIVES. The Funds invest in securities that may be considered to be
derivatives. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity
and management risks. A Fund's use of derivatives may cause the Fund to
recognize higher amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use such instruments.
WHAT IS A DERIVATIVE?
Derivatives are securities or
contracts (like futures and
options) that derive their value
from the performance of underlying
assets or securities.
--
LOWER RATED SECURITIES. The Intermediate Bond Fund, the Ultra Short-Term Bond
Fund, the Short-Term Bond Fund, the Bond Fund and the Income Bond Fund may
purchase debt securities rated in the lowest investment grade category.
Securities in this rating category are considered to have speculative
characteristics. Changes in economic conditions or other circumstances may have
a greater effect on the ability of issuers of these securities to make
principal and interest payments than they do on issuers of higher grade
securities.
--
HIGH YIELD/JUNK BONDS. The High Yield Bond Fund and, to a lesser extent, the
Income Bond Fund invest in high yield securities that are unrated or rated
below investment grade (commonly known as "junk bonds"). These securities are
considered to be high risk investments. You should not invest in the Funds
unless you are willing to assume the greater risk associated with high yield
securities. These risks include the following:
. Greater Risk of Loss. There is a greater risk that issuers of lower rated
securities will default than issuers of higher rated securities. Issuers of
lower rated securities may be less creditworthy, highly indebted,
financially distressed or bankrupt. These issuers are more vulnerable to
real or perceived economic changes, political changes or adverse industry
developments. If an issuer fails to pay principal or interest, the Funds
would experience a decrease in income and a decline in the market value of
their investments. The Funds also may incur additional expenses in seeking
recovery from the issuer.
. Sensitivity to Interest Rate and Economic Changes. The income and market
value of the Funds' securities may fluctuate more than higher rated
securities. Although non-investment grade securities tend to be less
sensitive to interest rate changes than investment grade securities, non-
investment grade securities are more sensitive to short-term corporate,
economic and market developments. During periods of economic uncertainty and
change, the market price of the Funds' investments and the Funds' net asset
value may be volatile.
------
38
<PAGE>
. Leverage Risk. The risk associated with securities or practices (such as
borrowing) that multiply small index or market movements into large changes
in value.
. Valuation Difficulties. It is often more difficult to value lower rated
securities than higher rated securities. If an issuer's financial condition
deteriorates, accurate financial and business information may be limited or
unavailable. In addition, the Funds' investments may be thinly traded and
there may be no established secondary market. Because of the lack of market
pricing and current information for certain of the Funds' investments,
valuation of such investments is much more dependent on judgment than is the
case with higher rated securities.
. Liquidity. There may be no established secondary or public market for the
Funds' investments. As a result, the Funds may be required to sell
investments at substantial losses or retain them indefinitely even where an
issuer's financial condition is deteriorating.
. High Yield Bond Market. Unlike investment grade securities (including
securities which were investment grade when issued but have fallen below
investment grade), the track record for bond default rates on new issues of
non-investment grade bonds is relatively short. It may be that future
default rates on new issues of non-investment grade securities will be more
widespread and higher than in the past, especially if economic conditions
deteriorate.
. Credit Quality. Credit quality of non-investment grade securities can change
suddenly and unexpectedly, and even recently-issued credit ratings may not
fully reflect the actual risks posed by a particular high-yield security.
For these reasons, the Funds will not rely solely on ratings issued by
established credit rating agencies, but will use such ratings in conjunction
with Banc One Investment Advisor's or the Sub-Advisor's independent and
ongoing review of credit quality. (Please see "Description of Ratings" in
the Statement of Additional Information.) Because investments in lower rated
or unrated securities involve greater investment risk, achievement of the
Funds' investment objectives will be more dependent on Banc One Investment
Advisor's or the Sub-Advisor's credit analysis than would be the case if the
Funds were investing in higher rated securities. The Funds may seek to hedge
investments through transactions in options, futures contracts and related
options. The Funds also may use swap agreements to further manage exposure
to lower rated securities.
--
SMALL-CAPITALIZATION COMPANIES. Investments in smaller, younger companies may
be riskier than investments in larger, more established companies. These
companies may be more vulnerable to changes in economic conditions, specific
industry conditions, market fluctuations and other factors effecting the
profitability of other companies. Because economic events may have a greater
impact on smaller companies, there may be a greater and more frequent
fluctuation in their stock price. This may cause frequent and unexpected
increases or decreases in the value of your investment.
--
FOREIGN SECURITIES. Investments in foreign securities involve risks different
from investments in U.S. securities. These risks include the risks associated
with higher transaction costs, delayed settlements, currency controls and
adverse economic developments. This also includes the risk that fluctuations in
the exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may erode or
reverse any gains produced by foreign currency denominated investments and
widen any losses. Exchange rate volatility also may affect the ability of an
issuer to repay U.S. dollar
------
39
<PAGE>
denominated debt, thereby increasing credit risk. Because of these risk
factors, the share price of Funds that invest in foreign securities is expected
to be volatile, and you should be able to sustain sudden, and sometimes
substantial, fluctuations in the value of your investment.
For more information about risks associated with the types of investments that
the Bond Funds purchase, please read "Fund Summaries: Investments, Risk &
Performance," Appendix A and the Statement of Additional Information.
--------------------------------------------------------------------------------
Investment Policies
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
--
Each Fund may not:
1. Purchase the securities of an issuer if as a result more than 5% of its
total assets would be invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or guaranteed by the United
States, its agencies or instrumentalities, securities of registered
investment companies, and repurchase agreements involving these securities.
This restriction applies with respect to 75% of a Fund's total assets.
2. Concentrate their investment in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Make loans, except that a Fund may:
(i) purchase or hold debt instruments in accordance with its investment
objective and policies;
(ii) enter into repurchase agreements; and
(iii) engage in securities lending.
Additional investment policies can be found in the Statement of Additional
Information.
--------------------------------------------------------------------------------
Portfolio Quality
Various rating organizations (like Standard & Poor's Corporation and Moody's
Investors Service) assign ratings to securities (other than equity securities).
Generally, ratings are divided into two main categories: "Investment Grade
Securities" and "Non-Investment Grade Securities." Although there is always a
risk of default, rating agencies believe that issuers of Investment Grade
Securities have a high probability of making payments on such securities. Non-
Investment Grade Securities include securities that, in the opinion of the
rating agencies, are more likely to default than Investment Grade Securities.
The Funds only purchase securities that meet the rating
------
40
<PAGE>
criteria described below. Banc One Investment Advisors (or Banc One High Yield
Partners with respect to the High Yield Bond Fund) will look at a security's
rating at the time of investment. If the securities are unrated, Banc One
Investment Advisors (or Banc One High Yield Partners with respect to the High
Yield Bond Fund) must determine that they are of comparable quality to rated
securities.
--
DEBT SECURITIES
. The Government Bond Fund and the Treasury & Agency Fund may invest in debt
securities rated in any of the three highest investment grade rating
categories.
. The Ultra Short-Term Bond Fund, the Intermediate Bond Fund, the Short-Term
Bond Fund and the Bond Fund may invest in debt securities rated in any of
the four investment grade rating categories.
. The Income Bond Fund and the High Yield Bond Fund may purchase securities in
ANY rating category. Please read "Fund Summaries: Investments, Risk &
Performance" and "High Yield/Junk Bonds" for more information about the
Income Bond Fund and the High Yield Bond Fund.
--
PREFERRED STOCK
. The Ultra Short-Term Bond Fund, the Short-Term Bond Fund, the Bond Fund and
the Intermediate Bond Fund may only invest in preferred stock rated in any
of the four highest rating categories.
. The Income Bond Fund and the High Yield Bond Fund may invest in preferred
stock in any rating category.
--
MUNICIPAL SECURITIES
. The Ultra Short-Term Bond Fund, the Short-Term Bond Fund, Intermediate Bond
Fund and the Bond Fund may only invest in municipal bonds rated in any of
the four highest rating categories.
. The Ultra Short-Term Bond Fund, the Intermediate Bond Fund and the Bond Fund
may only invest in other municipal securities, such as tax-exempt commercial
paper, notes and variable rate demand obligations which are rated in the
highest or second highest rating categories. The Short-Term Bond Fund may
invest in such securities only if they are rated in the highest rating
category.
. The Income Bond Fund and the High Yield Bond Fund may invest in municipal
securities rated in ANY category.
--
COMMERCIAL PAPER
. The Intermediate Bond Fund, the Short-Term Bond Fund, the Bond Fund and the
Ultra Short-Term Bond Fund may invest in commercial paper rated in the
highest or second highest rating category.
. The High Yield Bond Fund and the Income Bond Fund may invest in commercial
paper in any rating category.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
------
41
<PAGE>
--------------------------------------------------------------------------------
Temporary Defensive Positions
To respond to unusual market conditions, the Funds may invest all or most of
their assets in cash and cash equivalents for temporary defensive purposes.
These investments may result in a lower yield than lower-quality or longer-term
investments and may prevent the Funds from meeting their investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash equivalents are highly liquid,
high-quality instruments with
maturities of three months or less
on the date they are purchased They
include securities issued by the
U.S. government, its agencies and
instrumentalities, repurchase
agreements (other than equity
repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper
(rated in one of the two highest
rating categories), variable rate
master demand notes, money market
mutual funds and bank money market
deposit accounts.
--------------------------------------------------------------------------------
Portfolio Turnover
The Funds may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Funds and may result in additional tax consequences to you. The
portfolio turnover rate for each Fund for the fiscal year ended June 30, 2000,
is shown on the Financial Highlights. To the extent portfolio turnover results
in short-term capital gains, such gains will generally be taxed at ordinary
income tax rates.
------
42
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
How to Do Business with One Group Mutual Funds
--------------------------------------------------------------------------------
Purchasing Fund Shares
Where can I buy shares?
You may purchase Fund shares:
. Directly from One Group through The One Group Services Company (the
"Distributor"), and
. From Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this way
will be held for you by the Shareholder Servicing Agent.
When can I buy shares?
. Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends and days on which the New
York Stock Exchange ("NYSE") is closed including the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day.
. Purchase requests received before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close before 4 p.m. ET. When
that happens, purchase requests received after the NYSE closes will be
effective the following business day.
. If a Shareholder Servicing Agent holds your shares, it is the responsibility
of the Shareholder Servicing Agent to send your purchase or redemption order
to the Fund. Your Shareholder Servicing Agent may have an earlier cut-off
time for purchase and redemption requests.
. The Distributor can reject a purchase order if it does not think that it is
in the best interests of a Fund and/or its shareholders to accept the order.
. Shares are electronically recorded. Therefore, certificates will not be
issued.
What kind of shares can I buy?
One Group offers the following classes of shares:
. Class A, Class B and Class C shares are available to the general public.
. Class I shares are available to institutional investors, such as
corporations, pension and profit sharing plans, and foundations; and any
organization authorized to act in a fiduciary, advisory, custodial or agency
capacity. We will refer to these entities as "Intermediaries."
. When deciding what class of shares to buy, you should consider the amount of
your investment, the length of time you intend to hold the shares, and the
sales charges and expenses applicable to each class of shares. If you intend
to hold your shares for seven or more years, Class A shares may be more
appropriate for you. If you intend to hold your shares for less than seven
years, you may want to consider Class B or Class C shares. Sales charges are
discussed in the section of this prospectus entitled Sales Charges.
------
43
<PAGE>
ONE GROUP FUND DIRECT IRA AND 403(B). One Group offers retirement plans. These
plans allow participants to defer taxes while their retirement savings grow.
Call 1-800-480-4111 for an Adoption Agreement.
How much do shares cost?
. Shares are sold at net asset value ("NAV") plus a sales charge, if any.
. Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
. NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
. A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, NAV will be calculated as of the
time the NYSE closes.
How do I open an account?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
. The minimum initial investment for Class A, Class B and Class C shares for
all Funds, except the Treasury & Agency Fund, is $1,000 per Fund ($100 for
employees of Bank One Corporation and its affiliates). The minimum initial
investment for Class A, Class B and Class C shares for the Treasury &
Agency Fund is $50,000. The minimum initial investment for an IRA and
403(b) is $250.
. The minimum initial investment for Class I shares for all Funds is
$200,000 per Fund.
. You are required to maintain a minimum account balance equal to the
minimum initial investment in each Fund.
. Subsequent investments for all Funds must be at least $25 per Fund.
. You may purchase no more than $249,999 of Class B shares. This is because
Class A shares offer a reduced sales charge on purchases of $250,000 or
more and have lower expenses. The section of this prospectus entitled
"What Kind of Shares Can I Buy?" provides information that can help you
choose the appropriate share class.
. These minimums may be waived.
3. Complete the Account Application Form. Be sure to sign up for all of the
account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
4. Send the completed application and a personal check (unless you choose to
pay by wire) payable to "One Group" to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
------
44
<PAGE>
Contributions to Fund Direct IRAs should be made payable to "One Group Mutual
Funds for the Benefit of (your name)."
If you choose to pay by wire, please call 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual or company and endorsed to
One Group Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
. One Group Mutual Funds; or
. the specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be returned
to the address provided on the account application.
6. If you redeem shares purchased under the Systematic Investment Plan (see
below) or that were purchased by check, One Group will delay forwarding you
redemption proceeds until payment has been collected from your bank. One
Group generally receives payment within ten (10) calendar days of purchase.
7. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
8. If you have any questions, contact your Shareholder Servicing Agent or call
1-800-480-4111.
Can I purchase shares over the telephone?
Yes. Simply select this option on your Account Application Form and then:
. Contact your Shareholder Servicing Agent or call 1-800-480-4111 to relay
your purchase instructions.
. Authorize a bank transfer or initiate a wire transfer to the following wire
address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP INTERMEDIATE BOND FUND -- A)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: JOHN SMITH & MARY SMITH, JTWROS)
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. You may revoke your right to make purchases over the telephone by sending a
letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
------
45
<PAGE>
Can I automatically invest on a systematic basis?
Yes, except for the Treasury & Agency Fund. You may purchase additional Class
A, Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000 per Fund. To
establish a Systematic Investment Plan:
. Select the "Systematic Investment Plan" option on the Account Application
Form.
. Provide the necessary information about the bank account from which your
investments will be made.
. Shares purchased under a Systematic Investment Plan may not be redeemed for
five (5) business days.
. One Group currently does not charge for this service, but may impose a
charge in the future. However, your bank may impose a charge for debiting
your bank account.
. You may revoke your election to make systematic investments by calling 1-
800-480-4111 or by sending a letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
Conversion Feature
. Your Class B shares automatically convert to Class A shares.
. Class B shares of the Intermediate Bond Fund, the Income Bond Fund, the
Government Bond Fund, the High Yield Bond Fund and the Bond Fund
automatically convert after eight years. Class B shares of the Ultra Short-
Term Bond Fund, the Short-Term Bond Fund, and the Treasury & Agency Fund
automatically convert after six years.
. Conversion periods are measured from the end of the month in which Class B
shares were purchased.
. After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares.
. You will not be assessed any sales charges or fees for conversion of shares,
nor will you be subject to any federal income tax.
. Because the share price of the Class A shares may be higher than that of the
Class B shares at the time of conversion, you may receive fewer Class A
shares; however, the dollar value will be the same.
. If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together
for purposes of calculating the six and eight year time period.
--------------------------------------------------------------------------------
Sales Charges
The Distributor compensates Shareholder Servicing Agents who sell shares of One
Group Mutual Funds. Compensation comes from sales charges, 12b-1 fees, and
payments by the Distributor and the Funds' investment advisor from their own
resources. The tables below show the charges for each class of shares and the
percentage of your investment that is paid as a commission to a Shareholder
Servicing Agent.
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46
<PAGE>
----------------
----------------
CLASS A SHARES
If you buy Class A shares of the Short-Term Bond Fund, the Ultra Short-Term
Bond Fund and the Treasury & Agency Fund, the following table shows the amount
of sales charge you pay and the commissions paid to Shareholder Servicing
Agents.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SALES CHARGE SALES CHARGE COMMISSION
OF AS A % OF THE AS A % OF YOUR AS A % OF
PURCHASES OFFERING PRICE INVESTMENT OFFERING PRICE
<S> <C> <C> <C>
LESS THAN $100,000 3.00% 3.09% 2.70%
--------------------------------------------------------------------------
$100,000-$249,999 2.50% 2.56% 2.18%
--------------------------------------------------------------------------
$250,000-$499,999 2.00% 2.04% 1.64%
--------------------------------------------------------------------------
$500,000-$999,999 1.50% 1.52% 1.20%
--------------------------------------------------------------------------
$1,000,000* NONE NONE NONE
--------------------------------------------------------------------------
</TABLE>
* If you purchase $1 million or more of Class A shares and are not assessed a
sales charge at the time of purchase, you will be charged the equivalent of
0.50% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase, unless the Distributor receives notice before
you invest indicating that your Shareholder Servicing Agent is waiving its
commission.
If you buy Class A shares of the Intermediate Bond Fund, the Income Bond Fund,
the Government Bond Fund, the High Yield Bond Fund and the Bond Fund, the
following table shows the amount of sales charge you pay and the commissions
paid to Shareholder Servicing Agents.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SALES CHARGE SALES CHARGE COMMISSION
OF AS A % OF THE AS A % OF YOUR AS A % OF
PURCHASES OFFERING PRICE INVESTMENT OFFERING PRICE
<S> <C> <C> <C>
LESS THAN $100,000 4.50% 4.71% 4.05%
--------------------------------------------------------------------------
$100,000-$249,999 3.50% 3.63% 3.05%
--------------------------------------------------------------------------
$250,000-$499,999 2.50% 2.56% 2.05%
--------------------------------------------------------------------------
$500,000-$999,999 2.00% 2.04% 1.60%
--------------------------------------------------------------------------
$1,000,000* NONE NONE NONE
--------------------------------------------------------------------------
</TABLE>
* If you purchase $1 million or more of Class A shares and are not assessed a
sales charge at the time of purchase, you will be charged the equivalent of
1% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase and 0.50% of the purchase price if you redeem
within two years of purchase, unless the Distributor receives notice before
you invest indicating that your Shareholder Servicing Agent is waiving its
commission.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem Class B shares of the Intermediate Bond Fund, the Income Bond
Fund, the Government Bond Fund, the High Yield Bond Fund or the Bond Fund
before the sixth anniversary of purchase, you will be assessed a Contingent
Deferred Sales Charge ("CDSC") according to the following schedule:
------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
--------------------------------------
1-2 4.00%
--------------------------------------
2-3 3.00%
--------------------------------------
3-4 3.00%
--------------------------------------
4-5 2.00%
--------------------------------------
5-6 1.00%
--------------------------------------
MORE THAN 6 NONE
--------------------------------------
</TABLE>
------
47
<PAGE>
----------------
Or if you redeem Class B shares of the Ultra Short-Term Bond Fund, the Short-
Term Bond Fund or the Treasury & Agency Fund prior to the fourth anniversary of
purchase, you will be assessed a CDSC according to the following schedule:
------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 3.00%
--------------------------------------
1-2 3.00%
--------------------------------------
2-3 2.00%
--------------------------------------
3-4 1.00%
--------------------------------------
MORE THAN 4 NONE
--------------------------------------
</TABLE>
The Distributor pays a commission of 4.00% of the original purchase price to
Shareholder Servicing Agents who sell Class B shares of the Intermediate Bond
Fund, the Income Bond Fund, the Government Bond Fund, the High Yield Bond Fund
or the Bond Fund. Shareholder Servicing Agents who sell Class B shares of the
Ultra Short-Term Bond Fund, the Short-Term Bond Fund, and the Treasury & Agency
Fund receive a commission of 2.75% from The One Group Services Company.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 1.00%
--------------------------------------
AFTER FIRST YEAR NONE
--------------------------------------
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from the Distributor.
How the CDSC is Calculated
. The Fund assumes that all purchases made in a given month were made on the
first day of the month.
. The CDSC is based on the current market value or the original cost of the
shares, whichever is less.
. No CDSC is imposed on share appreciation, nor is a CDSC assessed on shares
acquired through reinvestment of dividends or capital gains distributions.
. To keep your CDSC as low as possible, the Fund first will redeem the shares
you have held for the longest time and thus have the lowest CDSC.
. If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of One Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including the
period of time you have held those shares) will be applied to One Group
shares you receive in the reorganization.
------
48
<PAGE>
----------------
----------------
12B-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 fees. 12b-1 fees are paid by
One Group Mutual Funds to the Distributor as compensation for its services and
expenses. The Distributor in turn pays all or part of the 12b-1 fee to
Shareholder Servicing Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net assets of
the Fund, which is currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the average daily net
assets of the Fund, which is currently being waived to .90% for the
Intermediate Bond Fund, the Income Bond Fund, the Government Bond Fund, the
High Yield Bond Fund and the Bond Fund and to .75% for the Short-Term Bond
Fund, the Ultra Short-Term Bond Fund, and the Treasury & Agency Fund. This
will cause expenses for Class B and Class C shares to be higher and
dividends to be lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
12b-1 fees, together with the CDSC, help the Distributor sell Class B and Class
C shares without an "up-front" sales charge by defraying the costs of advancing
brokerage commissions and other expenses paid to Shareholder Servicing Agents.
. The Distributor may use up to .25% of the fees for shareholder servicing
and up to .75% for distribution. During the last fiscal year, the
Distributor received 12b-1 fees totaling .25% of the average daily net
assets of Class A shares, .90% of the average daily net assets of the Class
B shares and .90% of the average daily net assets of the Class C shares of
the Intermediate Bond Fund, the Income Bond Fund, the Government Bond Fund,
the High Yield Bond Fund and the Bond Fund, and .25% of the average daily
net assets of Class A shares, .75% of the average daily net assets of the
Class B shares and .75% of the average daily net assets of the Class C
shares of the Short-Term Bond Fund, the Ultra Short-term Bond Fund, and the
Treasury & Agency Fund.
. The Distributor may pay 12b-1 fees to its affiliates and to Banc One
Investment Advisors and its affiliates (or any sub-advisor) for brokerage
and other agency transactions.
Because 12b-1 fees are paid out of Fund assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
--------------------------------------------------------------------------------
Sales Charge Reductions and Waivers
REDUCING YOUR CLASS A SALES CHARGE
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the higher of the market value or
original purchase price of any Class A, Class B or Class C shares of a Fund
(except a money market fund) that you (and your spouse and minor children)
already own
------
49
<PAGE>
----------------
to the amount of your next Class A purchase for purposes of calculating the
sales charge. An Intermediary also may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more funds over the next 13 months and pay the same
sales charge that you would have paid if all shares were purchased at once.
A percentage of your investment will be held in escrow until the full amount
covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your investment
representative. To determine if you are eligible for the accumulation
privilege, call 1-800-480-4111. These programs may be terminated or amended at
any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge has
been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and their
spouses and immediate family members) of:
. One Group.
. Bank One Corporation and its subsidiaries and affiliates.
. The Distributor and its subsidiaries and affiliates.
. State Street Bank and Trust Company and its subsidiaries and affiliates.
. Broker-dealers who have entered into dealer agreements with One Group and
their subsidiaries and affiliates.
. An investment sub-advisor of a fund of One Group and such sub-advisor's
subsidiaries and affiliates.
4. Bought by:
. Affiliates of Bank One Corporation and certain accounts (other than IRA
Accounts) for which an Intermediary acts in a fiduciary, advisory, agency,
or custodial capacity or accounts which participate in select affinity
programs with Bank One Corporation and its affiliates and subsidiaries.
. Accounts as to which a bank or broker-dealer charges an asset allocation
fee, provided the bank or broker-dealer has an agreement with the
Distributor.
. Accounts which participate in select affinity programs with Bank One
Corporation and its subsidiaries and affiliates.
. Certain retirement and deferred compensation plans and trusts used to fund
those plans, including, but not limited to, those defined in sections
401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi trusts."
. Shareholder Servicing Agents who have a dealer arrangement with the
Distributor, who place trades for their own accounts or for the accounts of
their clients and who charge a management, consulting or other fee for
their services, as well as clients of such Shareholder Servicing Agents who
place trades for their own accounts if the accounts are linked to the
master account of such Shareholder Servicing Agent.
------
50
<PAGE>
----------------
----------------
5. Bought with proceeds from the sale of Class I shares of a One Group Fund or
acquired in an exchange of Class I shares of a Fund for Class A shares of
the same Fund, but only if the purchase is made within 60 days of the sale
or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund, including
Class A shares of a One Group Fund, for which a sales charge was paid, but
only if the purchase is made within 60 days of the sale or distribution.
Appropriate documentation may be required.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the sale or
distribution and, at the time of the distribution, the employee benefit plan
had plan assets invested in a One Group Fund.
8. Bought with assets of One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12-month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver. For information on the Systematic Withdrawal Plan, please see "Can I
Redeem on a Systematic Basis?"
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the Distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability.
3. That represent a minimum required distribution from your One Group IRA
Account or other One Group qualifying retirement plan, but only if you are
at least age 70 1/2. Only your One Group assets are considered when
calculating that portion of your minimum required distribution that
qualifies for the waiver.
4. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class B shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the exchange.
Please read "Do I Pay a Sales Charge on an Exchange?"
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12-month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver. For information on the Systematic Withdrawal Plan, please see "Can I
Redeem on a Systematic Basis?"
------
51
<PAGE>
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability.
3. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2. Only
your One Group assets are considered when calculating that portion of your
minimum required distribution that qualifies for the waiver.
4. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the exchange.
Please read "Do I pay a Sales Charge on an Exchange?"
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
WAIVER QUALIFICATIONS
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, call 1-800-480-4111 or contact
your Shareholder Servicing Agent. These waivers will not continue indefinitely
and may be discontinued at any time without notice. Partnerships and
corporations are not eligible for these fee waivers.
--------------------------------------------------------------------------------
Exchanging Fund Shares
What are my exchange privileges?
You may make the following exchanges:
. Class I shares of a Fund may be exchanged for Class A shares of that Fund or
for Class A or Class I shares of another One Group Fund.
. Class A shares of a Fund may be exchanged for Class I shares of that Fund or
for Class A or Class I shares of another One Group Fund, but only if you are
eligible to purchase those shares.
. Class B shares of a Fund may be exchanged for Class B shares of another One
Group Fund.
. Class C shares of a Fund may be exchanged for Class C shares of another One
Group Fund.
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in dollar cost averaging. To participate in the
Systematic Exchange Privilege, please select it on your account application. To
learn more about it, please call 1-800-480-4111.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days
written notice.
------
52
<PAGE>
When are exchanges processed?
Exchanges are processed the same business day they are received, provided:
. State Street Bank and Trust Company receives the request by 4:00 p.m., ET.
. You have provided One Group with all of the information necessary to process
the exchange.
. You have received a current prospectus of the Fund or Funds in which you
wish to invest.
. You have contacted your Shareholder Servicing Agent, if necessary.
Do I pay a sales charge on an exchange?
Generally, you will not pay a sales charge on an exchange. However:
. You will pay a sales charge if you own Class I shares of a Fund and you want
to exchange those shares for Class A shares, unless you qualify for a sales
charge waiver (see above).
. You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them for
shares of a Fund that does, in which case you would pay the sales charge
applicable to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that Fund's
sales charge and all other sales charges you have already paid.
. If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you
exchanged, or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class B or Class C shares is
carried over to your new shares.
Are exchanges taxable
Generally:
. An exchange between classes of shares of the same Fund is not taxable for
federal income tax purposes.
. An exchange between Funds is considered a sale and generally results in a
capital gain or loss for federal income tax purposes.
. You should talk to your tax advisor before making an exchange.
Are there limits on exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short- term movements in the market. Therefore:
. To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity. Exchange activity is excessive if it exceeds two
substantive exchange redemptions within 30 days of each other.
. Excessive exchange activity will result in revocation of your exchange
privilege.
. In addition, One Group reserves the right to reject any exchange request
(even those that are not excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or otherwise adversely
affect other shareholders.
------
53
<PAGE>
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to exchanges, your account
value falls below the minimum required balance. For information on minimum
required balances, please read, "How Do I Open An Account?"
--------------------------------------------------------------------------------
Redeeming Fund Sares
When Can I Redeem Share?
You may redeem all or some of your shares on any day that the Funds are open
for business.
. Redemption requests received before 4:00 p.m. ET (or when the NYSE closes)
will be effective that day.
. All required documentation in the proper form must accompany a redemption
request. One Group may refuse to honor incomplete redemption requests.
. You may use any of the following methods to redeem your shares:
How Do I Redeem Shares?
1. You may send a written redemption request to your Shareholder Servicing
Agent, if applicable, or to State Street Bank and Trust Company at the
following address:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
2. You may use the One Group website at www.onegroup.com; or
3. You may redeem over the telephone. Please see "Can I Redeem By Telephone?"
for more information.
. All requests for redemptions from IRA accounts must be in writing.
. You may request redemption forms by calling 1-800-480-4111 or visiting
www.onegroup.com.
. One Group may require that the signature on your redemption request be
guaranteed by a participant in the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for shares worth $50,000 or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record address;
or
4. the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
. On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
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54
<PAGE>
. One Group may charge you a wire redemption fee. The current charge is $7.00.
. Your redemption proceeds will be paid within seven days after receipt of the
redemption request.
What will my shares be worth?
. If you own Class A and Class I shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that
day's NAV.
. If you own Class B or Class C shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that
day's NAV, minus the amount of any applicable CDSC.
Can I redeem by telephone?
Yes, if you selected this option on your Account Application Form.
. Contact your Shareholder Servicing Agent or call 1-800-480-4111 to relay
your redemption request.
. Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
. State Street Bank and Trust Company may charge you a wire redemption fee.
The current charge is $7.00.
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. Redemptions from your IRA account may not be made by telephone.
Can I redeem on a systematic basis?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each. This $10,000
minimum does not apply to minimum required distributions from your One Group
IRA or other qualifying retirement plan.
. Select the "Systematic Withdrawal Plan" option on the Account Application
Form.
. Specify the amount you wish to receive and the frequency of the payments.
. You may designate a person other than yourself as the payee.
. There is no charge for this service.
. If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A shares
while participating in a Systematic Withdrawal Plan. This is because
Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated payee may
receive systematic payments. The applicable Class B or Class C sales
charge is waived provided your withdrawals do not exceed 10% of your
account value annually, measured from the date you begin participating in
the Plan. Shares received from dividend and capital gains reinvestment
are included in calculating the 10%. Withdrawals in excess of 10% will
subject the entire annual withdrawal to the applicable sales load.
3. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from a One
Group IRA or other One Group qualifying retirement plan. Only One Group
assets are considered when calculating your minimum required
distribution.
------
55
<PAGE>
----------------
4. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
Additional Information Regarding Redemptions
. Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more, the Fund reserves the right to pay part or all of
your redemption proceeds in readily marketable securities instead of cash.
If payment is made in securities, the Fund will value the securities
selected in the same manner in which it computes its NAV. This process
minimizes the effect of large redemptions on the Fund and its remaining
shareholders.
. If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to redemptions, your account
value falls below the minimum required balance. The above provision does not
apply to accounts participating in the Systematic Withdrawal Plan. For
information on minimum required balances, please read, "How Do I Open An
Account?"
No CDSC will be charged on such redemptions.
. One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
. You generally will recognize a gain or loss on a redemption for federal
income tax purposes. You should talk to your tax advisor before making a
redemption.
------
56
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
Shareholder Information
--------------------------------------------------------------------------------
Voting Rights
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each
Fund, and each class of shares within each Fund, vote separately on matters
relating solely to that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal voting rights on matters
that affect all shareholders equally.
--------------------------------------------------------------------------------
Dividend Policies
DIVIDENDS. The Funds generally declare dividends on the last business day of
each month. Dividends are distributed on the first business day of each month.
Capital gains, if any, for all Funds are distributed at least annually. To
maintain a relatively even rate of distributions from the Treasury & Agency
Fund, the monthly distributions for that Fund may be fixed from time to time at
rates consistent with Banc One Investment Advisors' long-term earnings
expectations.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payments in cash. The price of the shares
is the NAV determined immediately following the dividend record date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street. You also may call 1-800-480-4111 to
make this change.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES. Class B shares received as dividends
and capital gains distributions will be accounted for separately. Each time any
Class B shares (other than those in the sub-account) convert to Class A shares,
a percentage of the Class B shares in the sub-account will also convert to
Class A shares. (See "Conversion Feature.")
------
57
<PAGE>
--------------------------------------------------------------------------------
Tax Treatment Of Shareholders
Taxation Of Shareholder Transactions
A sale, exchange or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated
by your transactions. Reinvested dividends and distributions receive the same
tax treatment as dividends and distributions paid in cash.
Taxation Of Distributions
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses) and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) on at least an
annual basis. Dividends you receive from a Fund, whether reinvested or received
in cash, will be taxable to you. Dividends from a Fund's net investment income
will be taxable as ordinary income and distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
Taxation of Zero Coupon Securities
Some of the Funds may acquire certain securities issued with original issue
discount (including zero-coupon securities). Current federal tax law requires
that a holder (such as a Fund) of such a security must include in taxable
income a portion of the original issue discount which accrues during the tax
year on such security even if a Fund receives no payment in cash on the
security during the year. As an investment company, a Fund must pay out
substantially all of its net investment income each year, including any
original issue discount. Accordingly, a Fund may be required to pay out in
income distribution each year an amount which is greater than the total amount
of cash interest a Fund actually received. Such distributions will be made from
the cash assets of a Fund or by liquidation of investments if necessary. If a
distribution of cash necessitates the liquidation of investments, Banc One
Investment Advisors or the Sub-Advisor will select which securities to sell and
a Fund may realize a gain or loss from those sales. In the event a Fund
realizes net capital gains from these transactions, you may receive a larger
capital gain distribution, if any, than you would in the absence of such
transactions.
Taxation of Retirement Plans
Distributions by the Funds to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for tax-
exempt treatment or by an individual who has received shares as a distribution
from a retirement plan, the distributions will be taxable to the plan or
individual as described in "Taxation of Distributions." If you are considering
purchasing shares with qualified retirement plan assets, you should consult
your tax advisor for a more complete explanation of the federal, state, local
and (if applicable) foreign tax consequences of making such an investment.
Tax Information
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature. No
attempt has been made to present a complete explanation of the federal, state,
local or foreign tax treatment of the Funds or their shareholders.
------
58
<PAGE>
--------------------------------------------------------------------------------
Shareholder Statements and Reports
One Group or your Shareholder Servicing Agent will send you transaction
confirmation statements and quarterly account statements. Please review these
statements carefully. One Group will correct errors if notified within one year
of the date printed on the transaction confirmation or account statement. Your
Shareholder Servicing Agent may have a different cut-off time.
To reduce expenses and conserve natural resources, One Group will deliver a
single copy of prospectuses and financial reports to individual investors who
share a residential address, provided they have the same last name or One Group
reasonably believes they are members of the same family. If you would like to
receive separate mailings, please call 1-800-480-4111 and One Group will begin
individual delivery within 30 days. If you would like to receive these
documents by e-mail, please visit www.onegroup.com and sign up for electronic
delivery.
If you are the record owner of your One Group shares (that is, you did not use
a Shareholder Servicing Agent to buy your shares), you may access your account
statements at www.onegroup.com.
In March and September, you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
If you have any questions or need additional information, please write One
Group Mutual Funds at 1111 Polaris Parkway, Columbus, OH 43271-1235, call 1-
800-480-4111 or visit www.onegroup.com.
------
59
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
Management of One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor to
the Trust since its inception. In addition, Banc One Investment Advisors serves
as investment advisor to other mutual funds and individual corporate,
charitable and retirement accounts. As of June 30, 2000, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $131 billion in assets.
--------------------------------------------------------------------------------
The Sub-Advisor
Banc One High Yield Partners, LLC (1111 Polaris Parkway, P.O. Box 710211,
Columbus, Ohio 43271-0211), is the sub-advisor to the High Yield Bond Fund and
the Income Bond Fund. Banc One High Yield Partners was formed in June 1998 to
provide investment advisory services related to high-yield, high-risk
investments to the High Yield Bond Fund and other advisory clients. Banc One
High Yield Partners is controlled by Banc One Investment Advisors and Pacholder
Associates, Inc. As of June 30, 2000, Banc One High Yield Partners had
approximately $357 million in assets under management.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Ultra Short-Term Bond Fund .28%
-----------------------------------------------------------------
One Group(R) Short-Term Bond Fund .32%
-----------------------------------------------------------------
One Group(R) Intermediate Bond Fund .37%
-----------------------------------------------------------------
One Group(R) Bond Fund .39%
-----------------------------------------------------------------
One Group(R) Income Bond Fund* .41%
-----------------------------------------------------------------
One Group(R) Government Bond Fund .43%
-----------------------------------------------------------------
One Group(R) Treasury & Agency Fund .20%
-----------------------------------------------------------------
One Group(R) High Yield Bond Fund* .60%
-----------------------------------------------------------------
</TABLE>
* Includes fees paid by Banc One Investment Advisors to Banc One High Yield
Partners, the sub-advisor to the High Yield Bond Fund and the Income Bond
Fund.
------
60
<PAGE>
--------------------------------------------------------------------------------
The Fund Managers
The Funds are managed by teams of Fund managers, research analysts and fixed
income traders. The team works together to establish general duration and
sector strategies for the Funds. Each team member makes recommendations about
securities in the Funds. The research analysts and trading personnel provide
individual security and sector recommendations, while the portfolio managers
select and allocate individual securities in a manner designed to meet the
investment objectives of the Fund.
--------------------------------------------------------------------------------
Banc One High Yield Partners -- Prior Performance of Pacholder Associates, Inc.
Banc One High Yield Partners was formed as a limited liability company under an
agreement between Banc One Investment Advisors and Pacholder Associates, Inc.
Under the Agreement, Pacholder is responsible for providing portfolio
management services on behalf of Banc One High Yield Partners. Pacholder is
also responsible for advising the Pacholder High Yield Fund, Inc. (formerly
known as the Pacholder Fund, Inc.), a closed-end fund through a limited
liability company known as Pacholder & Company, LLC./1/
The following table shows historical performance of the Pacholder High Yield
Fund, a fund with substantially similar investment objectives, policies,
strategies and risks to the High Yield Bond Fund as measured against specified
market indices. The information for the Pacholder High Yield Fund is provided
to show the past performance of Pacholder in managing a substantially similar
fund. This information does not represent the performance of the High Yield
Bond Fund. You should not consider this performance data as an indication of
future performance of the High Yield Bond Fund or the Pacholder High Yield
Fund. The first column shows the performance of the High Yield Bond Fund for
the period from November 13, 1998, through September 30, 2000.
With the exception of 1995 and 1998, the expense ratio of the Pacholder High
Yield Fund has been higher than the expense ratio of the High Yield Bond Fund.
The expense ratio has an impact on the total return that shareholders in the
fund would realize. Unlike the High Yield Bond Fund, the Pacholder High Yield
Fund pays a performance based investment advisory fee. With the exception of
investment advisory fees paid in 1991, 1995, and 1998, the Pacholder High Yield
Fund's investment advisory fees have been higher than the contractual advisory
fees of the High Yield Bond Fund.
Unlike the High Yield Bond Fund, the Pacholder High Yield Fund is a closed-end
fund that has issued both common and preferred stock. Holders of preferred
stock in the Pacholder Fund are entitled to fixed rate distributions. The first
column shows the return of the High Yield Bond Fund. The second column shows
the NAV return realized by holders of common shares in the Pacholder High Yield
Fund after distributions were made to preferred shareholders. The third column
shows the NAV return that would have been realized if preferred shares had not
been issued. The fourth and fifth columns compare the performance of the
Pacholder High Yield Fund to specified market indices.
/1/Prior to August 21, 1998, Pacholder was responsible for advising the
Pacholder Fund through a partnership known as Pacholder & Company.
------
61
<PAGE>
--------------------------------------------------------------------------------
Historical Performance/1/
<TABLE>
<CAPTION>
PACHOLDER HIGH YIELD FUND
----------------------------------
TOTAL RETURN
ASSUMING
COMMON COMMON STOCK CREDIT SUISSE CREDIT SUISSE
SHAREHOLDER'S IS NOT LEVERAGED FIRST BOSTON FIRST BOSTON
HIGH YIELD RETURN BASED THROUGH ISSUANCE OF GLOBAL HIGH YIELD DOMESTIC PLUS
BOND FUND ON NAV/2/ PREFERRED STOCK/3/ INDEX/4/ HIGH YIELD INDEX/5/
<S> <C> <C> <C> <C> <C>
1986/6/ NA NA NA NA
-------------------------------------------------------------------------------------------------------
1990 -0.87% -0.87%/2/,/7/ -6.38% *
-------------------------------------------------------------------------------------------------------
1991 36.71% 36.71%/2/,/7/ 43.75% *
-------------------------------------------------------------------------------------------------------
1992 18.78% 19.38% 16.66% *
-------------------------------------------------------------------------------------------------------
1993 20.27% 18.40% 18.91% *
-------------------------------------------------------------------------------------------------------
1994 0.72% 2.21% -0.97% *
-------------------------------------------------------------------------------------------------------
1995 10.68% 10.41% 17.38% *
-------------------------------------------------------------------------------------------------------
1996 20.40% 16.63% 12.42% *
-------------------------------------------------------------------------------------------------------
1997 15.44% 12.00% 12.63% *
-------------------------------------------------------------------------------------------------------
1998 -3.19% -0.45% 0.58% *
-------------------------------------------------------------------------------------------------------
1998/8/ 1.13% *
-------------------------------------------------------------------------------------------------------
1999 3.26%/9/ 2.56% 3.77% 3.28% 2.26%
-------------------------------------------------------------------------------------------------------
2000 0.30%/10/ -3.68%/11/ -0.73%/11/ -0.16%/11/ -0.95%/11/
-------------------------------------------------------------------------------------------------------
1 YR Average
Annual
Return/12/ 2.48% -1.82% 0.82% 1.92% 0.73%
-------------------------------------------------------------------------------------------------------
3 YR Average Annual
Return/12/ -1.09% 1.28% 1.76% *
-------------------------------------------------------------------------------------------------------
5 YR Average Annual
Return/12/ 5.87% 6.18% 6.20% *
-------------------------------------------------------------------------------------------------------
Average Annual Return since
1990/6/,/12/ 10.30% 10.40% 10.23% *
-------------------------------------------------------------------------------------------------------
</TABLE>
/1/Performance information is provided net of expenses. The net investment
performance represents total return, assuming reinvestment of all dividends
and proceeds from capital transactions.
/2/Return to holders of common shares of the Pacholder High Yield Fund after
distribution of dividends to preferred shareholders. Performance was derived
using the method for calculating the total return of a closed-end fund as
required by SEC Form N-2. The returns through December 31, 1999, were
audited by the Pacholder High Yield Fund's independent auditor in
conjunction with the audit of the Pacholder High Yield Fund. As a closed-end
fund, the Pacholder High Yield Fund is not required to redeem shares. As a
result, it may be fully invested, hold more illiquid securities, and have a
greater potential for gain or loss than the High Yield Bond Fund.
/3/Adjusts total return to show what shareholders would have received if the
Pacholder High Yield Fund's common stock was not leveraged through the
issuance of preferred stock. Assumes no distribution of dividends to
preferred shareholders and that all shareholders in the Pacholder High Yield
Fund hold common stock.
/4/The Credit Suisse First Boston (CSFB) Global High Yield Index is an
unmanaged index comprised of securities that are selected primarily on the
basis of size, liquidity and diversification to be representative of the
high yield bond market. The CSFB Global High Yield Index was formerly named
the CSFB High Yield Index. The benchmark index for the Pacholder High Yield
Fund has changed from the CSFB First Boston Global High Yield Index to the
Credit Suisse First Boston (CSFB) Domestic Plus High Yield Index in order to
better reflect the investment policies of the Fund for comparison purposes.
/5/The Credit Suisse First Boston (CSFB) Domestic Plus High Yield Index is an
unmanaged index comprised of high yield securities, within developed
nations, that are selected primarily on the basis of size, liquidity and
diversification to be representative of the high yield bond market.
/6/The Pacholder High Yield Fund commenced operation on November 23, 1988.
However, the Pacholder High Yield Fund was not managed with substantially
similar investment objectives to the High Yield Bond Fund in 1988 and 1989.
Beginning in the first quarter of 1990, the Pacholder High Yield Fund was
managed with substantially similar investment objectives to the High Yield
Bond Fund.
/7/No preferred stock was issued prior to April 6, 1992.
/8/For the period from November 13, 1998, through December 31, 1998. Returns
have not been annualized. Class I shares only.
/9/ Class I shares only.
/10/For the period from January 1, 2000, through September 30, 2000. Returns
have not been annualized. Class I shares only.
/11/For the period from January 1, 2000, through September 30, 2000. Returns
have not been annualized.
/12/Through September 30, 2000.
* Index did not exist.
------
62
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FINANCIAL HIGHLIGHTS
Ultra Short-Term Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS A 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.77 $ 9.87 $ 9.87 $ 9.78 $ 9.83
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.55 0.52 0.56 0.58 0.58
Net realized and unrealized gains
(losses) from investments (0.04) (0.10) (0.01) 0.09 (0.06)
-------------------------------------------------------------------------------
Total from Investment Activities 0.51 0.42 0.55 0.67 0.52
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.55) (0.52) (0.55) (0.58) (0.57)
Total Distributions (0.55) (0.52) (0.55) (0.58) (0.57)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.73 $ 9.77 $ 9.87 $ 9.87 $ 9.78
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 5.40% 4.40% 5.75% 7.00% 5.42%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $23,352 $24,300 $24,747 $29,643 $ 3,969
Ratio of expenses to average net
assets 0.65% 0.57% 0.54% 0.61% 0.70%
Ratio of net investment income to
average net assets 5.66% 5.37% 5.66% 5.78% 5.95%
Ratio of expenses to average net
assets* 1.12% 1.14% 1.15% 1.17% 1.41%
Portfolio turnover(A) 32.68% 38.70% 41.15% 70.36% 67.65%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS B 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.72 $ 9.81 $ 9.81 $ 9.76 $ 9.84
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51 0.48 0.52 0.54 0.52
Net realized and unrealized gains
(losses) from investments (0.04) (0.10) (0.01) 0.05 (0.07)
-------------------------------------------------------------------------------
Total from Investment Activities 0.47 0.38 0.51 0.59 0.45
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.47) (0.51) (0.54) (0.53)
Total Distributions (0.51) (0.47) (0.51) (0.54) (0.53)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.68 $ 9.72 $ 9.81 $ 9.81 $ 9.76
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 4.91% 3.99% 5.32% 6.22% 4.63%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 7,206 $ 6,124 $ 4,531 $ 2,818 $ 1,144
Ratio of expenses to average net
assets 1.15% 1.03% 0.99% 1.07% 1.20%
Ratio of net investment income to
average net assets 5.24% 4.93% 5.23% 5.18% 5.45%
Ratio of expenses to average net
assets* 1.77% 1.76% 1.75% 1.81% 2.06%
Portfolio turnover(A) 32.68% 38.70% 41.15% 70.36% 67.65%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
63
<PAGE>
------------------
Ultra Short-Term Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
CLASS I 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.77 $ 9.87 $ 9.87 $ 9.79 $ 9.84
--------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.58 0.56 0.59 0.62 0.62
Net realized and unrealized
gains (losses) from
investments and futures (0.04) (0.11) (0.01) 0.05 (0.07)
--------------------------------------------------------------------------------
Total from Investment
Activities 0.54 0.45 0.58 0.67 0.55
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.58) (0.55) (0.58) (0.59) (0.60)
Total Distributions (0.58) (0.55) (0.58) (0.59) (0.60)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.73 $ 9.77 $ 9.87 $ 9.87 $ 9.79
--------------------------------------------------------------------------------
Total Return 5.66% 4.66% 6.00% 7.14% 5.71%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $261,592 $259,873 $188,133 $114,413 $57,276
Ratio of expenses to average
net assets 0.40% 0.32% 0.30% 0.35% 0.45%
Ratio of net investment
income to average net assets 5.93% 5.63% 5.92% 6.02% 6.20%
Ratio of expenses to average
net assets* 0.77% 0.79% 0.81% 0.81% 1.06%
Portfolio turnover(A) 32.68% 38.70% 41.15% 70.36% 67.65%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
64
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Short-Term Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS A 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.39 $ 10.50 $ 10.46 $ 10.41 $ 10.52
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.57 0.57 0.61 0.61 0.63
Net realized and unrealized gains
(losses) from investments (0.11) (0.11) 0.04 0.05 (0.13)
-------------------------------------------------------------------------------
Total from Investment Activities 0.46 0.46 0.65 0.66 0.50
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.57) (0.57) (0.61) (0.61) (0.61)
Total Distributions (0.57) (0.57) (0.61) (0.61) (0.61)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.28 $ 10.39 $ 10.50 $ 10.46 $ 10.41
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 4.55% 4.41% 6.32% 6.47% 4.86%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $21,834 $21,450 $15,582 $20,055 $21,343
Ratio of expenses to average net
assets 0.78% 0.78% 0.78% 0.76% 0.76%
Ratio of net investment income to
average net assets 5.52% 5.30% 5.77% 5.81% 5.81%
Ratio of expenses to average net
assets* 1.16% 1.16% 1.17% 1.16% 1.17%
Portfolio turnover(A) 25.93% 37.22% 56.99% 66.61% 75.20%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------
CLASS B 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.46 $10.57 $10.53 $10.49 $10.60
-----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.52 0.53 0.58 0.55 0.55
Net realized and unrealized gains
(losses) from investments (0.11) (0.11) 0.04 0.04 (0.10)
-----------------------------------------------------------------------------
Total from Investment Activities 0.41 0.42 0.62 0.59 0.45
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.52) (0.53) (0.58) (0.55) (0.56)
Total Distributions (0.52) (0.53) (0.58) (0.55) (0.56)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.35 $10.46 $10.57 $10.53 $10.49
-----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 4.00% 4.02% 5.98% 5.74% 4.28%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $4,636 $5,047 $4,851 $4,920 $4,923
Ratio of expenses to average net
assets 1.28% 1.14% 1.11% 1.20% 1.26%
Ratio of net investment income to
average net assets 4.98% 4.96% 5.44% 5.21% 5.31%
Ratio of expenses to average net
assets* 1.80% 1.65% 1.64% 1.81% 1.82%
Portfolio turnover(A) 25.93% 37.22% 56.99% 66.61% 75.20%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
65
<PAGE>
------------------
Short-Term Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.40 $ 10.51 $ 10.47 $ 10.42 $ 10.53
--------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.59 0.59 0.63 0.63 0.64
Net realized and unrealized
gains (losses) from
investments (0.11) (0.11) 0.04 0.05 (0.11)
--------------------------------------------------------------------------------
Total from Investment
Activities 0.48 0.48 0.67 0.68 0.53
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.59) (0.59) (0.63) (0.63) (0.64)
Total Distributions (0.59) (0.59) (0.63) (0.63) (0.64)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.29 $ 10.40 $ 10.51 $ 10.47 $ 10.42
--------------------------------------------------------------------------------
Total Return 4.81% 4.67% 6.59% 6.75% 5.13%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $726,539 $804,883 $592,669 $563,979 $604,916
Ratio of expenses to average
net assets 0.53% 0.53% 0.53% 0.51% 0.51%
Ratio of net investment
income to average net
assets 5.77% 5.61% 6.01% 6.06% 6.06%
Ratio of expenses to average
net assets* 0.81% 0.81% 0.82% 0.81% 0.82%
Portfolio turnover(A) 25.93% 37.22% 56.99% 66.61% 75.20%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
66
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FINANCIAL HIGHLIGHTS
Intermediate Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED ----------------------------------
CLASS A JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.28 $ 10.61 $ 10.47 $ 10.29 $ 10.37 $ 9.21
-------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.59 0.30 0.61 0.62 0.64 0.59
Net realized and
unrealized gains
(losses) from
investments (0.21) (0.33) 0.14 0.18 (0.07) 1.16
-------------------------------------------------------------------------------------------
Total from Investment
Activities 0.38 (0.03) 0.75 0.80 0.57 1.75
-------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.59) (0.30) (0.61) (0.62) (0.65) (0.59)
Total Distributions (0.59) (0.30) (0.61) (0.62) (0.65) (0.59)
-------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.07 $ 10.28 $ 10.61 $ 10.47 $ 10.29 $ 10.37
-------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 3.86% (0.27)%(B) 7.37% 8.04% 5.65% 19.48%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $157,577 $124,940 $88,072 $42,343 $18,324 $11,654
Ratio of expenses to
average net assets 0.83% 0.84%(C) 0.91% 0.86% 0.79% 0.73%
Ratio of net investment
income to average net
assets 5.87% 5.87%(C) 5.77% 6.01% 6.17% 5.98%
Ratio of expenses to
average net assets* 1.16% 1.02%(C) 0.91% 0.86% 0.79% 0.73%
Portfolio turnover(D) 6.08% 9.24% 50.32% 31.66% 31.62% 36.47%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the One Group
Intermediate Bond Fund merged into the Pegasus Intermediate Bond Fund to
become the One Group Intermediate Bond Fund. The Financial Highlights for
the periods prior to March 22, 1999 represent the Pegasus Intermediate Bond
Fund. (B) Not annualized. (C) Annualized. (D) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 23,
DECEMBER 31, 1996 TO
YEAR ENDED SIX MONTHS ENDED -------------- DECEMBER 31,
CLASS B JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996(B)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.18 $ 10.50 $10.38 $10.20 $10.00
-------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.53 0.27 0.47 0.55 0.15
Net realized and
unrealized gains
(losses) from
investments (0.21) (0.32) 0.18 0.17 0.20
-------------------------------------------------------------------------------------
Total from Investment
Activities 0.32 (0.05) 0.65 0.72 0.35
-------------------------------------------------------------------------------------
Distributions:
Net investment income (0.53) (0.27) (0.53) (0.54) (0.15)
Total Distributions (0.53) (0.27) (0.53) (0.54) (0.15)
-------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.97 $ 10.18 $10.50 $10.38 $10.20
-------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 3.23% (0.46%)(C) 6.44% 7.32% 3.50%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $37,460 $37,681 $ 857 $ 385 $ 122
Ratio of expenses to
average net assets 1.48% 1.50%(D) 1.66% 1.61% 1.60%(D)
Ratio of net investment
income to average net
assets 5.26% 5.15%(D) 5.02% 5.26% 1.52%(D)
Ratio of expenses to
average net assets* 1.81% 1.91%(D) 1.66% 1.61% 1.60%(D)
Portfolio turnover(E) 6.08% 9.24% 50.32% 31.66% 31.62%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the One Group
Intermediate Bond Fund merged into the Pegasus Intermediate Bond Fund to
become the One Group Intermediate Bond Fund. The Financial Highlights for
the periods prior to March 22, 1999 represent the Pegasus Intermediate Bond
Fund. (B) Period from commencement of operations. (C) Not annualized. (D)
Annualized. (E) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
67
<PAGE>
------------------
Intermediate Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED MARCH 22, 1999 TO
CLASS C JUNE 30, 2000 JUNE 30, 1999(A)
------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.18 $ 10.38
------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.53 0.15
Net realized and unrealized gains (losses)
from investments (0.20) (0.20)
------------------------------------------------------------------------------
Total from Investment Activities 0.33 (0.05)
------------------------------------------------------------------------------
Distributions:
Net investment income (0.53) (0.15)
Total Distributions (0.53) (0.15)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.98 $ 10.18
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.33% (0.51%)(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $33,087 $16,650
Ratio of expenses to average net assets 1.49% 1.50%(C)
Ratio of net investment income to average net
assets 5.30% 5.18%(C)
Ratio of expenses to average net assets* 1.82% 2.13%(C)
Portfolio turnover(D) 6.08% 9.24%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED --------------------------------------
CLASS I JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.28 $ 10.61 $ 10.48 $ 10.29 $ 10.37 $ 9.21
------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.62 0.32 0.63 0.65 0.64 0.59
Net realized and
unrealized gains
(losses)
from investments (0.21) (0.33) 0.14 0.18 (0.07) 1.16
------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.41 (0.01) 0.77 0.83 0.57 1.75
------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income (0.62) (0.32) (0.64) (0.64) (0.65) (0.59)
Total Distributions (0.62) (0.32) (0.64) (0.64) (0.65) (0.59)
------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.07 $ 10.28 $ 10.61 $ 10.48 $ 10.29 $ 10.37
------------------------------------------------------------------------------------------------
Total Return 4.12% (0.08%)(B) 7.62% 8.37% 5.78% 19.48%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets At End Of
Period (000) $1,179,116 $1,385,890 $567,609 $482,679 $395,105 $393,656
Ratio Of Expenses To
Average Net Assets 0.58% 0.62%(C) 0.66% 0.61% 0.67% 0.73%
Ratio Of Net Investment
Income To Average
Net Assets 6.10% 6.27%(C) 6.02% 6.26% 6.29% 5.98%
Ratio Of Expenses To
Average Net Assets* 0.81% 0.77%(C) 0.66% 0.61% 0.67% 0.73%
Portfolio Turnover(D) 6.08% 9.24% 50.32% 31.66% 31.62% 36.47%
</TABLE>
* DURING THE PERIOD, CERTAIN FEES WERE VOLUNTARILY REDUCED. IF SUCH VOLUNTARY
FEE REDUCTIONS HAD NOT OCCURRED, THE RATIOS WOULD HAVE BEEN AS INDICATED.
(A) UPON REORGANIZING AS A FUND OF ONE GROUP MUTUAL FUNDS, THE ONE GROUP
INTERMEDIATE BOND FUND MERGED INTO THE PEGASUS INTERMEDIATE BOND FUND TO
BECOME THE ONE GROUP INTERMEDIATE BOND FUND. THE FINANCIAL HIGHLIGHTS FOR
THE PERIODS PRIOR TO MARCH 22, 1999 REPRESENT THE PEGASUS INTERMEDIATE BOND
FUND. (B) NOT ANNUALIZED. (C) ANNUALIZED. (D) PORTFOLIO TURNOVER IS
CALCULATED ON THE BASIS OF THE FUND AS A WHOLE WITHOUT DISTINGUISHING AMONG
THE CLASSES OF SHARES ISSUED.
------
68
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FINANCIAL HIGHLIGHTS
Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED ------------------------------------
CLASS A JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01
----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.62 0.34 0.61 0.63 0.67 0.63
Net realized and
unrealized gains
(losses)
from investments (0.26) (0.44) 0.21 0.32 (0.18) 1.45
----------------------------------------------------------------------------------------------
Total from Investment
Activities 0.36 (0.10) 0.82 0.95 0.49 2.08
----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.62) (0.34) (0.63) (0.63) (0.67) (0.64)
Total Distributions (0.62) (0.34) (0.63) (0.63) (0.67) (0.64)
----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.08 $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45
----------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 3.68% (0.98%)(B) 7.92% 9.65% 4.98% 23.75%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $143,421 $180,058 $226,261 $125,515 $46,977 $31,714
Ratio of expenses to
average net assets 0.85% 0.86%(C) 0.89% 0.86% 0.78% 0.74%
Ratio of net investment
income to average net
assets 6.15% 6.39%(C) 5.85% 6.16% 6.59% 6.39%
Ratio of expenses to
average net assets* 1.16% 0.97%(C) 0.89% 0.86% 0.78% 0.74%
Portfolio turnover(D) 16.19% 10.89% 34.69% 17.60% 24.92% 41.91%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Bond
Fund became the One Group Bond Fund. The Financial Highlights for the
periods prior to March 22, 1999 represent the Pegasus Bond Fund. (B) Not
annualized. (C) Annualized. (D) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 26,
DECEMBER 31, 1996 TO
YEAR ENDED SIX MONTHS ENDED -------------- DECEMBER 31,
CLASS B JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996(B)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.34 $ 10.78 $10.59 $10.27 $10.00
------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.56 0.30 0.47 0.56 0.21
Net realized and
unrealized gains
(losses) from
investments (0.26) (0.44) 0.27 0.32 0.27
------------------------------------------------------------------------------------
Total from Investment
Activities 0.30 (0.14) 0.74 0.88 0.48
------------------------------------------------------------------------------------
Distributions:
Net investment income (0.56) (0.30) (0.55) (0.56) (0.21)
Total Distributions (0.56) (0.30) (0.55) (0.56) (0.21)
------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.08 $ 10.34 $10.78 $10.59 $10.27
------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 3.01% (1.35%)(C) 7.16% 8.91% 4.81%(C)
ratios/supplementary
data:
Net assets at end of
period (000) $18,808 $13,812 $9,074 $3,394 $ 280
Ratio of expenses to
average net assets 1.50% 1.57%(D) 1.64% 1.61% 1.59%(D)
Ratio of net investment
income to average net
assets 5.52% 5.69%(D) 5.10% 5.41% 3.01%(D)
Ratio of expenses to
average net assets* 1.81% 1.70%(D) 1.64% 1.61% 1.59%(D)
Portfolio turnover(E) 16.19% 10.89% 34.69% 17.60% 24.92%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Bond
Fund became the One Group Bond Fund. The Financial Highlights for the
periods prior to March 22, 1999 represent the Pegasus Bond Fund. (B) Period
from commencement of operations. (C) Not annualized. (D) Annualized. (E)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
69
<PAGE>
------------------
Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED MARCH 22, 1999 TO
CLASS C JUNE 30, 2000 JUNE 30, 1999(A)
------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.38 $10.59
------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.56 0.17
Net realized and unrealized gains (losses)
from investments (0.24) (0.21)
------------------------------------------------------------------------------
Total from Investment Activities 0.32 (0.04)
------------------------------------------------------------------------------
Distributions:
Net investment income (0.56) (0.17)
Total Distributions (0.56) (0.17)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.14 $10.38
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.19% (0.35%)(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $2,118 $ 455
Ratio of expenses to average net assets 1.50% 1.47%(C)
Ratio of net investment income to average net
assets 5.56% 5.66%(C)
Ratio of expenses to average net assets* 1.82% 1.69%(C)
Portfolio turnover(D) 16.19% 10.89%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED ------------------------------------------
CLASS I JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01
----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.65 0.35 0.65 0.66 0.68 0.63
Net realized and
unrealized gains
(losses) from
investments (0.26) (0.44) 0.19 0.32 (0.18) 1.45
----------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.39 (0.09) 0.84 0.98 0.50 2.08
----------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.65) (0.35) (0.65) (0.66) (0.68) (0.64)
Total Distributions (0.65) (0.35) (0.65) (0.66) (0.68) (0.64)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.08 $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45
----------------------------------------------------------------------------------------------------
Total Return 3.94% (0.87%)(B) 8.17% 9.97% 5.08% 23.75%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,687,041 $1,330,527 $1,277,246 $1,101,894 $757,627 $485,851
Ratio of expenses to
average net assets 0.60% 0.64%(C) 0.64% 0.61% 0.66% 0.74%
Ratio of net investment
income to average net
assets 6.44% 6.65%(C) 6.10% 6.41% 6.71% 6.39%
Ratio of expenses to
average net assets* 0.83% 0.75%(C) 0.64% 0.61% 0.66% 0.74%
Portfolio turnover(D) 16.19% 10.89% 34.69% 17.60% 24.92% 41.91%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Bond
Fund became the One Group Bond Fund. The Financial Highlights for the
periods prior to March 22, 1999 represent the Pegasus Bond Fund. (B) Not
annualized. (C) Annualized. (D) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
------
70
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FINANCIAL HIGHLIGHTS
Income Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER FEBRUARY 1,
31, 1995 TO
YEAR ENDED SIX MONTHS ENDED ------------------------ DECEMBER 31,
CLASS A JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995(B)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 7.68 $ 8.09 $ 8.00 $ 7.84 $ 8.18 $ 7.68
----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.46 0.21 0.44 0.48 0.41 0.44
Net realized and
unrealized gains
(losses)
from investments (0.18) (0.34) 0.14 0.17 (0.25) 0.72
----------------------------------------------------------------------------------------------
Total from Investment
Activities 0.28 (0.13) 0.58 0.65 0.16 1.16
----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.22) (0.44) (0.47) (0.40) (0.44)
Net realized gains
(losses) - (0.06) (0.05) (0.02) (0.10) (0.22)
Total Distributions (0.46) (0.28) (0.49) (0.49) (0.50) (0.66)
----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 7.50 $ 7.68 $ 8.09 $ 8.00 $ 7.84 $ 8.18
----------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 3.80% (1.62%)(C) 7.44% 8.58% 2.75% 15.55%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $28,677 $31,603 $15,785 $7,832 $ 8,798 $ 6,095
Ratio of expenses to
average net assets 0.88% 0.87%(D) 0.90% 0.87% 0.84% 0.94%(D)
Ratio of net investment
income to average net
assets 6.11% 5.37%(D) 5.57% 5.83% 5.75% 5.72%(D)
Ratio of expenses to
average net assets* 1.16% 1.16%(D) 0.90% 0.87% 0.90% 1.15%(D)
Portfolio turnover(E) 25.10% 20.55% 41.69% 38.70% 103.93% 173.26%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the One Group
Income Bond Fund merged into the Pegasus Multi Sector Bond Fund to become the
One Group Income Bond Fund. The Financial Highlights for the periods prior to
March 22, 1999 represent the Pegasus Multi Sector Bond Fund. (B) Effective
February 1, 1995 the Fund changed its fiscal year end from January 31, to
December 31. (C) Not annualized. (D) Annualized. (E) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31, 1995
DECEMBER 31, TO
YEAR ENDED SIX MONTHS ENDED ----------------------- DECEMBER 31,
CLASS B JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995(B)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 7.71 $ 8.13 $ 8.00 $ 7.85 $ 8.18 $ 8.13
----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.41 0.18 0.39 0.42 0.45 0.24
Net realized and
unrealized gains
(losses)
from investments (0.18) (0.34) 0.14 0.17 (0.23) 0.27
----------------------------------------------------------------------------------------------
Total from Investment
Activities 0.23 (0.16) 0.53 0.59 0.22 0.51
----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.41) (0.20) (0.35) (0.42) (0.45) (0.24)
Net realized gains
(losses) - (0.06) (0.05) (0.02) (0.10) (0.22)
Total Distributions (0.41) (0.26) (0.40) (0.44) (0.55) (0.46)
----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 7.53 $ 7.71 $ 8.13 $ 8.00 $ 7.85 $ 8.18
----------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 3.11% (2.07%)(C) 6.74% 7.75% 2.09% 6.41%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $13,036 $16,309 $ 638 $ 533 $ 502 $ 259
Ratio of expenses to
average net assets 1.52% 1.52%(D) 1.65% 1.62% 1.58% 1.60%(D)
Ratio of net investment
income to average net
assets 5.42% 5.05%(D) 4.80% 5.08% 5.01% 5.00%(D)
Ratio of expenses to
average net assets* 1.81% 2.01%(D) 1.65% 1.62% 1.67% 1.78%(D)
Portfolio turnover(E) 25.10% 20.55% 41.69% 38.70% 103.93% 173.26%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the One Group
Income Bond Fund merged into the Pegasus Multi Sector Bond Fund to become the
One Group Income Bond Fund. The Financial Highlights for the periods prior to
March 22, 1999 represent the Pegasus Multi Sector Bond Fund. (B) Re-offering
date of Class B shares was May 31, 1995. (C) Not annualized. (D) Annualized.
(E) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
71
<PAGE>
------------------
Income Bond Fund
<TABLE>
<CAPTION>
MAY 30,
2000 TO
JUNE 30,
CLASS C 2000(A)
-----------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.40
-----------------------------------------------------------------------
Investment Activities:
Net investment income 0.04
Net realized and unrealized gains (losses) from investments 0.14
-----------------------------------------------------------------------
Total from Investment Activities 0.18
-----------------------------------------------------------------------
Distributions:
Net investment income (0.04)
Total Distributions (0.04)
-----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.54
-----------------------------------------------------------------------
Total Return (Excludes Sales Charge) 2.37%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 128
Ratio of expenses to average net assets 1.51%(C)
Ratio of net investment income to average net assets 5.90%(C)
Ratio of expenses to average net assets* 1.77%(C)
Portfolio turnover(D) 25.10%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
FEBRUARY 1,
YEAR ENDED DECEMBER 31, 1995 TO
YEAR ENDED SIX MONTHS ENDED --------------------------- DECEMBER 31,
CLASS I JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995(B)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 7.68 $ 8.10 $ 8.01 $ 7.85 $ 8.18 $ 7.68
---------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.48 0.22 0.47 0.50 0.46 0.47
Net realized and
unrealized gains
(losses)
from investments (0.17) (0.35) 0.14 0.17 (0.24) 0.72
---------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.31 (0.13) 0.61 0.67 0.22 1.19
---------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.23) (0.47) (0.49) (0.45) (0.47)
Net realized gains
(losses) - (0.06) (0.05) (0.02) (0.10) (0.22)
Total Distributions (0.48) (0.29) (0.52) (0.51) (0.55) (0.69)
---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 7.51 $ 7.68 $ 8.10 $ 8.01 $ 7.85 $ 8.18
---------------------------------------------------------------------------------------------------
Total Return 4.19% (1.68%)(C) 7.82% 8.86% 3.14% 15.90%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,317,128 $1,328,702 $385,672 $94,544 $187,112 $191,930
Ratio of expenses to
average net assets 0.62% 0.62%(D) 0.65% 0.62% 0.57% 0.55%(D)
Ratio of net investment
income to average net
assets 6.35% 5.92%(D) 5.79% 6.08% 6.02% 6.34%(D)
Ratio of expenses to
average net assets* 0.81% 0.76%(D) 0.65% 0.62% 0.66% 0.67%(D)
Portfolio turnover(E) 25.10% 20.55% 41.69% 38.70% 103.93% 173.26%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the One Group
Income Bond Fund merged into the Pegasus Multi Sector Bond Fund to become
the One Group Income Bond Fund. The Financial Highlights for the periods
prior to March 22, 1999 represent the Pegasus Multi Sector Bond Fund. (B)
Effective February 1, 1995 the Fund changed its fiscal year end from January
31, to December 31. (C) Not annualized. (D) Annualized. (E) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
72
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FINANCIAL HIGHLIGHTS
Government Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS A 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.73 $ 10.11 $ 9.69 $ 9.56 $ 9.81
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.57 0.56 0.58 0.60 0.60
Net realized and unrealized gains
(losses) from investments and
futures (0.18) (0.38) 0.42 0.13 (0.25)
-------------------------------------------------------------------------------
Total from Investment Activities 0.39 0.18 1.00 0.73 0.35
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.57) (0.56) (0.58) (0.60) (0.60)
Total Distributions (0.57) (0.56) (0.58) (0.60) (0.60)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.55 $ 9.73 $ 10.11 $ 9.69 $ 9.56
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 4.17% 1.69% 10.54% 7.83% 3.58%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $43,935 $42,819 $31,548 $34,727 $38,800
Ratio of expenses to average net
assets 0.87% 0.87% 0.87% 0.87% 0.93%
Ratio of net investment income to
average net assets 5.93% 5.52% 5.80% 6.20% 6.09%
Ratio of expenses to average net
assets* 1.01% 1.00% 1.02% 1.03% 1.04%
Portfolio turnover(A) 25.30% 80.86% 91.49% 60.53% 62.70%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS B 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.74 $ 10.11 $ 9.69 $ 9.56 $ 9.81
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51 0.49 0.52 0.54 0.54
Net realized and unrealized gains
(losses) from investments and
futures (0.19) (0.37) 0.42 0.13 (0.25)
-------------------------------------------------------------------------------
Total from Investment Activities 0.32 0.12 0.94 0.67 0.29
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.49) (0.52) (0.54) (0.54)
Total Distributions (0.51) (0.49) (0.52) (0.54) (0.54)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.55 $ 9.74 $ 10.11 $ 9.69 $ 9.56
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 3.39% 1.14% 9.86% 7.14% 2.95%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $43,077 $53,384 $20,922 $11,729 $10,782
Ratio of expenses to average net
assets 1.52% 1.52% 1.52% 1.52% 1.58%
Ratio of net investment income to
average net assets 5.30% 4.86% 5.14% 5.55% 5.44%
Ratio of expenses to average net
assets* 1.66% 1.65% 1.67% 1.68% 1.69%
Portfolio turnover(A) 25.30% 80.86% 91.49% 60.53% 62.70%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
73
<PAGE>
------------------
Government Bond Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
YEAR ENDED JUNE 30,
CLASS C JUNE 30, 2000 1999(A)
-------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.74 $10.03
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51 0.14
Net realized and unrealized gains (losses) from
investments and futures (0.19) (0.29)
-------------------------------------------------------------------------------
Total from Investment Activities 0.32 (0.15)
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.14)
Total Distributions (0.51) (0.14)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.55 $ 9.74
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.39% (1.54%)(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $3,130 $1,102
Ratio of expenses to average net assets 1.52% 1.52%(C)
Ratio of net investment income to average net assets 5.36% 5.06%(C)
Ratio of expenses to average net assets* 1.66% 1.65%(C)
Portfolio turnover(D) 25.30% 80.86%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.73 $ 10.11 $ 9.69 $ 9.56 $ 9.81
--------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.59 0.58 0.60 0.62 0.62
Net realized and unrealized
gains (losses) from
investments and futures (0.19) (0.38) 0.42 0.13 (0.25)
--------------------------------------------------------------------------------
Total from Investment
Activities 0.40 0.20 1.02 0.75 0.37
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.59) (0.58) (0.60) (0.62) (0.62)
Total Distributions (0.59) (0.58) (0.60) (0.62) (0.62)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.54 $ 9.73 $ 10.11 $ 9.69 $ 9.56
--------------------------------------------------------------------------------
Total Return 4.33% 1.94% 10.81% 8.10% 3.81%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $866,755 $964,576 $851,517 $724,423 $677,326
Ratio of expenses to average
net assets 0.62% 0.62% 0.62% 0.62% 0.68%
Ratio of net investment
income to average net
assets 6.21% 5.77% 6.05% 6.45% 6.34%
Ratio of expenses to average
net assets* 0.66% 0.66% 0.67% 0.68% 0.69%
Portfolio turnover(A) 25.30% 80.86% 91.49% 60.53% 62.70%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
74
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FINANCIAL HIGHLIGHTS
Treasury & Agency Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements are incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1997 TO
------------------------- JUNE 30,
CLASS A 2000 1999 1998 1997(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
net asset value, beginning of period $ 9.81 $ 10.09 $ 9.98 $10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.55 0.54 0.63 0.29
Net realized and unrealized gains
(losses) from investments (0.14) (0.21) 0.16 (0.02)
-------------------------------------------------------------------------------
Total from Investment Activities 0.41 0.33 0.79 0.27
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.55) (0.54) (0.63) (0.29)
Net realized gains (losses) (0.02) (0.07) (0.05) -
Total Distributions (0.57) (0.61) (0.68) (0.29)
-------------------------------------------------------------------------------
net asset value, end of period $ 9.65 $ 9.81 $ 10.09 $ 9.98
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 4.27% 3.30% 8.10% 2.78%(B)
ratios/supplementary data:
Net assets at end of period (000) $39,655 $72,941 $35,213 $ 94
Ratio of expenses to average net assets 0.63% 0.60% 0.58% 0.71%(C)
Ratio of net investment income to
average net assets 5.62% 5.30% 5.87% 6.47%(C)
Ratio of expenses to average net
assets* 0.99% 1.00% 0.98% 1.15%(C)
Portfolio turnover(D) 30.02% 76.73% 41.60% 54.44%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1997 TO
------------------------- JUNE 30,
CLASS B 2000 1999 1998 1997(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
net asset value, beginning of period $ 9.81 $ 10.08 $ 9.99 $10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.50 0.49 0.58 0.26
Net realized and unrealized gains
(losses) from investments (0.15) (0.20) 0.14 (0.01)
-------------------------------------------------------------------------------
Total from investment Activities 0.35 0.29 0.72 0.25
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.50) (0.49) (0.58) (0.26)
Net realized gains (losses) (0.02) (0.07) (0.05) -
Total Distributions (0.52) (0.56) (0.63) (0.26)
-------------------------------------------------------------------------------
net asset value, end of period $ 9.64 $ 9.81 $ 10.08 $ 9.99
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.65% 2.89% 7.33% 2.58%(B)
ratios/supplementary data:
Net assets at end of period (000) $54,322 $69,825 $12,483 $ 80
Ratio of expenses to average net assets 1.13% 1.10% 1.08% 1.23%(C)
Ratio of net investment income to
average net assets 5.14% 4.79% 5.39% 6.30%(C)
Ratio of expenses to average net
assets* 1.64% 1.64% 1.63% 1.81%(C)
Portfolio turnover(D) 30.02% 76.73% 41.60% 54.44%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
75
<PAGE>
------------------
Treasury & Agency Fund
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1997 TO
------------------------- JUNE 30,
CLASS I 2000 1999 1998 1997(A)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.81 $ 10.09 $ 9.99 $ 10.00
-----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.57 0.57 0.62 0.28
Net realized and unrealized gains
(losses) from investments (0.15) (0.21) 0.15 (0.01)
-----------------------------------------------------------------------------
Total from Investment Activities 0.42 0.36 0.77 0.27
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.57) (0.57) (0.62) (0.28)
Net realized gains (losses) (0.02) (0.07) (0.05) -
Total Distributions (0.59) (0.64) (0.67) (0.28)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.64 $ 9.81 $ 10.09 $ 9.99
-----------------------------------------------------------------------------
Total Return 4.42% 3.54% 7.91% 2.78%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $65,437 $79,958 $95,073 $110,084
Ratio of expenses to average net
assets 0.38% 0.36% 0.35% 0.45%(C)
Ratio of net investment income to
average net assets 5.89% 5.60% 6.16% 6.44%(C)
Ratio of expenses to average net
assets* 0.63% 0.65% 0.65% 0.78%(C)
Portfolio turnover(D) 30.02% 76.73% 41.60% 54.44%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
76
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FINANCIAL HIGHLIGHTS
High Yield Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
NOVEMBER 13,
YEAR ENDED 1998 TO
JUNE 30, JUNE 30,
CLASS A 2000 1999(A)
-----------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.86 $ 10.00
-----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.87 0.49
Net realized and unrealized gains (losses) from
investments (0.97) (0.14)
-----------------------------------------------------------------------------
Total from Investment Activities (0.10) 0.35
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.87) (0.49)
Total Distributions (0.87) (0.49)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.89 $ 9.86
-----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (1.00)% 3.53%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 9,860 $11,405
Ratio of expenses to average net assets 1.13% 1.13%(C)
Ratio of net investment income to average net assets 9.28% 8.46%(C)
Ratio of expenses to average net assets* 1.38% 1.43%(C)
Portfolio turnover(D) 35.14% 28.02%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
NOVEMBER 13,
YEAR ENDED 1998 TO
JUNE 30, JUNE 30,
CLASS B 2000 1999(A)
-----------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.88 $10.00
-----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.81 0.45
Net realized and unrealized gains (losses) from
investments (0.97) (0.12)
-----------------------------------------------------------------------------
Total from Investment Activities (0.16) 0.33
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.81) (0.45)
Total Distributions (0.81) (0.45)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.91 $ 9.88
-----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (1.64)% 3.30%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 6,565 $3,748
Ratio of expenses to average net assets 1.77% 1.77%(C)
Ratio of net investment income to average net assets 8.66% 7.69%(C)
Ratio of expenses to average net assets* 2.02% 2.06%(C)
Portfolio turnover(D) 35.14% 28.02%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
77
<PAGE>
------------------
High Yield Bond Fund
<TABLE>
<CAPTION>
MARCH 22,
YEAR ENDED 1999 TO
JUNE 30, JUNE 30,
CLASS C 2000 1999(A)
-------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $ 10.14
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.81 0.22
Net realized and unrealized gains (losses) from
investments (0.97) (0.27)
-------------------------------------------------------------------------------
Total from Investment Activities (0.16) (0.05)
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.81) (0.22)
Total Distributions (0.81) (0.22)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.90 $ 9.87
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (1.66)% (0.56)%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 2,121 $ 9
Ratio of expenses to average net assets 1.78% 1.76%(C)
Ratio of net investment income to average net assets 8.82% 7.84%(C)
Ratio of expenses to average net assets* 2.03% 2.08%(C)
Portfolio turnover(D) 35.14% 28.02%
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<CAPTION>
NOVEMBER 13,
YEAR ENDED 1998 TO
JUNE 30, JUNE 30,
CLASS I 2000 1999(A)
-------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $ 10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.89 0.51
Net realized and unrealized gains (losses) from
investments (0.97) (0.13)
-------------------------------------------------------------------------------
Total from Investment Activities (0.08) 0.38
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.89) (0.51)
Total Distributions (0.89) (0.51)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.90 $ 9.87
-------------------------------------------------------------------------------
Total Return (0.75)% 3.80%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $218,780 $137,433
Ratio of expenses to average net assets 0.88% 0.89%(C)
Ratio of net investment income to average net assets 9.63% 8.48%(C)
Ratio of expenses to average net assets* 1.03% 1.18%(C)
Portfolio turnover(D) 35.14% 28.02%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
78
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Funds, as well
as the risks inherent in their use. Equity securities are subject mainly to
market risk. Fixed income securities are primarily influenced by market, credit
and prepayment risks, although certain securities may be subject to additional
risks. For a more complete discussion, see the Statement of Additional
Information.
Following the table is a more complete discussion of risk.
<TABLE>
----------------------------------------------
<CAPTION>
FUND NAME FUND CODE
----------------------------------------------
<S> <C>
One Group(R) Ultra Short-Term Bond 1
----------------------------------------------
One Group(R) Short-Term Bond Fund 2
----------------------------------------------
One Group(R) Intermediate Bond Fund 3
----------------------------------------------
One Group(R) Bond Fund 4
----------------------------------------------
One Group(R) Income Bond Fund 5
----------------------------------------------
One Group(R) Government Bond Fund 6
----------------------------------------------
One Group(R) Treasury & Agency Fund 7
----------------------------------------------
One Group(R) High Yield Bond Fund 8
</TABLE>
<TABLE>
<CAPTION>
Fund
Instrument Code Risk Type
-------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS and 1-8 Market
CUBES.
-------------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs and CATS. 1-8 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by 1-8 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae and Freddie Mac.
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a stated 1-5, 8 Market
maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in 1-5, 8 Liquidity
exchange for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security and the 1-8 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
-------------------------------------------------------------------------------
</TABLE>
------
79
<PAGE>
<TABLE>
<CAPTION>
Risk
Instrument Fund Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Reverse Repurchase Agreements: The sale of a security and 1-8 Market
the simultaneous commitment to buy the security back at Leverage
an agreed upon price on an agreed upon date. This is
treated as a borrowing by a Fund.
-------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% of the 1-8 Credit
Fund's total assets. In return, the Fund will receive Market
cash, other securities, and/or letters of credit as Leverage
collateral.
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase 1-8 Market
or contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other mutual 1-8 Market
funds, including One Group money market funds and shares
of other money market mutual funds for which Banc One
Investment Advisors or its affiliates serve as investment
advisor or administrator. The Treasury & Agency Fund and
the Government Bond Fund will only purchase shares of
investment companies which invest exclusively in U.S.
Treasury and other U.S. agency obligations. Banc One
Investment Advisors will waive certain fees when
investing in funds for which it serves as investment
advisor.
-------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock that 1, 3-5, 8 Market
convert to common stock. Credit
-------------------------------------------------------------------------------
Call and Put Options: A call option gives the buyer the 1-6, 8 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price at a future date. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security at Leverage
a specified price at a future date. The Funds will sell
only covered call and secured put options.
-------------------------------------------------------------------------------
Futures and Related Options: A contract providing for the 1-6, 8 Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
-------------------------------------------------------------------------------
Real Estate Investment Trusts ("REITS"): Pooled 2-5, 8 Liquidity
investment vehicles which invest primarily in income Management
producing real estate or real estate related loans or Market
interest. Regulatory
Tax
Prepayment
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time drafts 1-5, 8 Credit
drawn on and accepted by a commercial bank. Maturities Liquidity
are generally six months or less. Market
-------------------------------------------------------------------------------
</TABLE>
------
80
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper: Secured and unsecured short-term 1-5, 8 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
-------------------------------------------------------------------------------
Foreign Securities: Stocks issued by foreign companies, as 1-5, 8 Market
well as commercial paper of foreign issuers and obligations Political
of foreign banks, overseas branches of U.S. banks and Liquidity
supranational entities. This Includes American Depositary Foreign
Receipts, Global Depository Receipts, American Depositary Investment
Securities and European Depositary Receipts.
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered under the 1-5, 8 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations with 1-8 Credit
interest rates which are reset daily, weekly, quarterly or Liquidity
some other period and which may be payable to the Fund on Market
demand.
-------------------------------------------------------------------------------
Warrants: Securities, typically issued with preferred stock 5, 8 Market
or bonds, that give the holder the right to buy a Credit
proportionate amount of common stock at a specified price.
-------------------------------------------------------------------------------
Preferred Stock: A class of stock that generally pays a 1-5, 8 Market
dividend at a specified rate and has preference over common
stock in the payment of dividends and in liquidation.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations secured by real 1-8 Prepayment
estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Estate Credit
Mortgage Investment Conduits ("REMICs"). Regulatory
-------------------------------------------------------------------------------
Corporate Debt Securities: Corporate bonds and non- 1-5, 8 Market
convertible debt securities. Credit
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to puts and 1-5, 8 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company 1-5, 8 Prepayment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Regulatory
-------------------------------------------------------------------------------
Mortgage Dollar Rolls: A transaction in which a Fund sells 1-8 Prepayment
securities for delivery in a current month and Market
simultaneously contracts with the same party to repurchase Regulatory
similar but not identical securities on a specified future
date.
-------------------------------------------------------------------------------
</TABLE>
------
81
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Adjustable Rate Mortgage Loans ("ARMS"): Loans in a 1-8 Prepayment
mortgage pool which provide for a fixed initial mortgage Market
interest rate for a specified period of time, after which Credit
the rate may be subject to periodic adjustments. Regulatory
-------------------------------------------------------------------------------
Swaps, Caps and Floors: A Fund may enter into these 1-6, 8 Management
transactions to manage its exposure to changing interest Credit
rates and other factors. Swaps involve an exchange of Liquidity
obligations by two parties. Caps and floors entitle a Market
purchaser to a principal amount from the seller of the cap
or floor to the extent that a specified index exceeds or
falls below a predetermined interest rate or amount.
-------------------------------------------------------------------------------
New Financial Products: New options and futures contracts 1-6, 8 Management
and other financial products continue to be developed and Credit
the Funds may invest in such options, contracts and Market
products. Liquidity
-------------------------------------------------------------------------------
Structured Instruments: Debt securities issued by agencies 1-8 Market
and instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
currency exchange rates, interest rates, or one or more Foreign
other referenced indices. Investment
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state or 1-5, 8 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as General Tax
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Regulatory
Notes, Revenue Anticipation Notes, Project Notes, other
short-term tax-exempt obligations, municipal leases,
obligations of municipal housing authorities and single
family revenue bonds.
-------------------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other debt that pay 1-8 Credit
no interest, but are issued at a discount from their value Market
at maturity. When held to maturity, their entire return Zero Coupon
equals the difference between their issue price and their
maturity value.
-------------------------------------------------------------------------------
Zero-Fixed-Coupon Debt Securities: Zero coupon debt 1-8 Credit
securities which convert on a specified date to interest Market
bearing debt securities. Zero Coupon
-------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative multi- 1-6, 8 Prepayment
class mortgage securities usually structured with two Market
classes of shares that receive different proportions of the Credit
interest and principal from a pool of mortgage-backed Regulatory
obligations. These include IOs and POs.
-------------------------------------------------------------------------------
Inverse Floating Rate Instruments: Leveraged variable rate 1-6, 8 Market
debt instruments with interest rates that reset in the Leverage
opposite direction from the market rate of interest to Credit
which the inverse floater is indexed.
-------------------------------------------------------------------------------
</TABLE>
------
82
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Loan Participations and Assignments: Participations in, or 1-5, 8 Credit
assignments of all or a portion of loans to corporations or Political
to governments, including governments of the less developed Liquidity
countries ("LDCs"). Foreign
Investment
Market
-------------------------------------------------------------------------------
Fixed Rate Mortgage Loans: Investments in fixed rate 1-8 Credit
mortgage loans or mortgage pools which bear simple interest Prepayment
at fixed annual rates and have short to long term final Regulatory
maturities. Market
-------------------------------------------------------------------------------
Short-Term Funding Agreements: Funding agreements issued by 1-5, 8 Credit
banks and highly rated U.S. insurance companies such as Liquidity
Guaranteed Investment Contracts ("GICs") and Bank Investment Market
Contracts ("BICs").
-------------------------------------------------------------------------------
Common Stock: Shares of ownership of a company. 8 Market
</TABLE>
--------------------------------------------------------------------------------
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to actual
default as its credit status deteriorates and the probability of default
rises.
. Leverage Risk. The risk associated with securities or practices that multiply
small index or market movements into large changes in value. Leverage is
often associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
Fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching between
the derivative and underlying security, and there can be no assurance that a
Fund's hedging transactions will be effective.
Speculative. To the extent that a derivative is not used as a hedge, the
Fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater than
the derivative's original cost.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the risk of
missing out on an investment opportunity
------
83
<PAGE>
because the assets necessary to take advantage of it are tied up in less
advantageous investments.
. Management Risk. The risk that a strategy used by a Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. Finally, key information about a security or market
may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
. Foreign Investment Risk. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgages and other obligations are prepaid, a Fund may have to reinvest
in securities with a lower yield. Further, with early prepayment, a Fund may
fail to recover any premium paid, resulting in an unexpected capital loss.
. Tax Risk. The risk that the issuer of the securities will fail to comply with
certain requirements of the Internal Revenue Code, which could cause adverse
tax consequences. Also, the risk that the tax treatment of municipal or other
securities could be changed by Congress thereby affecting the value of
outstanding securities.
. Regulatory Risk. The risk associated with federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
. Zero Coupon Risk. The market prices of securities structured as zero coupon
or pay-in-kind securities are generally affected to a greater extent by
interest rate changes. These securities tend to be more volatile than
securities which pay interest periodically.
------
84
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Funds, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
How can I get more information? You can get a free copy of the semi-annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1-800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
OR VISITING
WWW.ONEGROUP.COM,
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information may be
obtained, after paying a copying charge, by electronic request at the following
e-mail address: [email protected] or by writing the Public Reference Section
of the SEC, Washington, D.C. 20549-0102.
(Investment Company Act File No. 811-4236)
TOG-F-122
[LOGO OF ONE GROUP MUTUAL FUNDS]
<PAGE>
One Group(R)
Mortgage-Backed Securities Fund
PROSPECTUS
November 1, 2000
[LOGO OF ONE GROUP MUTUAL FUNDS]
------
The Securities and Ex-
change Commission has not
approved or disapproved
the shares of any of the
Portfolios as an invest-
ment or determined
whether this prospectus
is accurate or complete.
Anyone who tells you oth-
erwise is committing a
crime.
<PAGE>
Table of
CONTENTS
<TABLE>
<CAPTION>
Fund Summary: Investments, Risks and
Performance
<S> <C>
One Group Mortgage-Backed Securities Fund 2
---
</TABLE>
<TABLE>
<CAPTION>
More About The Fund
<S> <C>
Principal Investment Strategy 6
---
Investment Risks 7
---
Investment Policies 8
---
Portfolio Quality 8
---
Temporary Defensive Positions 9
---
Portfolio Turnover 9
---
</TABLE>
<TABLE>
<CAPTION>
How to Do Business with One Group
Mutual Funds
<S> <C>
Purchasing Fund Shares 10
---
Distribution and Servicing Expenses 12
---
Exchanging Fund Shares 13
---
Redeeming Fund Shares 14
---
</TABLE>
<TABLE>
<CAPTION>
Shareholder Information
<S> <C>
Voting Rights 16
---
Dividend Policies 16
---
Tax Treatment of Shareholders 16
---
Shareholder Statements and Reports 17
---
</TABLE>
<TABLE>
<CAPTION>
Management of One
Group Mutual
Funds
<S> <C>
The Advisor 18
---
The Fund Managers 18
---
</TABLE>
<TABLE>
<S> <C>
Appendix A: Investment Practices 19
---
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
------------------
-----------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Mortgage-Backed
Securities Fund
What is the goal of the Mortgage-Backed Securities Fund?
The Fund seeks to maximize total return by investing primarily in a diversified
portfolio of debt securities backed by pools of residential and/or commercial
mortgages.
What are the Mortgage-Backed Securities Fund's main investment strategies?
The Fund invests mainly in investment grade bonds and debt securities. These
include mortgage-backed securities issued by the Government National Mortgage
Association (GNMA), the Federal National Mortgage Association (FNMA), the
Federal Home Loan Mortgage Corporation (FHLMC), commercial mortgage securities
and collateralized mortgage obligations. The Fund also may invest in other
types of non-mortgage related debt securities, including U.S. government
securities, asset-backed securities, municipal securities and corporate debt
securities. Banc One Investment Advisors analyzes four major factors in
managing and constructing the Fund: duration, market sector, maturity
concentrations and individual securities. Banc One Investment Advisors selects
individual securities after performing a risk/reward analysis that includes an
evaluation of interest rate risk, credit risk and the complex legal and
technical structure of the transaction. For more information about the
Mortgage-Backed Securities Fund's investment strategies, please read "More
About the Fund" and "Principal Investment Strategies."
What is a bond?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and mortgage-
backed securities, asset-backed securities, stripped government securities and
zero coupon obligations.
What are the main risks of investing in the Mortgage-Backed Securities Fund?
The main risks of investing in the Fund and the circumstances likely to
adversely affect your investment are described below. The share price of the
Fund and its yield will change every day in response to interest rates and
other market conditions. You may lose money if you invest in the Fund. For
additional information on risk, please read "Investment Risks."
------
2
<PAGE>
------------------
MAIN RISKS
----------------
Mortgage-Backed Securities Fund
MAIN RISKS
Interest Rate Risk. The Fund mainly invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of the Fund's investments decrease. Securities with greater interest rate
sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of a Fund. Lower credit quality also may affect a
security's liquidity and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment strategy, the Fund
invests in mortgage-backed and asset-backed securities. The issuers of these
securities and other callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in prepayment rates can
affect the return on investment and yield of mortgage and asset-backed
securities. When mortgage and other obligations are pre-paid and when
securities are called, the Fund may have to reinvest in securities with a lower
yield. The Fund may also fail to recover additional amounts (i.e., premiums)
paid for the securities with higher interest rates, resulting in an unexpected
capital loss.
Derivative Risk. The Fund invests in securities that may be considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and riskier in
terms of both liquidity and value than traditional investments.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
3
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Mortgage-Backed Securities Fund
How has the Mortgage-Backed Securities Fund performed?
By showing the variability of the Mortgage-Backed Securities Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the Mortgage-Backed
Securities Fund is not necessarily an indication of how the Fund will perform
in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/,/2/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 10.10%
1991 15.11%
1992 6.87%
1993 11.54%
1994 -8.08%
1995 28.94%
1996 8.90%
1997 12.14%
1998 6.00%
1999 2.18%
/1/For the period January 1, 2000, through September 30, 2000, the Fund's total
return was 6.04%.
/2/The Fund commenced operations on August 18, 2000, subsequent to the transfer
of assets from a common trust fund with materially equivalent investment
objectives, policies, guidelines and restrictions as the Fund. The quoted
performance of the Fund includes the performance of the common trust fund for
the periods prior to the commencement of operations of the Fund as adjusted
to reflect the contractual expenses associated with the Fund. The common
trust fund was not registered with the SEC and was not subject to the
investment restrictions, limitations and diversification requirements imposed
by law on registered mutual funds. If the common trust fund had been
registered, its return may have been lower.
--------------------------------------------------------------------------------
Best Quarter: 9.05% 2Q1995 Worst Quarter: -2.81% 4Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 12/31/83
<S> <C> <C> <C> <C> <C>
Class I 8/18/00 2.18% 11.27% 9.01% 10.53%
Lehman Brothers 1.86% 7.98% 7.78% 9.93%
Mortgage-Backed
Securities
Index/2/
</TABLE>
/1/The Fund commenced operations on August
18, 2000, subsequent to the transfer of
assets from a common trust fund with
materially equivalent investment
objectives, policies, guidelines and
restrictions as the Fund. The quoted
performance of the Fund includes the
performance of the common trust fund for
periods prior to the commencement of
operations of the Fund as adjusted to
reflect the contractual expenses
associated with the Fund. The common
trust fund was not registered with the
SEC and was not subject to the investment
restrictions, limitations and
diversification requirements imposed by
law on registered mutual funds. If the
common trust fund had been registered,
its returns may have been lower. The Fund
also offers Class A shares. Class A
shares had not commenced operations as of
the date of this prospectus.
/2/The Lehman Brothers Mortgage-Backed
Securities Index is an unmanaged market
value weighted index of 15 and 30 year
fixed-rate securities backed by mortgage
pools of the Government National Mortgage
Association (GNMA), the Federal National
Mortgage Association (FNMA), the Federal
Home Loan Mortgage Corporation (FHLMC)
and balloon mortgages with fixed rate
coupons. The performance of the index
does not reflect the deduction of
expenses associated with a mutual fund,
such as investment management fees. By
contrast, the performance of the Fund
reflects the deduction of these expenses.
------
4
<PAGE>
------------------
Mortgage-Backed Securities Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------------------
(fees paid directly from your investment) CLASS A CLASS I
-------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
-------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
-------------------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
Redemption Fee NONE NONE
-------------------------------------------------------------------------------
Exchange Fee NONE NONE
-------------------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------
(expenses that are deducted from Fund assets)/1/ CLASS A CLASS I
-------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .35% .35%
-------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% NONE
-------------------------------------------------------------------------------
Other Expenses .25% .25%
-------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .95% .60%
-------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/2/ (.30%) (.20%)
-------------------------------------------------------------------------------
Net Expenses .65% .40%
-------------------------------------------------------------------------------
/1/Expense information is based on estimated amounts for the Fund's current
fiscal year.
/2/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .40% for Class I shares and .65% for Class
A shares for the period beginning November 1, 2000, and ending on October 31,
2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if either you redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below.
<CAPTION>
CLASS A CLASS I
-------------------------------------------------------------------------------
<S> <C> <C>
1 Year/1/ $ 66 $ 41
-------------------------------------------------------------------------------
3 Years 273 172
-------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be $97 for Class A
shares and $61 for Class I shares.
------
5
<PAGE>
ONE GROUP(R)
------------------
More About The Fund
The Fund described in this prospectus is a series of One Group Mutual Funds and
is managed by Banc One Investment Advisors Corporation. For more information
about One Group and Banc One Investment Advisors, please read "Management of
One Group Mutual Funds" and the Statement of Additional Information.
--------------------------------------------------------------------------------
Principal Investment Strategy
The One Group Mortgage-Backed Securities Fund is designed to maximize total
return. Banc One Investment Advisors analyzes four major factors in managing
and constructing the Fund: duration, market sector, maturity concentration and
individual securities. The portfolio attempts to enhance total return by
selecting market sectors that offer risk/reward advantages based on structural
risks and credit trends. Individual securities that are purchased by the Fund
are subject to a disciplined risk/reward analysis both at the time of purchase
and on an ongoing basis. This analysis includes an evaluation of interest rate
risk, credit risk and risks associated with the complex legal and technical
structure of the investment (e.g., mortgage-backed securities). In addition,
the principal investment strategy that is used to meet the Fund's investment
objective is described in "Fund Summary: Investments, Risks & Performance" in
the front of this prospectus. It is also described below.
FUNDAMENTAL POLICIES
A Fund's investment strategy may
involve "fundamental policies." A
policy is fundamental if it cannot
be changed without the consent of a
majority of the outstanding shares
of the Fund.
There can be no assurance that the Fund will achieve its investment objective.
Please note that the Fund may also use strategies that are not described below,
but which are described in the Statement of Additional Information.
The Fund will invest in mortgage-backed securities and other securities
representing an interest in or secured by mortgages.
. The Fund invests at least 65% of its total assets in mortgage-backed
securities.
. As a matter of fundamental policy, at least 65% of the Fund's total assets
will consist of bonds.
. The Fund will purchase securities issued or guaranteed by the Government
National Mortgage Association (GNMA), the Federal National Mortgage
Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).
The Fund also may purchase mortgage-backed securities and asset-backed
securities that are issued by non-governmental entities. Such securities may
or may not have private insurer guarantees of timely payments.
. The Fund may purchase taxable or tax-exempt municipal securities.
------
6
<PAGE>
. The Fund may invest in debt securities that are rated in the lowest
investment grade category.
. The Fund's average weighted maturity will normally range between two and ten
years although the Fund may shorten its weighted average if deemed
appropriate for temporary defensive purposes.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the
average of all the current
maturities (that is, the term of
the securities) of the individual
securities in a fund calculated so
as to count most heavily those
securities with the highest dollar
value. Average weighted maturity is
important to investors as an
indication of a fund's sensitivity
to changes in interest rates. The
longer the average weighted
maturity, the more fluctuation in
share price you can expect.
Mortgage-related securities are
subject to prepayment of principal,
which can shorten the average
weighted maturity of the Fund's
portfolio. Therefore, in the case
of a Fund holding mortgage-backed
securities, the average weighted
maturity of the Fund is equivalent
to its weighted average life.
Weighted average life is the
average weighted maturity of the
cash flows in the securities held
by the Fund given certain
prepayment assumptions.
--------------------------------------------------------------------------------
Investment Risks
The risks associated with investing in the Fund are described below and in
"Fund Summary: Investments, Risks & Performance" in the front of this
prospectus.
--
FIXED INCOME SECURITIES. Investments by the Fund in fixed income securities
(for example, bonds) will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. The value of the securities in the Fund, and
the value of your investment in the Fund, will increase and decrease as the
value of the Fund's investments increase and decrease.
--
DERIVATIVES. The Fund invests in securities that may be considered to be
derivatives. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity
and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or
contracts (like futures and
options) that derive their value
from the performance of underlying
assets or securities.
--
LOWER-RATED SECURITIES. The Fund may purchase debt securities rated in the
lowest investment grade category. Securities in this rating category are
considered to have speculative characteristics. Changes in economic conditions
or other circumstances may have a greater effect on the ability of issuers of
these securities to make principal and interest payments than they do on
issuers of higher-grade securities.
For more information about risks associated with the types of investments that
the Fund purchases, please read "Fund Summary: Investments, Risks &
Performance," Appendix A and the Statement of Additional Information.
------
7
<PAGE>
--------------------------------------------------------------------------------
Investment Policies
The Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Fund. The full text of the
fundamental policies can be found in the Statement of Additional Information.
The Fund will not:
1. Purchase an issuer's securities if as a result more then 5% of its total
assets would be invested in the securities of that issuer or the Fund would
own more than 10% of the outstanding voting securities of that issuer. This
does not include securities (including mortgage-backed securities) issued or
guaranteed by the United States, its agencies or instrumentalities,
securities of other registered investment companies and repurchase
agreements involving these securities. This restriction only applies to 75%
of the Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Make loans, except that the Fund may (i) purchase or hold debt instruments
in accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending.
--------------------------------------------------------------------------------
Portfolio Quality
Various rating organizations (like Standard & Poor's Corporation and Moody's
Investors Service) assign ratings to securities (other than equity securities).
Generally, ratings are divided into two main categories: "Investment Grade
Securities" and "Non-Investment Grade Securities." Although there is always a
risk of default, rating agencies believe that issuers of Investment Grade
Securities have a high probability of making payments on such securities. Non-
Investment Grade Securities include securities that, in the opinion of the
rating agencies, are more likely to default than Investment Grade Securities.
Banc One Investment Advisors will look at a security's rating at the time of
investment. If the securities are unrated, Banc One Investment Advisors must
determine that they are of comparable quality to rated securities.
The Mortgage-Backed Securities Fund only purchases securities that meet the
following criteria:
--
BONDS
. The Fund may invest in bonds rated in any of the four investment grade rating
categories.
--
PREFERRED STOCK
. The Fund may only invest in preferred stock rated in any of the three highest
rating categories.
------
8
<PAGE>
--
MUNICIPAL SECURITIES
. The Fund may only invest in municipal bonds rated in any of the three
investment grade rating categories.
. The Fund may only invest in other municipal securities, such as tax-exempt
commercial paper, notes and variable rate demand obligations that are rated
in the highest or second highest investment grade rating categories.
--
COMMERCIAL PAPER
. The Fund may invest in commercial paper rated in the highest or second
highest rating category.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
--------------------------------------------------------------------------------
Temporary Defensive Positions
To provide liquidity and to allow the Fund to respond to unusual market
conditions, the Fund may invest all or a portion of its assets in cash and cash
equivalents for temporary defensive purposes. Investments in cash and cash
equivalents may result in a lower yield than lower-quality or longer-term
investments and may prevent the Fund from meeting its investment objective.
While the Fund is engaged in a temporary defensive position, it will not be
pursuing its investment objective. Therefore, the Fund will pursue a temporary
defensive position only when market conditions warrant.
WHAT IS A CASH EQUIVALENT?
Cash equivalents are highly liquid, high quality instruments with maturities of
three months or less on the date they are purchased. They include securities
issued by the U.S. government, its agencies and instrumentalities, repurchase
agreements (other than equity repurchase agreements), certificates of deposit,
bankers' acceptances, commercial paper (rated in one of the two highest rating
categories), variable rate master demand notes, money market mutual funds and
bank money market deposit accounts.
--------------------------------------------------------------------------------
Portfolio Turnover
The Fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Fund. The Fund anticipates a portfolio turnover rate between 50 - 100%.
------
9
<PAGE>
ONE GROUP(R)
------------------
How to Do Business with
One Group Mutual Funds
--------------------------------------------------------------------------------
Purchasing Fund Shares
Where Can I Buy Shares?
You may purchase Fund shares:
. Directly from One Group through The One Group Services Company (the
"Distributor"), and
. From Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or 401(k)
plan sponsors or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
When Can I Buy Shares?
. Purchases may be made on any business day. This includes any day that the
Fund is open for business, other than weekends and days on which the New York
Stock Exchange ("NYSE") is closed, including the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day.
Purchase requests received before 4 p.m. Eastern Time ("ET") will be effective
that day. On occasion, the NYSE will close before 4 p.m. ET. When that
happens, purchase requests received after the NYSE closes will be effective
the following business day.
. If a Shareholder Servicing Agent holds your shares, it is the responsibility
of the Shareholder Servicing Agent to send your purchase or redemption order
to the Fund. Your Shareholder Servicing Agent may have an earlier cut-off
time for purchase and redemption requests.
. The Distributor can reject a purchase order if it does not think that it is
in the best interests of a Fund and/or its shareholders to accept the order.
. Shares are electronically recorded. Therefore, certificates will not be
issued.
What Kind Of Shares Can I Buy?
The Fund offers the following classes of shares:
. Class A shares are available to the general public.
. Class I shares are available to institutional investors, such as
corporations, pension and profit sharing plans and foundations; and any
organization authorized to act in a fiduciary, advisory, custodial or agency
capacity. We will refer to these entities as "Intermediaries."
How Much Do Shares Cost?
. Shares are sold at net asset value ("NAV").
. Each class of shares has a different NAV. This is primarily because each
class has different distribution expenses.
. NAV per share is calculated by dividing the total market value of the Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
------
10
<PAGE>
. NAV is calculated each business day following the close of the NYSE at 4:00
p.m. ET. On occasion, the NYSE will close before 4 p.m. ET. When that
happens, NAV will be calculated as of the time the NYSE closes.
How Do I Open An Account?
1. Read the prospectus carefully.
2. Decide how much you want to invest.
. The minimum initial investment is $200,000. You are required to maintain a
minimum account balance of $200,000.
. Subsequent investments must be at least $5,000.
. These minimums may be waived.
3. Complete the Account Application Form. Be sure to sign up for all of the
account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
4. Send the completed application to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
And authorize a wire to:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY AND SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP MORTGAGE-BACKED SECURITIES FUND
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: ABC CORPORATION)
5. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
6. If you have any questions, contact your Shareholder Servicing Agent or call
1-877-691-1118.
Can I Purchase Shares Over The Telephone?
Yes. Simply select this option on your Account Application Form and then:
. Contact your Shareholder Servicing Agent or call 1-877-691-1118 to relay
your purchase instructions.
------
11
<PAGE>
. Initiate a wire to the following wire address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY AND SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP MORTGAGE-BACKED SECURITIES FUND
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: ABC CORPORATION)
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. You may revoke your election to make purchases over the telephone by sending
a letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
--------------------------------------------------------------------------------
Distribution and Servicing Expenses
The Distributor compensates Shareholder Servicing Agents who sell shares of One
Group Mutual Funds. Compensation comes from 12b-1 fees and payments by the
Distributor and the Funds' investment advisor from their own resources.
12b-1 FEES
--------------
The Fund has adopted a plan under Rule 12b-1 that allows it to pay distribution
and shareholder servicing fees for the sale and distribution of shares of the
Fund. These fees are called 12b-1 fees. The Fund pays 12b-1 fees to the
Distributor as compensation for its services and expenses. The Distributor in
turn pays all or part of the 12b-1 fee to Shareholder Servicing Agents that
sell shares of One Group.
The 12b-1 fees vary by share class as follows:
. Class A shares pay a 12b-1 fee of .35% of the average daily net assets of the
Fund, which is currently being waived to .25%.
. There are no 12b-1 fees for Class I shares.
. The Distributor may pay 12b-1 fees to its affiliates and to Banc One
Investment Advisors and its affiliates (or any sub-advisor) for brokerage and
other agency transactions.
. Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
------
12
<PAGE>
--------------------------------------------------------------------------------
Exchanging Fund Shares
What Are My Exchange Privileges?
You may make the following exchanges:
. Class I shares of the Fund may be exchanged for Class A shares of the
Fund or for Class A or Class I shares of another One Group Fund.
. Class A shares of the Fund may be exchanged for Class I shares of the
Fund or for Class I shares of another One Group Fund, but only if you are
eligible to purchase those shares.
. One Group does not charge a fee for this privilege. In addition, One
Group may change the terms and conditions of your exchange privileges
upon 60 days written notice.
When Are Exchanges Processed?
Exchanges are processed the same business day they are received, provided:
. State Street Bank and Trust Company receives the request by 4:00 p.m. ET.
. You have provided One Group with all of the information necessary to
process the exchange.
. You have received a current prospectus of the Fund or Funds in which you
wish to invest.
. You have contacted your Shareholder Servicing Agent, if necessary.
Do I Pay A Sales Charge On An Exchange?
Generally, you will not pay a sales charge on an exchange. However:
. You will pay a sales charge if you own Class I or Class A shares of the
Fund and you want to exchange those shares for Class A shares of another
One Group Fund, unless you qualify for a sales charge waiver.
Are Exchanges Taxable?
Generally:
. An exchange between classes of shares of the same Fund are not taxable
for federal income tax purposes.
. An exchange between Funds is considered a sale and may result in a
capital gain or loss for federal income tax purposes.
. You should talk to your tax advisor before making an exchange.
Are There Limits On Exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
. To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity. Exchange activity is excessive if it exceeds
two substantive exchange redemptions within 30 days of each other.
. Excessive exchange activity will result in revocation of your exchange
privileges.
. In addition, One Group reserves the right to reject any exchange request
(even those that are not excessive) if the Fund reasonably believes that
the exchange will result in excessive transaction costs or otherwise
adversely affect other shareholders.
. Also your shares may be automatically redeemed if, due to exchanges, you
no longer meet the Fund's minimum balance requirement. For information on
the minimum required balance, please read, "How Do I Open An Account?"
------
13
<PAGE>
--------------------------------------------------------------------------------
Redeeming Fund Shares
When Can I Redeem Shares?
You may redeem all or some of your shares on any day that the Fund is open for
business.
. Redemption requests received before 4:00 p.m. ET will be effective that day.
. All required documentation in the proper form must accompany a redemption
request. One Group may refuse to honor incomplete redemption requests.
How Do I Redeem Shares?
. You may use any of the following methods to redeem your shares:
1. You may send a written redemption request to your Shareholder Servicing
Agent, if applicable, or to State Street Bank and Trust Company at the
following address:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
2. You may use the One Group website at www.onegroup.com; or
3. You may redeem over the telephone. Please see "Can I Redeem By Telephone?"
for more information.
. You may request redemption forms by calling 1-877-691-1118 or visiting
www.onegroup.com
. One Group may require that the signature on your redemption request be
guaranteed by a participant in the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is payable to the shareholder of record; and
2. the redemption check is mailed to the shareholder at the record address;
and
3. the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
. On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. A designated commercial bank; or
2. Your Shareholder Servicing Agent.
. Your redemption proceeds will be paid within seven days after receipt of the
redemption request.
What Will My Shares Be Worth?
. You will receive the NAV calculated after the redemption request is received.
Please read "How Much Do My Shares Cost?"
Can I Redeem By Telephone?
Yes, if you selected this option on your Account Application Form.
. Contact your Shareholder Servicing Agent or call 1-877-691-1118 to relay your
redemption request.
. Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions
------
14
<PAGE>
----------------
and asking for personal identification. If these procedures are followed, One
Group will not be responsible for any loss, liability, cost or expense of
acting upon unauthorized or fraudulent instructions; you bear the risk of
loss.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
. Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more, the Fund reserves the right to pay part or all of
your redemption proceeds in readily marketable securities instead of cash. If
payment is made in securities, the Fund will value the securities selected in
the same manner in which it computes its NAV. This process minimizes the
effect of large redemptions on the Fund and its remaining shareholders.
. Your shares may be automatically redeemed if, due to redemptions, you no
longer meet the Fund's minimum balance requirement. For information on the
minimum required balance, please read, "How Do I Open An Account?"
.One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
. You generally will recognize a gain or loss on a redemption for federal
income tax purposes. You should talk to your tax adviser before making a
redemption.
------
15
<PAGE>
ONE GROUP(R)
------------------
Shareholder Information
--------------------------------------------------------------------------------
Voting Rights
The Fund does not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change the Fund's fundamental investment objective or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share you own. The Fund, and
each class of shares within each Fund, votes separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
--------------------------------------------------------------------------------
Dividend Policies
DIVIDENDS. The Fund generally declares dividends once each month. Dividends are
distributed on the first business day of the next month after they are
declared. Capital gains, if any, for the Fund are distributed at least
annually.
The Fund pays dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment.
Dividends payable on Class I shares will be more than those payable on Class A
shares. This is because Class A shares have higher distribution expenses.
If you want to change the way in which you receive dividends and distributions,
you may write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street. You also may call 1-877-691-1118 to make this
change.
--------------------------------------------------------------------------------
Tax Treatment Of Shareholders
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange, or redemption of Fund
shares generally will produce either a taxable gain or a loss. You are
responsible for any tax liabilities generated by your transactions.
TAXATION OF DISTRIBUTIONS. the fund will distribute substantially all of its
net investment income (including, for this purpose, the excess of net short-
term capital gains over net long-term capital losses) and net capital gains
(i.e., the excess of net long-term capital gains over net short-term capital
losses) on at least an annual basis.
Taxation of Retirement Plans
Distributions by the Fund to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for tax-
exempt treatment or by an individual who has received shares as a distribution
from a retirement plan, the distributions will be taxable to the plan or
individual. If you are considering purchasing shares with qualified retirement
plan assets, you should consult your tax
------
16
<PAGE>
advisor for a more complete explanation of the federal, state, local and (if
applicable) foreign tax consequences of making such an investment.
Taxation Of Zero Coupon Securities
The Fund may acquire certain securities issued with original issue discount
(including zero coupon securities). Current federal tax requires that a holder
(such as the Fund) of such a security must include in taxable income a portion
of the original issue discount which accrues during the tax year on such
security even if the Fund receives no payment in cash on the security during
the year. As an investment company, the Fund must pay out substantially all of
its net investment income each year, including any original issue discount.
Accordingly, the Fund may be required to pay out in income distribution each
year an amount that is greater than the total amount of cash interest the Fund
actually received. Such distributions will be made from the cash assets of the
Fund or by liquidation of investments if necessary. If a distribution of cash
necessitates the liquidation of investments, Banc One Investment Advisors will
select which securities to sell.
--------------------------------------------------------------------------------
Shareholder Statements And Reports
One Group or your Shareholder Servicing Agent will send you transaction
confirmation statements and quarterly account statements. Please review these
statements carefully. One Group will correct errors if notified within one year
of the date printed on the transaction confirmation or account statement. Your
Shareholder Servicing Agent may have a different cut-off time.
To reduce expenses and conserve natural resources, One Group will deliver a
single copy of prospectuses and financial reports to individual investors who
share a residential address, provided they have the same last name or One Group
reasonably believes they are members of the same family. If you would like to
receive separate mailings, please call 1-877-691-1118 and One Group will begin
individual delivery within 30 days. If you would like to receive these
documents by e-mail, please visit www.onegroup.com and sign up for electronic
delivery.
If you are the record owner of your One Group shares (that is, you did not use
a Shareholder Servicing Agent to buy your shares), you may access your account
statements at www.onegroup.com.
In March and September, you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
If you have any questions or need additional information, please write to One
Group Mutual Funds at 1111 Polaris Parkway, Columbus, OH 43271-1235, call
1-877-691-1118 or visit www.onegroup.com.
------
17
<PAGE>
ONE GROUP(R)
------------------
Management of One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Fund and
continuously reviews, supervises and administers the Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group Mutual
Funds. Banc One Investment Advisors has served as investment advisor to the
Trust since its inception. In addition, Banc One Investment Advisors serves as
investment advisor to other mutual funds and individual corporate, charitable
and retirement accounts. As of June 30, 2000, Banc One Investment Advisors, an
indirect wholly-owned subsidiary of Bank One Corporation, managed over $131
billion in assets.
--------------------------------------------------------------------------------
The Fund Managers
The Fund is managed by a team of Fund managers, research analysts and fixed
income traders. The team works together to establish general duration and
sector strategies for the Fund. Each team member makes recommendations about
securities in the Fund. The research analysts and trading personnel provide
individual security and sector recommendations, while the portfolio managers
select and allocate individual securities in a manner designed to meet the
investment objective of the Fund.
------
18
<PAGE>
ONE GROUP(R)
------------------
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Fund invests in a variety of securities and employs a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Fund, as well
as the risks inherent in their use. Fixed income securities are primarily
influenced by market, credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
<TABLE>
<CAPTION>
Risk
Instrument Type
-------------------------------------------------------------------------------
<S> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS and CUBES. Market
-------------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs and CATS. Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by agencies and Market
instrumentalities of the U.S. government. These include Ginnie Mae, Credit
Fannie Mae and Freddie Mac.
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a stated Market
maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in exchange Liquidity
for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security and the Credit
simultaneous commitment to return the security to the seller at an Market
agreed upon price on an agreed upon date. This is treated as a loan. Liquidity
-------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a security and the Market
simultaneous commitment to buy the security back at an agreed upon Leverage
price on an agreed upon date. This is treated as a borrowing by a
Fund.
-------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% of the Fund's total Credit
assets. In return, the Fund will receive cash, other securities Market
and/or letters of credit as collateral. Leverage
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase or contract Market
to purchase securities at a fixed price for delivery at a future Leverage
date. Liquidity
Credit
-------------------------------------------------------------------------------
</TABLE>
------
19
<PAGE>
<TABLE>
<CAPTION>
Risk
Instrument Type
-------------------------------------------------------------------------------
<S> <C>
Investment Company Securities: Shares of other mutual funds, Market
including One Group money market funds and shares of other money
market funds for which Banc One Investment Advisors or its
affiliates serve as investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when investing in funds
for which it serves as investment advisor.
-------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock that can convert Market
to common stock. Credit
-------------------------------------------------------------------------------
Call and Put Options: A call option gives the buyer the right to Management
buy, and obligates the seller of the option to sell, a security at Liquidity
a specified price. A put option gives the buyer the right to sell, Credit
and obligates the seller of the option to buy, a security at a Market
specified price. The Fund will sell covered call and secured put Leverage
options.
-------------------------------------------------------------------------------
Futures and Related Options: A contract providing for the future Management
sale and purchase of a specified amount of a specified security, Market
class of securities or an index at a specified time in the future Credit
and at a specified price. Liquidity
Leverage
-------------------------------------------------------------------------------
Real Estate Investment Trusts ("REITs"): Pooled investment vehicles Liquidity
which invest primarily in income-producing real estate or real Management
estate related loans or interest. Market
Regulatory
Tax
Prepayment
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time drafts drawn on and Credit
accepted by a commercial bank. Maturities are generally six months Liquidity
or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term promissory notes Credit
issued by corporations and other entities. Maturities generally Liquidity
vary from a few days to nine months. Market
-------------------------------------------------------------------------------
Foreign Securities: Stocks issued by foreign companies, as well as Market
commercial paper of foreign issuers and obligations of foreign Political
banks, overseas branches of U.S. banks and supranational entities. Liquidity
Includes American Depositary Receipts and Global Depositary Foreign
Receipts, and American Depositary Securities. Investment
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered under the Liquidity
Securities Act of 1933, such as privately placed commercial paper Market
and Rule 144A securities. Credit
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations with interest Credit
rates which are reset daily, weekly, quarterly or some other period Liquidity
and which may be payable to the Fund on demand. Market
-------------------------------------------------------------------------------
</TABLE>
------
20
<PAGE>
<TABLE>
<CAPTION>
Risk
Instrument Type
-------------------------------------------------------------------------------
<S> <C>
Preferred Stock: A class of stock that generally pays a dividend at Market
a specified rate and has preference over common stock in the
payment of dividends and in liquidation.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations secured by real estate Prepayment
loans and pools of loans. These include collateralized mortgage Market
obligations ("CMOs") and Real Estate Mortgage Investment Conduits Credit
("REMICs"). Regulatory
-------------------------------------------------------------------------------
Corporate Debt Securities: Corporate bonds and non-convertible debt Market
securities. Credit
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to puts and standby Market
commitments to purchase the securities at a fixed price (usually Liquidity
with accrued interest) within a fixed period of time following Management
demand by the Fund.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company receivables, Prepayment
home equity loans, truck and auto loans, leases, credit card Market
receivables and other securities backed by other types of Credit
receivables or other assets. Regulatory
-------------------------------------------------------------------------------
Mortgage Dollar Rolls: A transaction in which the Fund sells Prepayment
securities for delivery in a current month and simultaneously Market
contracts with the same party to repurchase similar but not Regulatory
identical securities on a specified future date.
-------------------------------------------------------------------------------
Adjustable Rate Mortgage Loans ("ARMS"): Loans in a mortgage pool Prepayment
which provide for a fixed initial mortgage interest rate for a Market
specified period of time, after which the rate may be subject to Credit
periodic adjustments. Regulatory
-------------------------------------------------------------------------------
Swaps, Caps and Floors: The Fund may enter into these transactions Management
to manage its exposure to changing interest rates and other Credit
factors. Swaps involve an exchange of obligations by two parties. Liquidity
Caps and floors entitle a purchaser to a principal amount from the Market
seller of the cap or floor to the extent that a specified index
exceeds or falls below a predetermined interest rate or amount.
-------------------------------------------------------------------------------
New Financial Products: New options and futures contracts and other Management
financial products continue to be developed and the Fund may invest Credit
in such options, contracts and products. Market
Liquidity
-------------------------------------------------------------------------------
Structured Instruments: Debt securities issued by agencies and Market
instrumentalities of the U.S. government, banks, municipalities, Liquidity
corporations and other businesses whose interest and/or principal Management
payments are indexed to foreign currency exchange rates, interest Credit
rates or one or more other referenced indices. Foreign
Investment
-------------------------------------------------------------------------------
</TABLE>
------
21
<PAGE>
<TABLE>
<CAPTION>
Risk
Instrument Type
-------------------------------------------------------------------------------
<S> <C>
Municipal Securities: Securities issued by a state or political Market
subdivision to obtain funds for various public purposes. Municipal Credit
securities include private activity bonds and industrial Political
development bonds, as well as General Obligation Notes, Tax Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Regulatory
Notes, Project Notes, other short-term tax-exempt obligations,
municipal leases, obligations of municipal housing authorities and
single family revenue bonds.
-------------------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other debt that pay no Credit
interest, but are issued at a discount from their value at Market
maturity. When held to maturity, their entire return equals the Zero Coupon
difference between their issue price and their maturity value.
-------------------------------------------------------------------------------
Zero-Fixed-Coupon Debt Securities: Zero coupon debt securities Credit
which convert on a specified date to interest bearing debt Market
securities. Zero Coupon
-------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative multi-class Prepayment
mortgage securities usually structured with two classes of shares Market
that receive different proportions of the interest and principal Credit
from a pool of mortgage-backed obligations. These include IOs and Regulatory
POs.
-------------------------------------------------------------------------------
Inverse Floating Rate Instruments: Floating rate debt instruments Market
with interest rates that reset in the opposite direction from the Leverage
market rate of interest to which the inverse floater is indexed. Credit
-------------------------------------------------------------------------------
Loan Participations and Assignments: Participations in, or Credit
assignments of all or a portion of loans to corporations or to Political
governments, including governments of the less developed countries Liquidity
("LDCs"). Foreign
Investment
Market
-------------------------------------------------------------------------------
Fixed Rate Mortgage Loans: Investments in fixed rate mortgage Credit
loans or mortgage pools which bear simple interest at fixed annual Prepayment
rates and have short- to long-term final maturities. Regulatory
Market
-------------------------------------------------------------------------------
Short-Term Funding Agreements: Investments in short-term funding Credit
agreements issued by banks and highly rated U.S. insurance Liquidity
companies such as Guaranteed Investment Contracts ("GICs") and Market
Bank Investment Contracts ("BICs").
-------------------------------------------------------------------------------
</TABLE>
------
22
<PAGE>
--------------------------------------------------------------------------------
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Fund may fluctuate, as will the value of
your investment in the Fund. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to actual
default as its credit status deteriorates and the probability of default
rises.
. Leverage Risk. The risk associated with securities or practices that multiply
small index or market movements into large changes in value. Leverage is
often associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the Fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching
between the derivative and underlying security, and there can be no
assurance that the Fund's hedging transactions will be effective.
Speculative. To the extent that a derivative is not used as a hedge, the
Fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
. Management Risk. The risk that a strategy used by the Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. Finally, key information about a security or market
may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes and governmental collapse and war.
------
23
<PAGE>
. Foreign Investment Risk. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other obligations are pre-paid, the Fund may have to
reinvest in securities with a lower yield. Further, with early prepayment,
the Fund may fail to recover any premium paid, resulting in an unexpected
capital loss.
. Tax Risk. The risk that the issuer of the securities will fail to comply with
certain requirements of the Internal Revenue Code, which could cause adverse
tax consequences. Also, the risk that the tax treatment of municipal or other
securities would be changed by Congress thereby affecting the value of
outstanding securities.
. Regulatory Risk. The risk associated with federal and state laws that may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
. Zero Coupon Risk. The market prices of securities structured as zero coupon
or pay-in-kind securities are generally affected to a greater extent by
interest rate changes. These securities tend to be more volatile than
securities that pay interest periodically.
------
24
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Fund, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus by
reference.
How can I get more information? You can get a free copy of the semi-
annual/annual reports or the SAI, request other information or discuss your
questions about the Fund by calling 1-877-691-1118 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
OR VISITING
WWW.ONEGROUP.COM
You can also review and copy the Fund's reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of the information also may
be obtained, after paying a copying charge, by electronic request at the
following e-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
(Investment Company Act File No. 811-4236)
TOG-F-134
[LOGO OF ONE GROUP]
<PAGE>
Municipal Bond Funds
PROSPECTUS
November 1, 2000
[LOGO OF ONE GROUP]
One Group(R) Short-Term Municipal Bond Fund
One Group(R) Intermediate Tax-Free Bond Fund
One Group(R) Tax-Free Bond Fund
One Group(R) Municipal Income Fund
One Group(R) Arizona Municipal Bond Fund
One Group(R) Kentucky Municipal Bond Fund
One Group(R) Louisiana Municipal Bond Fund
One Group(R) Michigan Municipal Bond Fund
One Group(R) Ohio Municipal Bond Fund
One Group(R) West Virginia Municipal Bond Fund
The Securities and Exchange Commission has not approved or disapproved
the shares of any of the Funds as an investment or determined whether
this prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
<PAGE>
TABLE OF
CONTENTS
<TABLE>
<CAPTION>
FUND SUMMARIES: INVESTMENTS, RISK &
PERFORMANCE
<S> <C>
One Group Short-Term Municipal Bond Fund 2
---
One Group Intermediate Tax-Free Bond Fund 6
---
One Group Tax-Free Bond Fund 10
---
One Group Municipal Income Fund 14
---
One Group Arizona Municipal Bond Fund 18
---
One Group Kentucky Municipal Bond Fund 22
---
One Group Louisiana Municipal Bond Fund 26
---
One Group Michigan Municipal Bond Fund 30
---
One Group Ohio Municipal Bond Fund 34
---
One Group West Virginia Municipal Bond Fund 38
---
</TABLE>
<TABLE>
<CAPTION>
MORE ABOUT THE FUNDS
<S> <C>
Principal Investment
Strategies 42
---
Investment Risks 45
---
Investment Policies 46
---
Portfolio Quality 47
---
Temporary Defensive
Positions 48
---
Portfolio Turnover 48
---
</TABLE>
<TABLE>
<CAPTION>
HOW TO DO BUSINESS WITH ONE GROUP
MUTUAL FUNDS
<S> <C>
Purchasing Fund Shares 49
---
Sales Charges 52
---
Sales Charge Reductions and Waivers 55
---
Exchanging Fund Shares 58
---
Redeeming Fund Shares 60
---
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDER INFORMATION
<S> <C>
Voting Rights 63
---
Dividend Policies 63
---
Tax Treatment of
Shareholders 64
---
Shareholder Statements and
Reports 66
---
</TABLE>
<TABLE>
<CAPTION>
MANAGEMENT OF ONE
GROUP MUTUAL
FUNDS
<S> <C>
The Advisor 67
---
The Fund Managers 67
---
</TABLE>
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS 68
---
APPENDIX A: INVESTMENT PRACTICES 88
---
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
KEY DEFINITIONS
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
COLLECTION OF NONPUBLIC PERSONAL INFORMATION
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing
you a financial product or service.
INFORMATION SHARING WITH NON-AFFILIATED THIRD PARTIES
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
INFORMATION SHARING WITH JOINT MARKETERS
We also may share the information described above in COLLECTION OF NONPUBLIC
PERSONAL INFORMATION with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
CHILDREN'S ONLINE PRIVACY ACT DISCLOSURE
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
SECURITY
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
ONE GROUP MUTUAL FUNDS' PRIVACY COMMITMENT
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Short-Term Municipal
Bond Fund
What is the goal of the Short-Term Municipal Bond Fund?
The Fund seeks as high a level of current income exempt from federal income tax
as is consistent with relative stability of principal.
What are the main investment strategies of the Short-Term Municipal Bond Fund?
The Fund invests in a portfolio of municipal securities with an average
weighted maturity of three years or less. Banc One Investment Advisors selects
securities for the Fund by analyzing both individual securities and different
market sectors. Taking a long-term approach, Banc One Investment Advisors looks
for individual securities that it believes will perform well over market
cycles. The Short-Term Municipal Bond Fund spreads its holdings across various
security types within the municipal securities market. Banc One Investment
Advisors selects individual securities after performing a risk/reward
evaluation of interest rate risk, credit risk, and the complex legal and
technical structure of the transaction. For more information about the Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are municipal securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any portion of my investment be taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income. Any capital gains distributed by the Fund may be
taxable.
What are the main risks of investing in the Short-Term Municipal Bond Fund?
The main risks of investing in the Short-Term Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Short-Term Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the Short-
Term Municipal Bond Fund. For additional information on risk, please read
"Investment Risks."
------
2
<PAGE>
------------------
----------------
Short-Term Municipal Bond Fund
MAIN RISKS
Interest Rate Risk. The Fund invests mainly in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of a Fund's investments decreases. Securities with greater interest rate
sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives. The Fund invests in securities that may be considered to be
DERIVATIVES. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Portfolio Quality. The Fund may invest in municipal securities that are rated
in the lowest investment grade. Even though such securities are generally
considered investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
3
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Short-Term Municipal Bond Fund
How has the Short-Term Municipal Bond Fund Performed?
By showing the variability of the Short-Term Municipal Bond Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE SHORT-TERM MUNICIPAL
BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
BAR CHART (per calendar year)/1/ -- CLASS I SHARES
--------------------------------------------------------------------------------
[GRAPH]
1999 1.20%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 3.80%.
--------------------------------------------------------------------------------
Best Quarter: 0.73% 1Q 1999 Worst Quarter: -0.23% 2Q 1999
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 5/4/98
<S> <C> <C> <C>
Class A 5/4/98 -2.15% 0.85%
Class B 5/4/98 -2.50% 0.44%
Class I 5/4/98 1.20% 3.09%
Lehman Brothers Short Municipal
Bond Index/2/ 2.00% 3.39%
Lehman Brothers 3 Year Municipal
Bond Index/3/ 1.96% 3.35%
Lipper Short-Term Municipal Debt
Fund Index/4/ 2.07% 3.13%
</TABLE>
/1/The above-quoted 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.
/2/The Lehman Brothers Short Municipal Bond Index is an unmanaged index of
investment grade, tax-exempt municipal bonds with short-term maturities. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares. The benchmark index for
the Short-Term Municipal Bond Fund has changed from the Lehman Brothers 3
Year Municipal Bond Index to the Lehman Brothers Short Municipal Bond Index
in order to better represent the investment policies for comparison
purposes.
/3/The Lehman Brothers 3 Year Municipal Bond Index is an unmanaged index
generally representative of the short-term municipal bond market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges as Class A shares and
contingent deferred sales charges on Class B shares.
/4/The Lipper Short-Term Municipal Debt Fund Index consists of funds that
invest in municipal debt issues with dollar-weighted average maturities of
one to three years. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management fees. By contrast, the performance of the Fund reflects the
deduction of these expenses as well as the deduction of sales charges on
Class A shares and contingent deferred sales charges on Class B shares.
------
4
<PAGE>
------------------
Short-Term Municipal Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 3.00% NONE NONE NONE
-----------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 3.00% 1.00% NONE
-----------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------
(expenses that are deductible
from Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
-----------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-----------------------------------------------------------------
Other Expenses .27% .27% .27% .27%
-----------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.22% 1.87% 1.87% .87%
-----------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/4/ (.42%) (.57%) (.57%) (.32%)
-----------------------------------------------------------------
Net Expense .80% 1.30% 1.30% .55%
-----------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .80% for Class A shares, 1.30% for Class B
shares, 1.30% for Class C shares and .55% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them to the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 379 $ 432 $ 132 $ 232 $ 132 $ 56
------------------------------------------------------------------------------
3 Years 635 732 532 532 532 246
------------------------------------------------------------------------------
5 Years 911 958 958 958 958 451
------------------------------------------------------------------------------
10 Years 1,697 1,973 1,973 2,144 2,l44 1,043
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $421
Class B (with re-
demption) $490
Class B (no re-
demption) $190
Class C (with re-
demption) $290
Class C (no re-
demption) $190
Class I $89
</TABLE>
/2/Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
5
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Intermediate Tax-Free
Bond Fund
What is the goal of the Intermediate Tax-Free Bond Fund?
The Fund seeks current income exempt from federal income taxes consistent with
prudent investment management and the preservation of capital.
What are the Main Investment Strategies of the Intermediate Tax-Free Bond Fund?
The Fund invests primarily in a portfolio of municipal securities with an
average weighted maturity of between three and 10 years. Banc One Investment
Advisors selects securities for the Fund by analyzing both individual
securities and different market sectors. Taking a long-term approach, Banc One
Investment Advisors looks for individual securities that it believes will
perform well over market cycles. The Intermediate Tax-Free Bond Fund spreads
its holdings across various security types within the municipal securities
market. Banc One Investment Advisors selects individual securities after
performing a risk/reward evaluation of interest rate risk, credit risk, and the
complex legal and technical structure of the transaction. For more information
about the Fund's investment strategies, please read "More About the Funds" and
"Principal Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any portion of my investment be taxed?
Up to 20% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income. Any capital gains distributed by the Fund may be
taxable.
What are the main risks of investing in the Intermediate Tax-Free Bond Fund?
The main risks of investing in the Intermediate Tax-Free Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Intermediate Tax-Free Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the
Intermediate Tax-Free Bond Fund. For additional information on risk, please
read "Investment Risks."
------
6
<PAGE>
------------------
----------------
Intermediate Tax-Free Bond Fund
MAIN RISKS
Interest Rate Risk. The Fund invests mainly in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of a Fund's investments decreases. Securities with greater interest rate
sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal securities that are rated
in the lowest investment grade. Even though such securities are generally
considered investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities.
Derivatives. The Fund may invest in securities that are considered to be
DERIVATIVES. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Generally, derivatives are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
7
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Intermediate Tax-Free Bond Fund
How has the Intermediate Tax-Free Bond Fund Performed?
By showing the variability of the Intermediate Tax-Free Bond Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE INTERMEDIATE TAX-
FREE BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN
THE FUTURE.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
BAR CHART (per calendar year)/1/ -- CLASS I SHARES
--------------------------------------------------------------------------------
[GRAPH]
1991 10.02%
1992 7.54%
1993 9.68%
1994 -3.90%
1995 13.06%
1996 4.39%
1997 8.20%
1998 6.00%
1999 -2.32%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.95%.
--------------------------------------------------------------------------------
Best Quarter: 5.14% 1Q1995 Worst Quarter: -4.73% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF CLASS SINCE 9/4/90
<S> <C> <C> <C> <C>
Class A 2/18/92 -6.93% 4.53% 5.12%
Class B 1/14/94 -7.77% 4.52% 4.94%
Class I 9/4/90 -2.32% 5.75% 5.92%
Lehman Brothers 7 Year
Municipal Bond Index/2/ -0.14% 6.35% 6.75%
Lehman Brothers 3-15
Year Municipal Bond
Index/3/ -0.46% 6.68% *
Lipper Intermediate
Municipal Fund Index/4/ -1.37% 5.59% 6.02%
</TABLE>
/1/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 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.
/2/The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/3/The Lehman Brothers 3-15 Year Municipal Bond Index is an unmanaged index of
investment grade, tax-exempt municipal bonds with maturities of 3-15 years.
The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/4/The Lipper Intermediate Municipal Fund Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in this category.
* Index did not exist.
------
8
<PAGE>
------------------
Intermediate Tax-Free Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deductible
from Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------
Other Expenses .19% .19% .19% .19%
------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.14% 1.79% 1.79% .79%
------------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/4/ (.29%) (.29%) (.29%) (.19%)
------------------------------------------------------------------
Net Expenses .85% 1.50% 1.50% .60%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .85% for Class A shares, 1.50% for Class B
shares, 1.50% for Class C shares and .60% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 533 $ 653 $ 153 $ 253 $ 153 $ 61
------------------------------------------------------------------------------
3 Years 768 835 535 535 535 233
------------------------------------------------------------------------------
5 Years 1,023 1,143 943 943 943 420
------------------------------------------------------------------------------
10 Years 1,749 1,910 1,910 2,081 2,081 960
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $561
Class B (with
redemption) $682
Class B (no
redemption) $182
Class C (with
redemption) $282
Class C (no
redemption) $182
Class I $81
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
9
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Tax-Free Bond Fund
What is the goal of the Tax-Free Bond Fund?
The Fund seeks as high a level of current income exempt from federal income tax
as is consistent with relative stability of principal.
What are the Main Investment Strategies of the Tax-Free Bond Fund?
The Fund invests primarily in a portfolio of municipal securities. Banc One
Investment Advisors selects securities for the Fund by analyzing both
individual securities and different market sectors. Taking a long-term
approach, Banc One Investment Advisors looks for individual securities that it
believes will perform well over market cycles. The Tax-Free Bond Fund spreads
its holdings across various security types within the municipal securities
market. Banc One Investment Advisors selects individual securities after
performing a risk/reward evaluation of interest rate risk, credit risk, and the
complex legal and technical structure of the transaction. For more information
about the Fund's investment strategies, please read "More About the Funds" and
"Principal Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any portion of my investment be taxed?
Up to 20% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income. Any capital gains distributed by the Fund may be
taxable.
What are the main risks of investing in the Tax-Free Bond Fund?
The main risks of investing in the Tax-Free Bond Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Tax-Free Bond Fund will change every day in response to market
conditions. You may lose money if you invest in the Tax-Free Bond Fund. For
additional information on risk, please read "Investment Risks."
------
10
<PAGE>
------------------
----------------
Tax-Free Bond Fund
Main Risks
Interest Rate Risk. The Fund invests mainly in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of a Fund's investments decreases. Securities with greater interest rate
sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives. The Fund may invest in securities that are considered to be
DERIVATIVES. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Generally, derivatives are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Portfolio Quality. The Fund may invest in municipal securities that are rated
in the lowest investment grade. Even though such securities are generally
considered investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
11
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Tax-Free Bond Fund
How has the Tax-Free Bond Fund Performed?
By showing the variability of the Tax-Free Bond Fund's performance from year to
year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE TAX-FREE BOND FUND IS NOT NECESSARILY
AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
BAR CHART (per calendar year)/1/,/2/ -- CLASS A SHARES
--------------------------------------------------------------------------------
[GRAPH]
1990 7.76%
1991 11.85%
1992 9.45%
1993 10.74%
1994 -1.98%
1995 16.89%
1996 3.36%
1997 9.15%
1998 5.71%
1999 -3.39%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 6.07%.
/2/Performance data includes performance of the Pegasus Municipal Bond Fund for
the period before it was consolidated with the One Group Tax-Free Bond Fund
on March 22, 1999.
--------------------------------------------------------------------------------
Best Quarter: 6.71% 1Q1995 Worst Quarter: -3.74% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF SINCE
CLASS 3/1/88
<S> <C> <C> <C> <C> <C>
Class A 3/1/88 -7.72% 5.17% 6.30% 6.70%
Class B 4/4/95 -8.65% 5.01% 5.99% 6.32%
Class I 2/1/95 -3.15% 6.41% 6.93% 7.23%
Lehman Brothers
Municipal Bond
Index/2/ -2.06% 6.91% 6.89% 7.34%
Lipper General
Municipal Debt
Index/3/ -4.07% 6.14% 6.29% 6.91%
</TABLE>
/1/ The above quoted performance data includes the performance of the Pegasus
Municipal Bond Fund for the period before it was consolidated with the One
Group Tax-Free Bond Fund on March 22, 1999. 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.
/2/ The Lehman Brothers Municipal Bond Index is an unmanaged index generally
representative of the municipal bond market as a whole. The performance of
the index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management fees. By contrast, the performance of the
Fund reflects the deduction of these expenses as well as the deduction of
sales charges on Class A shares and contingent deferred sales charges on
Class B shares.
/3/ The Lipper General Municipal Bond Index consists of the equally weighted
average monthly return of the largest funds within the universe of all funds
in this category.
------
12
<PAGE>
------------------
Tax-Free Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------
Other Expenses .21% .21% .21% .21%
------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.01% 1.66% 1.66% .66%
------------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/4/ (.14%) (.14%) (.14%) (.04%)
------------------------------------------------------------------
Net Expenses .87% 1.52% 1.52% .62%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .87% for Class A shares, 1.52% for Class B
shares, 1.52% for Class C shares and .62% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you redeemed all of your shares or if you hold them. The examples
also assume that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Your actual costs may be higher or lower
than those shown below. There is no sales charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 535 $ 655 $ 155 $ 255 $ 155 $63
------------------------------------------------------------------------------
3 Years 744 810 510 510 510 207
------------------------------------------------------------------------------
5 Years 970 1,089 889 889 889 364
------------------------------------------------------------------------------
10 Years 1,618 1,780 1,780 1,954 1,954 819
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $548
Class B (with
redemption) $669
Class B (no
redemption) $169
Class C (with
redemption) $269
Class C (no
redemption) $169
Class I $ 67
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
13
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Municipal Income
Fund
What is the goal of the Municipal Income Fund?
The Fund seeks current income exempt from federal income taxes.
What are the Main Investment Strategies of the Municipal Income Fund?
The Fund invests in a portfolio of municipal securities, including mortgage-
backed securities. While current income is the Fund's primary focus, it seeks
to produce income in a manner consistent with the preservation of principal.
The Fund's average weighted maturity will normally range between five and 15
years. From time to time, a significant portion of the Funds total assets may
be invested in municipal housing authority obligations. Banc One Investment
Advisors selects securities for the Fund by analyzing both individual
securities and different market sectors. Taking a long-term approach, Banc One
Investment Advisors looks for individual securities that it believes will
perform well over market cycles. The Municipal Income Fund spreads its holdings
across various security types within the municipal securities market. Banc One
Investment Advisors selects individual securities after performing a
risk/reward evaluation of interest rate risk, credit risk, and the complex
legal and technical structure of the transaction. For more information about
the Fund's investment strategies, please read "More About the Funds" and
"Principal Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any portion of my investment be taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income. Any capital gains distributed by the Fund may be
taxable.
What are the main risks of investing in the Municipal Income Fund?
The main risks of investing in the Municipal Income Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Municipal Income Fund will change every day in response to market
conditions. You may lose money if you invest in the Municipal Income Fund. For
additional information on risk, please read "Investment Risks."
------
14
<PAGE>
------------------
----------------
Municipal Income Fund
Main Risks
Interest Rate Risk. The Fund invests mainly in bonds and other debt securities.
The securities decrease in value based on changes in interest rates. If rates
increase, the value of the Fund's investments generally declines. On the other
hand, if rates fall, the value of the investments generally increases. Your
investment will decline in value if the value of a Fund's investments
decreases. Securities with greater interest rate sensitivity and longer
maturities tend to produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of fixed income securities
will not affect cash income generated, but may affect the value of your
investment.
Prepayment and Call Risk. As part of its main investment strategy, the
Municipal Income Fund may invest in mortgage-backed securities. The issuers of
these and other callable securities may be able to repay principal in advance,
especially when interest rates fall. Changes in prepayment rates can make the
price and yield of mortgage-backed securities volatile. When mortgages are
prepaid or when securities are called, the Fund may have to reinvest in
securities with a lower yield. The Fund also may fail to recover additional
amounts (i.e., premiums) paid for securities with higher interest rates,
resulting in an unexpected capital loss.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Derivatives. The Fund may invest in securities that are considered to be
DERIVATIVES. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Generally, derivatives are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Portfolio Quality. The Fund may invest in municipal securities that are rated
in the lowest investment grade. Even though such securities are generally
considered investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
15
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Municipal Income Fund
How has the Municipal Income Fund Performed?
By showing the variability of the Municipal Income Fund's performance from year
to year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE MUNICIPAL INCOME FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
BAR CHART (per calendar year)/1/ -- CLASS I SHARES
--------------------------------------------------------------------------------
[GRAPH]
1994 -1.60%
1995 12.O1%
1996 4.58%
1997 8.58%
1998 6.14%
1999 -2.49%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.02%.
--------------------------------------------------------------------------------
Best Quarter: 4.74% 1Q1995 Worst Quarter: -1.91% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF SINCE
CLASS 2/9/93
<S> <C> <C> <C> <C>
Class A 2/23/93 -7.10% 4.47% 3.85%
Class B 1/14/94 -8.01% 4.42% 3.83%
Class C 11/4/97 -4.21% 5.53% 4.37%
Class I 2/9/93 -2.49% 5.65% 4.70%
Lehman Brothers 7 Year
Municipal Bond Index/2/ 0.14% 6.35% 5.02%
Lehman Brothers 3-15 Year
Municipal Bond Index/3/ -0.46% 6.68% *
Lipper Intermediate Municipal
Fund Index/4/ -1.37% 5.59% 4.34%
</TABLE>
/1/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.
/2/The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B and Class C shares.
/3/The Lehman Brothers 3-15 Year Municipal Bond Index is an unmanaged index of
investment grade tax-exempt municipal bonds with maturities of 3-15 years.
The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B and Class C shares.
/4/The Lipper Intermediate Municipal Fund Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
* Index did not exist.
------
16
<PAGE>
------------------
Municipal Income Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
-------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------
Other Expenses .22% .22% .22% .22%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.02% 1.67% 1.67% .67%
-------------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/4/ (.15%) (.15%) (.15%) (.05%)
-------------------------------------------------------------------
Net Expenses .87% 1.52% 1.52% .62%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10,000 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .87% for Class A shares, 1.52% foe Class B
shares, 1.52% of Class C shares, and .62% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 535 $ 655 $ 155 $ 255 $ 155 $ 63
------------------------------------------------------------------------------
3 Years 746 812 512 512 512 209
------------------------------------------------------------------------------
5 Years 974 1,093 893 893 893 368
------------------------------------------------------------------------------
10 Years 1,629 1,791 1,791 1,964 1,964 830
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $549
Class B (with
redemption) $670
Class B (no
redemption) $170
Class C (with
redemption) $270
Class C (no
redemption) $170
Class I $ 68
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
17
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Arizona Municipal
Bond Fund
What is the goal of the Arizona Municipal Bond Fund?
The Fund seeks current income exempt from federal income tax and Arizona
personal income tax, consistent with the preservation of principal.
What are the Main Investment Strategies of the Arizona Municipal Bond Fund?
The Fund invests in municipal securities issued by or on behalf of Arizona and
its respective authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Arizona municipal securities is exempt
from federal income tax and Arizona personal income tax. A portion of the
Fund's total assets also may be invested in municipal securities issued by
other states and territories. The Fund's average weighted maturity normally
will range between five and 20 years. Banc One Investment Advisors selects
securities for the Fund by analyzing both individual securities and different
market sectors. Taking a long-term approach, Banc One Investment Advisors looks
for individual securities that it believes will perform well over market
cycles. The Arizona Municipal Bond Fund spreads its holdings across various
security types within the municipal securities market. Banc One Investment
Advisors selects individual securities after performing a risk/reward
evaluation of interest rate risk, credit risk, and the complex legal and
technical structure of the transaction. For more information about the Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any portion of my investment be taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income. Any capital gains distributed by the Fund may be
taxable.
What are the main risks of investing in the Arizona Municipal Bond Fund?
The main risks of investing in the Arizona Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Arizona Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the Arizona
Municipal Bond Fund. For additional information on risk, please read
"Investment Risks."
------
18
<PAGE>
------------------
----------------
Arizona Municipal Bond Fund
Main Risks
Non-Diversification. The Arizona Municipal Bond Fund is "non-diversified." This
means that the Fund may invest a more significant portion of its assets in the
securities of a single issuer than can a "diversified" fund. Non-
diversification increases the risk of loss to the Fund if an issuer fails to
make interest or principal payments or if the market value of a security
declines.
Geographic Concentration. Because the Arizona Municipal Bond Fund is not
diversified and because it concentrates its investments in the securities of
issuers in Arizona, certain factors including economic conditions,
constitutional amendments, legislative and executive measures, and voter
initiatives may have a disproportionately negative effect on the Fund's
investments. For example, Arizona's population growth continues to outpace the
national average. However, this growth is expensive and Arizona's economic
outlook depends on its ability to match long-term revenues with expenditures.
In addition, Arizona's continued growth depends, to some extent, on its ability
to manage its water resources.
Interest Rate Risk. The Fund invests mainly in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of a Fund's investments decreases. Securities with greater interest rate
sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives. The Fund may invest in securities that are considered to be
DERIVATIVES. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Generally, derivatives are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal securities that are rated
in the lowest investment grade. Even though such securities are generally
considered investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
19
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Arizona Municipal Bond Fund
How has the Arizona Municipal Bond Fund Performed?
By showing the variability of the Arizona Municipal Bond Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE ARIZONA MUNICIPAL
BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
BAR CHART (per calendar year)/1/ -- CLASS I SHARES
--------------------------------------------------------------------------------
[GRAPH]
1990 6.47%
1991 10.37%
1992 7.65%
1993 9.98%
1994 -2.38%
1995 11.96%
1996 4.05%
1997 7.33%
1998 5.56%
1999 -2.27%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.26%. The Arizona Municipal Bond Fund commenced operations
on January 20, 1997, subsequent to the transfer of assets from a common
trust fund with materially equivalent investment objectives, policies,
guidelines and restrictions as the Fund. The quoted performance of the Fund
includes the performance of the common trust fund for the period prior to
the Fund's commencement of operations as adjusted to reflect the expenses
associated with each class of the Fund. The common trust fund was not
registered with the SEC and was not subject to the investment restrictions,
limitations and diversification requirements imposed by law on registered
mutual funds. If the common trust fund had been registered, its return may
have been lower.
--------------------------------------------------------------------------------
Best Quarter: 4.65% 4Q1990 Worst Quarter: -3.51% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table DO include applicable sales charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION
DATE OF PERFORMANCE
CLASS 1 YEAR 5 YEARS 10 YEARS SINCE 11/30/79
<S> <C> <C> <C> <C> <C>
Class A 1/20/97 -6.88% 3.72% 4.88% 6.26%
Class B 1/20/97 -7.87% 3.00% 4.36% 5.65%
Class I 1/20/97 -2.27% 5.22% 5.77% 6.84%
Lehman Brothers
7 Year
Municipal Bond
Index/2/ -0.14% 6.35% 6.59% *
Lehman Brothers
3-15 Year
Municipal Bond
Index/3/ -0.46% 6.68% * *
Lipper
Intermediate
Municipal Fund
Index/4/ -1.37% 5.59% 5.90% *
</TABLE>
/1/The Arizona Municipal Bond Fund commenced operations on January 20, 1997,
subsequent to the transfer of assets from a common trust fund with
materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for the period prior to the Fund's
commencement of operations as adjusted to reflect the expenses associated
with each class of the Fund. The common trust fund was not registered with
the SEC and was not subject to the investment restrictions, limitations and
diversification restrictions imposed by law on registered mutual funds. If
the common trust fund had been registered, its return may have been lower.
/2/The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/3/The Lehman Brothers 3-15 Year Municipal Bond Index is an unmanaged index of
investment grade, tax-exempt municipal bonds with maturities of 3-15 years.
The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/4/The Lipper Intermediate Municipal Fund Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
* Index did not exist.
------
20
<PAGE>
------------------
Arizona Municipal Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
-------------------------------------------------------------------
(as a percentage of offering
price)/1/
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------
Other Expenses .20% .20% .20% .20%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.00% 1.65% 1.65% .65%
-------------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/4/ (.10%) (.10%) (.10%) none
-------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .90% for Class A shares, 1.55% for Class B
shares and 1.55% for Class C shares for the period beginning November 1,
2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the FUND
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the FUND for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them to the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the FUND'S operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 538 $ 658 $ 158 $ 258 $ 158 $66
------------------------------------------------------------------------------
3 Years 745 811 511 511 511 208
------------------------------------------------------------------------------
5 Years 968 1,088 888 888 888 362
------------------------------------------------------------------------------
10 Years 1,611 1,773 1,773 1,946 1,946 810
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $547
Class B (with
redemption) $668
Class B (no
redemption) $168
Class C (with
redemption) $268
Class C (no
redemption) $168
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
21
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Kentucky Municipal
Bond Fund
What is the goal of the Kentucky Municipal Bond Fund?
The Fund seeks current income exempt from federal income tax and Kentucky
personal income tax, consistent with the preservation of principal.
What are the Main Investment Strategies of the Kentucky Municipal Bond Fund?
The Fund invests in municipal securities issued by or on behalf of Kentucky and
its respective authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Kentucky municipal securities is exempt
from federal income tax and Kentucky personal income tax. The Fund also may
invest in municipal securities issued by other states and territories. The
Fund's average weighted maturity normally will range between five and 20 years.
Banc One Investment Advisors selects securities for the Fund by analyzing both
individual securities and different market sectors. Taking a long-term
approach, Banc One Investment Advisors looks for individual securities that it
believes will perform well over market cycles. The Kentucky Municipal Bond Fund
spreads its holdings across various security types within the municipal
securities market. Banc One Investment Advisors selects individual securities
after performing a risk/reward evaluation of interest rate risk, credit risk,
and the complex legal and technical structure of the transaction. For more
information about the Fund's investment strategies, please read "More About the
Funds" and "Principal Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any portion of my investment be taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income. Any capital gains distributed by the Fund may be
taxable.
What are the main risks of investing in the Kentucky Municipal Bond Fund?
The main risks of investing in the Kentucky Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Kentucky Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the Kentucky
Municipal Bond Fund. For additional information on risk, please read
"Investment Risks."
------
22
<PAGE>
------------------
----------------
Kentucky Municipal Bond Fund
MAIN RISKS
Non-Diversification. The Kentucky Municipal Bond Fund is "non-diversified."
This means that the Fund may invest a more significant portion of its assets in
the securities of a single issuer than can a "diversified" fund. Non-
diversification increases the risk of loss to the Fund if an issuer fails to
make interest or principal payments or if the market value of a security
declines.
Geographic Concentration. Because the Kentucky Municipal Bond Fund is not
diversified and because it concentrates its investments in the securities of
issuers in Kentucky, certain factors including economic conditions,
constitutional amendments, legislative and executive measures, and voter
initiatives may have a disproportionately negative effect on the Fund's
investments. For example, securities issued by Kentucky and its agencies are
general obligations of the issuer only in those rare instances when they are
approved by the voters in a state-wide referendum. In other instances, payment
generally is dependent on only the revenues generated directly from the
properties financed by the securities or the lease payments from a user which
may be bound by only a short-term lease.
Interest Rate Risk. The Fund invests mainly in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of a Fund's investments decreases. Securities with greater interest rate
sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives. The Fund may invest in securities that are considered to be
DERIVATIVES. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund declines. Generally, derivatives are more volatile and are riskier
in terms of both liquidity and value than traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal securities that are rated
in the lowest investment grade. Even though such securities are generally
considered investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
23
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Kentucky Municipal Bond Fund
How has the Kentucky Municipal Bond Fund performed?
By showing the variability of the Kentucky Municipal Bond Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE KENTUCKY MUNICIPAL
BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
BAR CHART (per calendar year)/1/,/2/ -- CLASS I SHARES
--------------------------------------------------------------------------------
[GRAPH]
1994 -5.67%
1995 15.32%
1996 4.18%
1997 7.50%
1998 5.52%
1999 -1.64%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.19%.
/2/Performance data includes the performance of the Trademark Kentucky
Municipal Bond Fund for the period before it was consolidated with the One
Group Kentucky Municipal Bond Fund on January 20, 1995.
--------------------------------------------------------------------------------
Best Quarter: 6.17% 1Q1995 Worst Quarter: -4.63% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF SINCE 3/12/93
CLASS
<S> <C> <C> <C> <C>
Class A 1/20/95 -6.26% 4.76% 3.58%
------------------------------------------------------------------
Class B 3/16/95 -7.21% 4.64% 3.53%
------------------------------------------------------------------
Class I 3/12/93 -1.64% 6.04% 4.50%
------------------------------------------------------------------
Lehman Brothers 7 Year
Municipal Bond Index/2/ -0.14% 6.35% 5.29%
------------------------------------------------------------------
Lehman Brothers 3-15 Year
Municipal Bond Index/3/ -0.46% 6.68% *
------------------------------------------------------------------
Lipper Intermediate
Municipal Fund Index/4/ -1.37% 5.59% 4.57%
------------------------------------------------------------------
</TABLE>
/1/The above quoted performance data includes the performance of the Trademark
Kentucky Municipal Bond Fund for the period before it was consolidated with
the One Group Kentucky Municipal Bond Fund on January 20, 1995. 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 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.
/2/The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the One Group Kentucky Municipal Bond Fund
reflects the deduction of these expenses as well as the deduction of sales
charges on Class A shares and contingent deferred sales charges on Class B
shares.
/3/The Lehman Brothers 3-15 Year Municipal Bond Index is an unmanaged index of
investment grade, tax-exempt municipal bonds with maturities of 3-15 years.
The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/4/The Lipper Intermediate Municipal Fund Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
* Index did not exist.
------
24
<PAGE>
------------------
Kentucky Municipal Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------
Other Expenses .22% .22% .22% .22%
------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.02% 1.67% 1.67% .67%
------------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/4/ (.12%) (.12%) (.12%) (.02%)
------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .90% for Class A shares, 1.55% for Class B
shares, 1.55% for Class C shares and .65% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them to the end of the period shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown.
There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 538 $ 658 $ 158 $ 258 $ 158 $ 66
------------------------------------------------------------------------------
3 Years 749 815 515 515 515 212
------------------------------------------------------------------------------
5 Years 977 1,096 896 896 896 371
------------------------------------------------------------------------------
10 Years 1,631 1,793 1,793 1,966 1,966 833
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $549
Class B (with
redemption) $670
Class B (no
redemption) $170
Class C (with
redemption) $270
Class C (no
redemption) $170
Class I $ 68
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
25
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Louisiana Municipal
Bond Fund
What is the goal of the Louisiana Municipal Bond Fund?
The Fund seeks current income exempt from federal income tax and Louisiana
personal income tax, consistent with the preservation of principal.
What are the main investment strategies of the Louisiana Municipal Bond Fund?
The Fund invests in municipal securities issued by or on behalf of Louisiana
and its respective authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Louisiana municipal securities is
exempt from federal income tax and Louisiana personal income tax. A portion of
the Fund's total assets also may be invested in municipal securities issued by
other states and territories. The Fund's average weighted maturity normally
will range between five and 20 years. Banc One Investment Advisors selects
securities for the Fund by analyzing both individual securities and different
market sectors. Taking a long-term approach, Banc One Investment Advisors looks
for individual securities that it believes will perform well over market
cycles. The Louisiana Municipal Bond Fund spreads its holdings across various
security types within the municipal securities market. Banc One Investment
Advisors selects individual securities after performing a risk/reward
evaluation of interest rate risk, credit risk, and the complex legal and
technical structure of the transaction. For more information about the Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are municipal securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any portion of my investment be taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income. Any capital gains distributed by the Fund may be
taxable.
What are the main risks of investing in the Louisiana Municipal Bond Fund?
The main risks of investing in the Louisiana Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Louisiana Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the
Louisiana Municipal Bond Fund. For additional information on risk, please read
"Investment Risks."
------
26
<PAGE>
------------------
----------------
Louisiana Municipal Bond Fund
MAIN RISKS
Non-Diversification. The Louisiana Municipal Bond Fund is "non-diversified."
This means that the Fund may invest a more significant portion of its assets in
the securities of a single issuer than can a "diversified" fund. Non-
diversification increases the risk of loss to the Fund if an issuer fails to
make interest or principal payments or if the market value of a security
declines.
Geographic Concentration. Because the Louisiana Municipal Bond Fund is not
diversified and because it concentrates its investments in the securities of
issuers in Louisiana, certain factors including economic conditions,
constitutional amendments, legislative and executive measures, and voter
initiatives may have a disproportionately negative effect on the Fund's
investments. For example, the Louisiana economy is heavily dependent on a
single industry, in this case energy (oil and gas). Louisiana continues to
recover from the oil price declines of the mid-1980's. Although Louisiana has
reduced its per capita debt burden to more moderate levels, wealth and income
indicators are below the national average. Louisiana's average employment
growth for the past five years is the highest since 1982. Economic growth is
expected to follow the national trend and slow over the next five years.
Interest Rate Risk. The Fund invests mainly in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of the Fund's investments decreases. Securities with greater interest
rate sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives. The Fund may invest in securities that are considered to be
DERIVATIVES. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Generally, derivatives are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal securities that are rated
in the lowest investment grade. Even though such securities are generally
considered investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
27
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Louisiana Municipal Bond Fund
How has the Louisiana Municipal Bond Fund Performed?
By showing the variability of the Louisiana Municipal Bond Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE LOUISIANA MUNICIPAL
BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
BAR CHART (per calendar year)/1/,/2/ -- CLASS A SHARES
--------------------------------------------------------------------------------
[GRAPH]
1990 7.41%
1991 9.93%
1992 7.97%
1993 10.35%
1994 -3.25%
1995 12.02%
1996 4.54%
1997 7.04%
1998 5.43%
1999 -2.29%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.20%.
/2/Performance data includes the performance of the Paragon Louisiana Tax-Free
Bond Fund for the period before it was consolidated with the One Group
Louisiana Municipal Bond Fund on March 26, 1996.
--------------------------------------------------------------------------------
Best Quarter: 4.81% 1Q1995 Worst Quarter: -4.19% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF SINCE 12/29/89
CLASS
<S> <C> <C> <C> <C> <C>
Class A 12/29/89 -6.71% 4.27% 5.32% 5.35%
-----------------------------------------------------------------
Class B 9/16/94 -7.59% 4.15% 5.01% 5.05%
-----------------------------------------------------------------
Class I 3/26/96 -2.05% 5.38% 5.87% 5.90%
-----------------------------------------------------------------
Lehman Brothers
7 Year
Municipal
Bond Index/2/ -0.14% 6.35% 6.59% 6.59%
-----------------------------------------------------------------
Lehman Brothers
3-15 Year
Municipal
Bond Index/3/ -0.46% 6.68% * *
-----------------------------------------------------------------
Lipper
Intermediate
Municipal Bond
Fund Index/4/ -1.37% 5.59% 5.90% 5.90%
-----------------------------------------------------------------
</TABLE>
/1/The above-quoted performance data includes the performance of the Paragon
Louisiana Tax-Free Bond Fund for the period before it was consolidated with
the One Group Louisiana Municipal Bond Fund on March 26, 1996. 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.
/2/The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/3/The Lehman Brothers 3-15 Year Municipal Bond Index is an unmanaged index of
investment grade, tax-exempt municipal bonds with maturities of 3-15 years.
The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/4/The Lipper Intermediate Municipal Bond Fund Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
* Index did not exist.
------
28
<PAGE>
------------------
Louisiana Municipal Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------
Other Expenses .23% .23% .23% .23%
------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.18% 1.83% 1.83% .83%
------------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/4/ (.28%) (.28%) (.28%) (.18%)
------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .90% for Class A shares, 1.55% for Class B
shares, 1.55% for Class C shares and .65% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the FUND
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the FUND for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the FUND's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING ASSUMING ASSUMING
REDEMPTION AT NO REDEMPTION AT NO
THE END OF REDEMPTION THE END OF REDEMPTION
EACH PERIOD EACH PERIOD
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 538 $ 658 $ 158 $ 258 $ 158 $ 66
----------------------------------------------------------------------------
3 Years 781 848 548 548 548 247
----------------------------------------------------------------------------
5 Years 1,044 1,164 964 964 964 443
----------------------------------------------------------------------------
10 Years 1,794 1,954 1,954 2,125 2,125 1,009
----------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $565
Class B (with
redemption) $686
Class B (no
redemption) $186
Class C (with
redemption) $286
Class C (no
redemption) $186
Class I $ 85
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
29
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Michigan Municipal
Bond Fund
What is the goal of the Michigan Municipal Bond Fund?
The Fund seeks current income exempt from federal income tax and Michigan
personal income tax, consistent with the preservation of principal.
What are the Main Investment Strategies of the Michigan Municipal Bond Fund?
The Fund invests in municipal securities issued by or on behalf of Michigan and
its respective authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Michigan municipal securities is exempt
from federal income tax and Michigan personal income tax. A portion of the
Fund's total assets also may be invested in municipal securities issued by
other states and territories. The Fund's average weighted maturity normally
will range between five and 20 years. Banc One Investment Advisors selects
securities for the Fund by analyzing both individual securities and different
market sectors. Taking a long-term approach, Banc One Investment Advisors looks
for individual securities that it believes will perform well over market
cycles. The Michigan Municipal Bond Fund spreads its holdings across various
security types within the municipal securities market. Banc One Investment
Advisors selects individual securities after performing a risk/reward
evaluation of interest rate risk, credit risk, and the complex legal and
technical structure of the transaction. For more information about the Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any portion of my investment be taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income. Any capital gains distributed by the Fund may be
taxable.
What are the main risks of investing in the Michigan Municipal Bond Fund?
The main risks of investing in the Michigan Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Michigan Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the Michigan
Municipal Bond Fund. For additional information on risk, please read
"Investment Risks."
------
30
<PAGE>
------------------
----------------
Michigan Municipal Bond Fund
MAIN RISKS
Non-Diversification. The Michigan Municipal Bond Fund is "non-diversified."
This means that the Fund may invest a more significant portion of its assets in
the securities of a single issuer than can a "diversified" fund. Non-
diversification increases the risk of loss to the Fund if an issuer fails to
make interest or principal payments or if the market value of a security
declines.
Geographic Concentration. Because the Michigan Municipal Bond Fund is not
diversified and because it concentrates its investments in the securities of
issuers in Michigan, certain factors including economic conditions,
constitutional amendments, legislative and executive measures, and voter
initiatives may have a disproportionately negative effect on the Fund's
investments. For example, the Michigan economy is heavily dependent on the
automobile industry, a highly cyclical industry. This affects the revenue
streams of the state and local governments because of its impact on tax
sources, particularly sales taxes, income taxes and Michigan single business
taxes. State and local revenues also are affected by statutory and
constitutional changes adopted in 1993 and 1994, which limit annual assessment
increases and transfer a substantial part of the financing of education costs
from local property taxes to sales taxes and other taxes imposed at the state
level.
Interest Rate Risk. The Fund invests mainly in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of a Fund's investments decreases. Securities with greater interest rate
sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives. The Fund may invest in securities that are considered to be
DERIVATIVES. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Generally, derivatives are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal securities that are rated
in the lowest investment grade. Even though such securities are generally
considered investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
31
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Michigan Municipal Bond Fund
How has the Michigan Municipal Bond Fund Performed?
By showing the variability of the Michigan Municipal Bond Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE MICHIGAN MUNICIPAL
BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these were included, the return
would be lower than those shown.
BAR CHART (per calendar year)/1/,/2/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1994 -5.37%
1995 16.43%
1996 3.46%
1997 9.42%
1998 5.91%
1999 -3.91%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 6.07%.
/2/The performance data includes the performance of the Pegasus Michigan
Municipal Bond Fund for the period before it was consolidated with the One
Group Michigan Municipal Bond Fund on March 22, 1999.
--------------------------------------------------------------------------------
Best Quarter: 6.71% 1Q1995 Worst Quarter: -5.52% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
SINCE
DATE OF CLASS 2/1/93
<S> <C> <C> <C> <C>
Class A 2/1/93 -8.36% 4.91% 4.20%
-------------------------------------------------------------------
Class B 9/23/96 -9.30% 4.69% 3.99%
-------------------------------------------------------------------
Class I 2/1/93 -3.91% 6.05% 5.02%
-------------------------------------------------------------------
Lehman Brothers 7 Year
Municipal Bond Index/2/ 0.14% 6.35% 5.02%
-------------------------------------------------------------------
Lehman Brothers Michigan
Municipal Bond Index/3/ -2.28% 7.10% *
-------------------------------------------------------------------
Lipper Michigan Municipal
Debt Fund Index/4/ -3.66% 5.62% 4.29%
-------------------------------------------------------------------
</TABLE>
/1/The performance data includes the performance of the Pegasus Michigan
Municipal Bond Fund for the period before it was consolidated with the One
Group Michigan Municipal Bond Fund on March 22, 1999. Prior to the
commencement of operations of Class B on September 23, 1996, the performance
for Class B shares is based on Class A share performance adjusted to reflect
expenses and sales charges.
/2/The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/3/The Lehman Brothers Michigan Municipal Debt Fund Index is an unmanaged index
generally representative of the Michigan municipal bond market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/4/The Lipper Michigan Municipal Bond Fund Index is comprised of funds that
limit their asset to those securities that are exempt from taxation in a
specific state (double tax-exempt) or city (triple tax-exempt).
* Index did not exist.
------
32
<PAGE>
------------------
Michigan Municipal Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------
Other Expenses .20% .20% .20% .20%
------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.00% 1.65% 1.65% .65%
------------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/4/ (.10%) (.10%) (.10%) none
------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .90% for Class A shares, 1.55% for Class B
shares and 1.55% for Class C shares for the period beginning November 1,
2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them to the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 538 $ 658 $ 158 $ 258 $ 158 $ 66
------------------------------------------------------------------------------
3 Years 745 811 511 511 511 208
------------------------------------------------------------------------------
5 Years 968 1,088 888 888 888 362
------------------------------------------------------------------------------
10 Years 1,611 1,773 1,773 1,946 1,946 810
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $547
Class B (with
redemption) $668
Class B (no
redemption) $168
Class C (with
redemption) $268
Class C (no
redemption) $168
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
33
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Ohio Municipal Bond
Fund
What is the goal of the Ohio Municipal Bond Fund?
The Fund seeks current income exempt from federal income tax and Ohio personal
income tax, consistent with the preservation of principal.
What are the Main Investment Strategies of the Ohio Municipal Bond Fund?
The Fund invests in municipal securities issued by or on behalf of Ohio and its
respective authorities, political subdivisions, agencies and instrumentalities.
The interest paid on Ohio municipal securities is exempt from federal income
tax and Ohio personal income tax. A portion of the Fund's total assets also may
be invested in municipal securities issued by other states and territories. The
Fund's average weighted maturity normally will range between five and 20 years.
Banc One Investment Advisors selects securities for the Fund by analyzing both
individual securities and different market sectors. Taking a long-term
approach, Banc One Investment Advisors looks for individual securities that it
believes will perform well over market cycles. The Ohio Municipal Bond Fund
spreads its holdings across various security types within the municipal
securities market. Banc One Investment Advisors selects individual securities
after performing a risk/reward evaluation of interest rate risk, credit risk,
and the complex legal and technical structure of the transaction. For more
information about the Fund's investment strategies, please read "More About the
Funds" and "Principal Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any portion of my investment be taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income. Any capital gains distributed by the Fund may be
taxable.
What are the main risks of investing in the Ohio Municipal Bond Fund?
The main risks of investing in the Ohio Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Ohio Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the Ohio
Municipal Bond Fund. For additional information on risk, please read
"Investment Risks."
------
34
<PAGE>
------------------
----------------
Ohio Municipal Bond Fund
MAIN RISKS
Non-Diversification. The Ohio Municipal Bond Fund is "non-diversified." This
means that the Fund may invest a more significant portion of its assets in the
securities of a single issuer than can a "diversified" fund. Non-
diversification increases the risk of loss to the Fund if an issuer fails to
make interest or principal payments or if the market value of a security
declines.
Geographic Concentration. Because the Ohio Municipal Bond Fund is not
diversified and because it concentrates its investments in the securities of
issuers in Ohio, certain factors including economic conditions, constitutional
amendments, legislative and executive measures, and voter initiatives may have
a disproportionately negative effect on the Fund's investments. For example,
the Ohio economy relies to a significant degree on manufacturing. As a result,
economic activity in Ohio tends to be cyclical, which may affect the market
value of Ohio Municipal Securities or the ability of issuers to make timely
payments of interest and principal.
Interest Rate Risk. The Fund invests mainly in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of a Fund's investments decreases. Securities with greater interest rate
sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives. The Fund may invest in securities that are considered to be
DERIVATIVES. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Generally, derivatives are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal securities that are rated
in the lowest investment grade. Even though such securities are generally
considered investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
35
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Ohio Municipal Bond Fund
How has the Ohio Municipal Bond Fund Performed?
By showing the variability of the Ohio Municipal Bond Fund's performance from
year to year, the chart and table below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE OHIO MUNICIPAL BOND FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
BAR CHART (per calendar year)/1/ -- CLASS I SHARES
--------------------------------------------------------------------------------
[GRAPH]
1992 8.54%
1993 11.52%
1994 -4.71%
1995 13.28%
1996 4.15%
1997 7.46%
1998 5.64%
1999 -2.10%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.22%.
--------------------------------------------------------------------------------
BEST QUARTER: 4.89% 1Q1995 Worst Quarter: -4.71 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF SINCE
CLASS 7/2/91
<S> <C> <C> <C> <C>
Class A 2/18/92 -6.84% 4.34% 4.93%
Class B 1/14/94 -7.62% 4.34% 4.86%
Class I 7/2/91 -2.10% 5.57% 5.72%
Lehman Brothers 7 Year
Municipal Bond Index/2/ -0.14% 6.35% 6.33%
Lehman Brothers 3-15 Year
Municipal Bond Index/3/ -0.46% 6.68% *
Lipper Intermediate Municipal
Fund Index/4/ -1.37% 5.59% 5.60%
</TABLE>
/1/ 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.
/2/The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment group municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses a well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/3/The Lehman Brothers 3-15 Year Municipal Bond Index is an unmanaged index of
investment grade, tax-exempt municipal bonds with maturities of 3-15 years.
The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/4/The Lipper Intermediate Municipal Fund Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
* Index did not exist.
------
36
<PAGE>
------------------
Ohio Municipal Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------
(fees paid directly from your investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
------------------------------------------------------------------------------
(as a percentage of offering price)
------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
------------------------------------------------------------------------------
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------
(expenses that are deducted from Fund
assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------
Other Expenses .23% .23% .23% .23%
------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.18% 1.83% 1.83% .83%
------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement]/4/ (.31%) (.31%) (.31%) (.21%)
------------------------------------------------------------------------------
Net Expenses .87% 1.52% 1.52% .62%
------------------------------------------------------------------------------
</TABLE>
/1/ If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/ Except for purchases of $1 million or more. Please see "Sales Charges."
/3/ Expense Information has been restated to reflect current fees.
/4/ Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .87% for Class A shares, 1.52% for Class B
shares, 1.52% for Class C shares and .62% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them to the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 535 $ 655 $ 155 $ 255 $ 155 $ 63
------------------------------------------------------------------------------
3 Years 779 845 545 545 545 244
------------------------------------------------------------------------------
5 Years 1,041 1,161 961 961 961 440
------------------------------------------------------------------------------
10 Years 1,791 1,952 1,952 2,123 2,123 1,006
------------------------------------------------------------------------------
</TABLE>
/1/ Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $565
Class B (with re-
demption) $686
Class B (no re-
demption) $186
Class C (with re-
demption) $286
Class C (no re-
demption) $186
Class I $ 85
</TABLE>
/2/ Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
37
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
West Virginia
Municipal Bond Fund
----------------
What is the goal of the West Virginia Municipal Bond Fund?
The Fund seeks current income exempt from federal income tax and West Virginia
personal income tax, consistent with the preservation of principal.
What are the Main Investment Strategies of the West Virginia Municipal Bond
Fund?
The Fund invests in municipal securities issued by or on behalf of West
Virginia and its respective authorities, political subdivisions, agencies and
instrumentalities. The interest paid on West Virginia municipal securities is
exempt from federal income tax and West Virginia personal income tax. A portion
of the Fund's total assets also may be invested in municipal securities issued
by other states and territories. The Fund's average weighted maturity normally
will range between five and 20 years. Banc One Investment Advisors selects
securities for the Fund by analyzing both individual securities and different
market sectors. Taking a long-term approach, Banc One Investment Advisors looks
for individual securities that it believes will perform well over market
cycles. The West Virginia Municipal Bond Fund spreads its holdings across
various security types within the municipal securities market. Banc One
Investment Advisors selects individual securities after performing a
risk/reward evaluation of interest rate risk, credit risk, and the complex
legal and technical structure of the transaction. For more information about
the Fund's investment strategies, please read "More About the Funds" and
"Principal Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any portion of my investment be taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income. Any capital gains distributed by the Fund may be
taxable.
What are the main risks of investing in the West Virginia Municipal Bond Fund?
The main risks of investing in the West Virginia Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the West Virginia Municipal Bond Fund will change every day
in response to market conditions. You may lose money if you invest in the West
Virginia Municipal Bond Fund. For additional information on risk, please read
"Investment Risks."
MAIN RISKS
Non-Diversification. The West Virginia Municipal Bond Fund is "non-
diversified." This means that the Fund may invest a more significant portion of
its assets in the securities of a single issuer than can a "diversified" fund.
Non-diversification increases the risk of loss to the Fund if an issuer fails
to make interest or principal payments or if the market value of a security
declines.
------
38
<PAGE>
------------------
West Virginia Municipal Bond Fund
Geographic Concentration. Because the West Virginia Municipal Bond Fund is not
diversified and because it concentrates its investments in the securities of
issuers in West Virginia, certain factors including economic conditions,
constitutional amendments, legislative and executive measures, and voter
initiatives may have a disproportionately negative effect on the Fund's
investments. For example, coal mining and related industries are an important
part of the West Virginia economy. Increased government regulation and a
reduced demand for coal has adversely affected that industry. West Virginia's
unemployment rate is above the national average.
Interest Rate Risk. The Fund invests mainly in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of the Fund's investments decreases. Securities with greater interest
rate sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives. The Fund may invest in securities that are considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Generally, derivatives are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality also may affect
liquidity and make it difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal securities that are rated
in the lowest investment grade. Even though such securities are generally
considered investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
39
<PAGE>
ONE GROUP(R)
------------------
West Virginia Municipal Bond Fund
How has the West Virginia Municipal Bond Fund performed?
By showing the variability of the West Virginia Municipal Bond Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE WEST
VIRGINIA MUNICIPAL BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
BAR CHART (per calendar year)/1/ -- CLASS I SHARES
--------------------------------------------------------------------------------
[GRAPH]
1990 7.17%
1991 9.01%
1992 6.93%
1993 7.73%
1994 -0.12%
1995 10.66%
1996 4.71%
1997 7.90%
1998 5.87%
1999 -2.20%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.48%. The West Virginia Municipal Bond Fund commenced
operations on January 20, 1997, subsequent to the transfer of assets from a
common trust fund with materially equivalent investment objectives,
policies, guidelines, and restrictions as the Fund. The quoted performance
of the Fund includes the performance of the common trust fund for the period
prior to the Fund's commencement of operations as adjusted to reflect the
expenses associated with each class of the Fund. The common trust fund was
not registered with the SEC and was not subject to the investment
restrictions, limitations and diversification requirements imposed by law on
registered mutual funds. If the common trust fund had been registered, its
return may have been lower.
--------------------------------------------------------------------------------
Best Quarter: 4.06% 1Q1995 Worst Quarter: -2.04% 2Q1999
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION PERFORMANCE
DATE OF SINCE
CLASS 1 YEAR 5 YEARS 10 YEARS 12/31/83
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 1/20/97 -6.89% 4.11% 4.96% 6.20%
------------------------------------------------------------------
Class B 1/20/97 -7.81% 4.07% 4.79% 5.82%
------------------------------------------------------------------
Class I 1/20/97 -2.20% 5.30% 5.70% 6.75%
------------------------------------------------------------------
Lehman Brothers 7
Year Municipal
Bond Index/2/ -0.14% 6.35% 6.59% *
------------------------------------------------------------------
Lehman Brothers 3-
15 Year Municipal
Bond Index/3/ -0.46% 6.68% * *
------------------------------------------------------------------
Lipper Intermediate
Municipal
Fund Index/4/ -1.37% 5.59% 5.90% *
</TABLE>
/1/The West Virginia Municipal Bond Fund commenced operations on January 20,
1997, subsequent to the transfer of assets from a common trust fund with
materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for period prior to the Fund's
commencement of operations as adjusted to reflect the expenses associated
with each class of the Fund. The common trust fund was not registered with
the SEC and was not subject to the investment restrictions, limitations and
diversification requirements imposed by law on registered mutual funds. If
the common trust fund had been registered, its return may have been lower.
/2/The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class I shares and
contingent deferred sales charges on Class B shares.
/3/The Lehman Brothers 3-15 Year Municipal Bond Index is an unmanaged index
comprised of investment grade, tax-exempt municipal bonds with maturities of
3-15 years. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B shares.
/4/The Lipper Intermediate Municipal Fund Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
* Index did not exist.
------
40
<PAGE>
------------------
West Virginia Municipal Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.50% none none none
-------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) none/2/ 5.00% 1.00% none
-------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee none none none none
-------------------------------------------------------------------
Exchange Fee none none none none
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
-------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% none
-------------------------------------------------------------------
Other Expenses .23% .23% .23% .23%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses 1.03% 1.68% 1.68% .68%
-------------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/4/ (.13%) (.13%) (.13%) (.03%)
-------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense Information has been restated to reflect current fees.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .90% for Class A shares, 1.55% for Class B
shares, 1.55% for Class C shares and .65% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 538 $ 658 $ 158 $ 258 $ 158 $ 66
------------------------------------------------------------------------------
3 Years 751 817 517 517 517 215
------------------------------------------------------------------------------
5 Years 981 1,100 900 900 900 376
------------------------------------------------------------------------------
10 Years 1,642 1,803 1,803 1,976 1,976 844
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $550
Class B (with
redemption) $671
Class B (no
redemption) $171
Class C (with
redemption) $271
Class C (no
redemption) $171
Class I $69
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
41
<PAGE>
ONE GROUP(R)
------------------
More About The Funds
Each of the ten funds described in this prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of the Funds" and the Statement of Additional Information.
--------------------------------------------------------------------------------
Principal Investment Strategies
The mutual funds described in this prospectus are designed to produce income
exempt from federal and/or state income tax. The principal investment
strategies that are used to meet each Fund's investment objective are described
in "Fund Summaries: Investments, Risk & Performance" in the front of this
prospectus. They are also described below.
FUNDAMENTAL POLICIES
Each Fund's investment strategy
may involve "fundamental
policies." A policy is fundamental
if it cannot be changed without
the consent of a majority of the
outstanding shares of the Fund.
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund also may use strategies that are not
described below, but which are described in the Statement of Additional
Information.
--
ONE GROUP SHORT-TERM MUNICIPAL BOND FUND. The Fund invests at least 80% of its
net assets in investment grade municipal securities, as well as mortgage-backed
securities and restricted securities. The securities in which the Fund invests
may have fixed rates of return or floating or variable rates.
. As a matter of fundamental policy, the Fund invests as least 65% of its total
assets in bonds.
. The Fund will, from time to time, invest more than 25% of its net assets in
municipal housing authority obligations.
. Up to 20% of the Fund's total assets may be held in cash and cash
equivalents.
. The Fund's average weighted maturity normally will be three years or less.
--
ONE GROUP INTERMEDIATE TAX-FREE BOND FUND. The Fund invests at least 80% of its
net assets in investment grade municipal securities, including restricted
securities. The securities in which the Fund invests may have fixed rates of
return or floating or variable rates.
. As a matter of fundamental policy, the Fund invests at least 65% of its total
assets in bonds.
------
42
<PAGE>
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average
of all the current maturities (that
is, the term of the securities) of the
individual bonds in a fund calculated so
as to count most heavily those securities
with the highest dollar value.
Average maturity is important to bond
investors as an indication of a fund's
sensitivity to changes in interest rates.
The longer the average maturity, the
more fluctuation in share price you can
expect. The terms "Intermediate" and
"Short-Term" in a fund's name refer to
the average maturity the fund maintains.
. The Fund's average weighted maturity normally will range between three and 10
years.
--
ONE GROUP TAX-FREE BOND FUND. The Fund invests at least 80% of its net assets
in investment grade municipal securities. The securities in which the Fund
invests may have fixed rates of return or floating or variable rates.
. As a matter of fundamental policy, the Fund invests as least 65% of its total
assets in bonds.
. Up to 20% of the Fund's total assets may be held in cash and cash
equivalents.
. The Fund may invest in securities without regard to maturity.
--
ONE GROUP MUNICIPAL INCOME FUND. The Fund invests at least 80% of its net
assets in investment grade municipal securities, as well as mortgage-backed
securities and restricted securities. The securities in which the Fund invests
may have fixed rates of return or floating or variable rates.
. As a matter of fundamental policy, the Fund invests as least 65% of its total
assets in bonds.
. As a matter of fundamental policy, the Fund will not invest more than 25% of
its total assets:
(i) in securities within a single industry; or
(ii) in securities of governmental units or issuers in the same state,
territory or possession. However, from time to time, the Fund will invest
more than 25% of its net assets in municipal housing authority
obligations.
. The Fund's average weighted maturity will range from five to 15 years,
although the Fund may shorten its average weighted maturity to as little as
two years if appropriate for temporary defensive purposes.
--
ONE GROUP ARIZONA MUNICIPAL BOND FUND. The Fund invests at least 80% of its
total assets in municipal securities issued by or on behalf of Arizona and its
respective authorities, political subdivisions, agencies and instrumentalities.
This is a fundamental policy.
. The Fund also may invest up to 20% of its total assets in municipal
securities of other states and territories.
. The Fund will purchase Arizona municipal securities only if it receives
assurances from attorneys for the issuer of the securities that the interest
payable on the securities is exempt from federal income tax and Arizona
personal income tax.
. The securities in which the Fund invests may have fixed rates of return or
floating or variable rates.
------
43
<PAGE>
. The Fund's average weighted maturity normally will be between five and 20
years, although the Fund may invest in securities with any maturity.
--
ONE GROUP KENTUCKY MUNICIPAL BOND FUND. The Fund invests at least 80% of its
total assets in municipal securities that are exempt from federal income tax.
Alternatively, the Fund invests its assets so that 80% of its annual interest
income is exempt from federal income tax. The Fund invests at least 65% of its
total assets in securities issued by or on behalf of Kentucky and its
respective authorities, political subdivisions, agencies and instrumentalities.
These are fundamental policies.
. The Fund also may invest up to 35% of its total assets in municipal
securities of other states and territories.
. The Fund will purchase Kentucky municipal securities only if it receives
assurances from attorneys for the issuer of the securities that the interest
payable on the securities is exempt from federal income tax and Kentucky
personal income tax.
. The securities in which the Fund invests may have fixed rates of return or
floating or variable rates.
. The Fund's average weighted maturity normally will be between five and 20
years, although the Fund may invest in securities with any maturity.
--
ONE GROUP LOUISIANA MUNICIPAL BOND FUND. The Fund invests at least 80% of its
total assets in municipal securities issued by or on behalf of Louisiana and
its respective authorities, political subdivisions, agencies and
instrumentalities. This is a fundamental policy.
. The Fund also may invest up to 20% of its total assets in municipal
securities of other states and territories.
. The Fund will purchase Louisiana municipal securities only if it receives
assurances from attorneys for the issuer of the securities that the interest
payable on the securities is exempt from federal income tax and Louisiana
personal income tax.
. The securities in which the Fund invests may have fixed rates of return or
floating or variable rates.
. The Fund's average weighted maturity normally will be between five and 20
years, although the Fund may invest in securities with any maturity.
--
ONE GROUP MICHIGAN MUNICIPAL BOND FUND. The Fund invests at least 80% of its
total assets in municipal securities issued by or on behalf of Michigan and its
respective authorities, political subdivisions, agencies and instrumentalities.
This is a fundamental policy.
. The Fund also may invest up to 20% of its total assets in municipal
securities of other states and territories.
. The Fund will purchase Michigan municipal securities only if it receives
assurances from attorneys for the issuer of the securities that the interest
payable on the securities is exempt from federal income tax and Michigan
personal income tax.
. The securities in which the Fund invests may have fixed rates of return or
floating or variable rates.
------
44
<PAGE>
. The Fund's average weighted maturity normally will be between five and 20
years, although the Fund may invest in securities with any maturity.
--
ONE GROUP OHIO MUNICIPAL BOND FUND. The Fund invests at least 80% of its total
assets in municipal securities issued by or on behalf of Ohio and its
respective authorities, political subdivisions, agencies and instrumentalities.
This is a fundamental policy.
. The Fund also may invest up to 20% of its total assets in municipal
securities of other states and territories.
. The Fund will purchase Ohio municipal securities only if it receives
assurances from attorneys for the issuer of the securities that the interest
payable on the securities is exempt from federal income tax and Ohio personal
income tax.
. The securities in which the Fund invests may have fixed rates of return or
floating or variable rates.
. The Fund's average weighted maturity normally will be between five and 20
years, although the Fund may invest in securities with any maturity.
--
ONE GROUP WEST VIRGINIA MUNICIPAL BOND FUND. The Fund invests at least 80% of
its total assets in municipal securities issued by or on behalf of West
Virginia and its respective authorities, political subdivisions, agencies and
instrumentalities. This is a fundamental policy.
. The Fund also may invest up to 20% of its total assets in municipal
securities of other states and territories.
. The Fund will purchase West Virginia municipal securities only if it receives
assurances from attorneys for the issuer of the securities that the interest
payable on the securities is exempt from federal income tax and West Virginia
personal income tax.
. The securities in which the Fund invests may have fixed rates of return or
floating or variable rates.
. The Fund's average weighted maturity normally will be between five and 20
years, although the Fund may invest in securities with any maturity.
--------------------------------------------------------------------------------
Investment Risks
The main risks associated with investing in the Funds are described below and
in "Fund Summaries: Investments, Risk Performance" at the front of this
prospectus.
--
DERIVATIVES. The Funds invest in securities that may be considered to be
DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity
and management risks. A Fund's use of derivatives may cause the Fund to
recognize higher amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use such instruments.
WHAT IS A DERIVATIVE?
Derivatives are securities or
contracts (like futures and
options) that derive their value
from the performance of underlying
assets or securities.
------
45
<PAGE>
--
PREPAYMENT AND CALL RISK: The Funds may invest a portion of their assets in
mortgage-backed securities. These securities are subject to prepayment and call
risk. The issuers of mortgage-backed and other callable securities may be able
to repay principal in advance, especially when interest rates fall. Changes in
prepayment rates can affect the return on investment and yield of mortgage-
backed securities. When mortgages are prepaid, a Fund may have to reinvest in
securities with a lower yield. A Fund also may fail to recover premiums paid
for the securities, resulting in unexpected capital loss.
--------------------------------------------------------------------------------
Investment Policies
Each Fund's investment objective and the following investment policies
summarized below are fundamental. In addition to the fundamental policies
mentioned in "Principal Investment Strategies," the following fundamental
policies apply to each Fund as specified. The full text of the fundamental
policies can be found in the Statement of Additional Information.
--------------------------------------------------------------------------------
Investment Policies for Specific Funds
The Intermediate Tax-Free Bond Fund and the Municipal Income Fund may not:
1. Purchase the securities of an issuer if as a result more than 5% of its
total assets would be invested in the securities of that issuer, or the
Fund would own more than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or guaranteed by the United
States, its agencies or instrumentalities, and repurchase agreements
involving these securities. This restriction applies to 75% of a Fund's
total assets.
2. Concentrate in a particular industry or group of industries. This does not
include municipal securities or governmental guarantees of municipal
securities, and with respect to the Municipal Income Fund, housing
authority obligations. Private activity bonds that are backed only by the
assets and revenues of a non-governmental issuer are not municipal
securities for purposes of this restriction.
The Arizona Municipal Bond Fund, the West Virginia Municipal Bond Fund, the
Louisiana Municipal Bond Fund, the Ohio Municipal Bond Fund, the Kentucky
Municipal Bond Fund and the Michigan Municipal Bond Fund may not:
1. Purchase the securities of an issuer if as a result more than 25% of its
total assets would be invested in the securities of that issuer. This
restriction applies with respect to 50% of a Fund's total assets. With
respect to the remaining 50% of its total assets, a Fund may not purchase
the securities of an issuer if as a result more than 5% of its total assets
would be invested in the securities of that issuer. This restriction does
not apply to securities issued or guaranteed by the United States, its
agencies, or instrumentalities, securities of regulated investment
companies, and repurchase agreements involving such securities.
2. Concentrate their investment in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include:
. Obligations issued or guaranteed by the United States government or its
agencies and instrumentalities and repurchase agreements involving such
securities; and
------
46
<PAGE>
. Municipal securities. With respect to the Arizona Municipal Bond Fund and the
West Virginia Municipal Bond Fund, private activity bonds that are backed
only by the assets and revenues of a non-governmental issuer are not
municipal securities for purposes of this restriction.
--------------------------------------------------------------------------------
Investment Policies for all Funds
None of the Funds may make loans, except that a Fund may (i) purchase or hold
debt instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending.
Additional investment policies are set forth in the Statement of Additional
Information.
--------------------------------------------------------------------------------
Portfolio Quality
Various rating organizations (like Standard & Poor's Corporation and Moody's
Investors Service) assign ratings to debt securities (i.e., bonds). Generally,
ratings are divided into two main categories: "Investment Grade Securities" and
"Non-Investment Grade Securities." Although there is always a risk of default,
rating agencies believe that issuers of Investment Grade Securities have a high
probability of making payments on such securities. Non-Investment Grade
Securities include securities that, in the opinion of the rating agencies, are
more likely to default than Investment Grade Securities. The Funds only
purchase securities that meet the rating criteria described below.
. Municipal Securities that are bonds must be rated as investment grade.
. Other securities such as taxable and tax-exempt commercial paper, notes and
variable demand obligations must be rated in one of the two highest
investment grade categories.
. The Louisiana Municipal Bond Fund also may invest in short-term tax-exempt
municipal securities rated at least MIG3 (VMIG3) by Moody's or SP-2 by S&P.
These securities may have speculative characteristics.
If the securities are unrated, Banc One Investment Advisors must determine that
they are of comparable quality to rated securities. Banc One Investment
Advisors will look at a security's rating at the time of investment.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
------
47
<PAGE>
--------------------------------------------------------------------------------
Temporary Defensive Position
For liquidity and to respond to unusual market conditions, the Funds may invest
all or most of their assets in cash and CASH EQUIVALENTS for temporary
defensive purposes. These investments may result in a lower yield than lower-
quality or longer term investments and may prevent the Funds from meeting their
investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash equivalents are highly-liquid,
high-quality instruments with maturities
of three months or less on the date
they are purchased. They include securities
issued by the U.S. government, its
agencies and instrumentalities, repurchase
agreements (other than equity repurchase
agreements), certificates of deposit,
bankers' acceptances, commercial paper
(rated in one of the two highest rating
categories), variable rate master demand
notes, money market mutual funds and
bank money market deposit accounts.
While the Funds are engaged in a temporary defensive position, they will not be
pursuing their investment objectives. Therefore, the Funds will pursue a
temporary defensive position only when market conditions warrant.
--------------------------------------------------------------------------------
Portfolio Turnover
The Funds may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Funds and may result in additional tax consequences to you. The
portfolio turnover rate for each Fund for the fiscal year ended June 30, 2000,
is shown on the Financial Highlights. To the extent portfolio turnover results
in short-term capital gains, such gains will generally be taxed at ordinary
income tax rates.
------
48
<PAGE>
ONE GROUP(R)
------------------
-----------------
How to Do Business with One Group Mutual Funds
--------------------------------------------------------------------------------
Purchasing Fund Shares
Where Can I Buy Shares?
You may purchase Fund shares:
. Directly from One Group through The One Group Services Company (the
"Distributor"), and
. From Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or 401(k)
plan sponsors, or other intermediaries. Shares purchased this way will be
held for you by the Shareholder Servicing Agent.
When Can I Buy Shares?
. Purchases may be made on any business day. This includes any day that the
Fund is open for business, other than weekends, and days on which the New
York Stock Exchange ("NYSE") is closed, including the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day.
. Purchase requests received before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close before 4 p.m. ET. When
that happens, purchase requests received after the NYSE closes will be
effective the following business day.
. If a Shareholder Servicing Agent holds your shares, it is the responsibility
of the Shareholder Servicing Agent to send your purchase or redemption order
to the Fund. Your Shareholder Servicing Agent may have an earlier cut-off
time for purchase and redemption requests.
. The Distributor can reject a purchase order if it does not think that it is
in the best interests of a Fund and/or its shareholders to accept the order.
. Shares are electronically recorded. Therefore, certificates will not be
issued.
What Kind Of Shares Can I Buy?
One Group offers the following classes of shares:
. Class A, Class B and Class C shares are available to the general public.
. Class I shares are available to institutional investors, such as
corporations, pension and profit sharing plans, and foundations; and any
organization authorized to act in a fiduciary, advisory, custodial or agency
capacity. We will refer to these entities as "Intermediaries."
------
49
<PAGE>
. When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time you intend to hold the shares and
the sales charges and expenses applicable to each class of shares. If you
intend to hold your shares for seven or more years, Class A shares may be
more appropriate for you. If you intend to hold your shares for less than
seven years, you may want to consider Class B or Class C shares. Sales
charges are discussed in the section of this prospectus entitled "Sales
Charges".
How Much Do Shares Cost?
. Shares are sold at net asset value ("NAV") plus a sales charge, if any.
. Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
. NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
. A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, NAV will be calculated as of the
time the NYSE closes.
How Do I Open An Account?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
. The minimum initial investment for all classes except Class I shares is
$1,000 per Fund ($100 for employees of Bank One Corporation and its
affiliates).
. The minimum initial investment for Class I shares is $200,000 per Fund.
. You are required to maintain a minimum account balance equal to the minimum
initial investment in each Fund.
. Subsequent investments must be at least $25 per Fund.
. You may purchase no more than $249,999 of Class B shares. This is because
Class A shares offer a reduced sales charge on purchases of $250,000 or
more and have lower expenses. The section of this prospectus entitled "What
Kind of Shares Can I Buy?" provides information that can help you choose
the appropriate share class.
. These minimums may be waived.
3. Complete the Account Application Form. Be sure to sign up for all of the
account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
4. Send the completed application and a personal check (unless you choose to
pay by wire) to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
If you choose to pay by wire, please call 1-800-480-4111.
------
50
<PAGE>
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual or company and endorsed to
One Group are considered third party checks.
All checks must be payable to one of the following:
. One Group Mutual Funds; or
. The specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. If you redeem shares that were purchased by check, One Group will delay
forwarding you redemption proceeds until payment has been collected from
your bank. One Group generally receives payment within seven (7) business
days of purchase.
7. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
8. If you have any questions, contact your Shareholder Servicing Agent or call
1-800-480-4111.
Can I Purchase Shares Over The Telephone?
Yes. Simply select this option on your Account Application Form and then:
. Contact your Shareholder Servicing Agent or call 1-800-480-4111 to relay
your purchase instructions.
. Authorize a bank transfer or initiate a wire transfer to the following wire
address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP INTERMEDIATE TAX-FREE BOND FUND -- A)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: JOHN SMITH & MARY SMITH, JTWROS)
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. You may revoke your right to make purchases over the telephone by sending a
letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
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<PAGE>
Can I Automatically Invest On A Systematic Basis?
Yes. You may purchase additional Class A, Class B and Class C shares by making
automatic monthly investments from your bank account. The minimum initial
investment is still $1,000 per Fund. To establish a Systematic Investment Plan:
. Select the "Systematic Investment Plan" option on the Account Application
Form.
. Provide the necessary information about the bank account from which your
investments will be made.
. Shares purchased under a Systematic Investment Plan may not be redeemed for
five (5) business days.
. One Group currently does not charge for this service, but may impose a charge
in the future. However, your bank may impose a charge for debiting your bank
account.
. You may revoke your election to make systematic investments by calling 1-800-
480-4111 or by sending a letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
Conversion Feature
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased). Class B
shares of the Short-Term Municipal Bond Fund convert to Class A shares after
six years.
. After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares.
. You will not be assessed any sales charges or fees for conversion of shares,
nor will you be subject to any federal income tax.
. Because the share price of the Class A shares may be higher than that of the
Class B shares at the time of conversion, you may receive fewer Class A
shares; however, the dollar value will be the same.
. If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together.
--------------------------------------------------------------------------------
Sales Charges
The Distributor compensates Shareholder Servicing Agents who sell shares of One
Group. Compensation comes from sales charges, 12b-1 fees and payments by the
Distributor and the Funds' investment advisor from their own resources. The
tables below show the sales charges for each class of shares and the percentage
of your investment that is paid as a commission to a Shareholder Servicing
Agent.
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52
<PAGE>
----------------
----------------
CLASS A SHARES
Except for the Short-Term Municipal Bond Fund, this table shows the amount of
sales charge you pay and the commissions paid to Shareholder Servicing Agents.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SALES CHARGE SALES CHARGE COMMISSION
OF AS A % OF THE AS A % AS A %
PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C>
less than $100,000 4.50% 4.71% 4.05%
---------------------------------------------------------------------------
$100,000-$249,999 3.50% 3.63% 3.05%
---------------------------------------------------------------------------
$250,000-$499,999 2.50% 2.56% 2.05%
---------------------------------------------------------------------------
$500,000-$999,999 2.00% 2.04% 1.60%
---------------------------------------------------------------------------
$1,000,000* NONE NONE NONE
---------------------------------------------------------------------------
</TABLE>
* If you purchase $1 million or more of Class A shares and are not assessed a
sales charge at the time of purchase, you will be charged the equivalent of
1% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase and 0.50% of the purchase price if you redeem
within two years of purchase, unless the Distributor receives notice before
you invest indicating that your Shareholder Servicing Agent is waiving its
commission.
If you buy Class A shares of the SHORT-TERM MUNICIPAL BOND FUND, the following
table shows the amount of sales charge and the commissions paid to Shareholder
Servicing Agents.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SALES CHARGE SALES CHARGE COMMISSION
OF AS A % OF THE AS A % AS A %
PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C>
less than $100,000 3.00% 3.09% 2.70%
---------------------------------------------------------------------------
$100,000-$249,999 2.50% 2.56% 2.18%
---------------------------------------------------------------------------
$250,000-$499,999 2.00% 2.04% 1.64%
---------------------------------------------------------------------------
$500,000-$999,999 1.50% 1.52% 1.20%
---------------------------------------------------------------------------
$1,000,000* NONE NONE NONE
---------------------------------------------------------------------------
</TABLE>
* If you purchase $1 million or more of Class A shares and are not assessed a
sales charge at the time of purchase, you will be charged the equivalent of
0.50% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase, unless the Distributor receives notice before
you invest indicating that your Shareholder Servicing Agent is waiving its
commission.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date (except shares
of the Short-Term Municipal Bond Fund), you will be assessed a Contingent
Deferred Sales Charge ("CDSC") according to the following schedule:
-----------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
--------------------------------------
1-2 4.00%
--------------------------------------
2-3 3.00%
--------------------------------------
3-4 3.00%
--------------------------------------
4-5 2.00%
--------------------------------------
5-6 1.00%
--------------------------------------
more than 6 NONE
--------------------------------------
</TABLE>
------
53
<PAGE>
----------------
Or if you redeem Class B shares of the SHORT-TERM MUNICIPAL BOND FUND prior to
the fourth anniversary of purchase, you will be assessed a CDSC according to
the following schedule:
-----------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 3.00%
--------------------------------------
1-2 3.00%
--------------------------------------
2-3 2.00%
--------------------------------------
3-4 1.00%
--------------------------------------
more than 4 NONE
--------------------------------------
</TABLE>
The Distributor pays a commission of 4.00% of the original purchase price to
Shareholder Servicing Agents who sell Class B shares of all the Funds except
for the Short-Term Municipal Bond Fund. Shareholder Servicing Agents receive a
commission of 2.75% of the purchase price of Class B shares of the Short-Term
Municipal Bond Fund.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
-----------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 1.00%
--------------------------------------
after first year NONE
--------------------------------------
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from the Distributor.
How the CDSC is Calculated:
. The Fund assumes that all purchases made in a given month were made on the
first day of the month.
. The CDSC is based on the current market value or the original cost of the
shares, whichever is less.
. No CDSC is imposed on share appreciation, nor is a CDSC assessed on shares
acquired through reinvestment of dividends or capital gains distributions.
. To keep your CDSC as low as possible, the Fund first will redeem any shares
in your account that carry no CDSC, starting with Class A Shares. After
that, the Fund will redeem the shares acquired through dividend reinvestment
followed by shares you have held for the longest time and thus have the
lowest CDSC.
. If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of One Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including the
period of time you have held those shares) will be applied to One Group
shares you receive in the reorganization.
------
54
<PAGE>
----------------
----------------
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees. These fees are called "12b-1
fees." 12b-1 fees are paid by One Group to the Distributor as compensation for
its services and expenses. The Distributor in turn pays all or part of the 12b-
1 fee to Shareholder Servicing Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net assets of
the Fund, which is currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the average daily net
assets of the Fund, which is currently being waived to .75% for the Short-
Term Municipal Bond Fund and .90% for all other Funds. This will cause
expenses for Class B and Class C shares to be higher and dividends to be
lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
12b-1 fees, together with the CDSC, help the Distributor sell Class B and Class
C shares without an "up-front" sales charge by financing the costs of advancing
brokerage commissions and other expenses paid to Shareholder Servicing Agents.
The Distributor may use up to .25% of the fees for shareholder servicing and up
to .75% for distribution. During the last fiscal year, the Distributor received
12b-1 fees totaling .25% and .90% of the average daily net assets of Class A
and Class B shares, respectively.
. The Distributor may pay 12b-1 fees to its affiliates and to Banc One
Investment Advisors and its affiliates (or any sub-advisor).
Because 12b-1 fees are paid out of Fund assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
--------------------------------------------------------------------------------
Sales Charge Reductions and Waivers
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the higher of the market value or
original purchase price of any Class A, Class B or Class C shares of a Fund
(except a money market fund) that you (and your spouse and minor children)
already own to the amount of your next Class A purchase for purposes of
calculating the sales charge. An Intermediary also may take advantage of
this option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more funds over the next 13 months and pay the
same sales charge that you would have paid if all shares were purchased at
once. A percentage of your investment will be held in escrow until the full
amount covered by the Letter of Intent has been invested.
------
55
<PAGE>
----------------
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your investment
representative. To determine if you are eligible for the accumulation
privilege, call 1-800-480-4111. These programs may be terminated or amended at
any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Fund if the shares were:
1. Bought with the reinvestment of dividends and capital gains distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge has
been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
. One Group.
. Bank One Corporation and its subsidiaries and affiliates.
. The Distributor and its subsidiaries and affiliates.
. State Street Bank and Trust Company and its subsidiaries and affiliates.
. Broker/dealers who have entered into dealer agreements with One Group and
their subsidiaries and affiliates.
. An investment sub-advisor of a fund of One Group and such sub-advisor's
subsidiaries and affiliates.
4. Bought by:
. Affiliates of Bank One Corporation and certain accounts (other than IRA
Accounts) for which an Intermediary acts in a fiduciary, advisory, agency,
or custodial capacity or accounts which participate in select affinity
programs with Bank One Corporation and its affiliates and subsidiaries.
. Accounts as to which a bank or broker-dealer charges an asset allocation
fee, provided the bank or broker-dealer has an agreement with the
Distributor.
Certain retirement and deferred compensation plans and trusts used to fund
those plans, including, but not limited to, those defined in sections
401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi trusts."
. Shareholder Servicing Agents who have a dealer arrangement with the
Distributor, who place trades for their own accounts or for the accounts of
their clients and who charge a management, consulting or other fee for
their services, as well as clients of such Shareholder Servicing Agents who
place trades for their own accounts if the accounts are linked to the
master account of such Shareholder Servicing Agent.
5. Bought with proceeds from the sale of Class I shares of a One Group Fund or
acquired in an exchange of Class I shares of a Fund for Class A shares of
the same Fund, but only if the purchase is made within 60 days of the sale
or distribution. Appropriate documentation may be required.
6. Bought with proceeds from the sale of shares of a mutual fund, including
Class A shares of a One Group Fund, for which a sales charge was paid, but
only if the purchase is made within 60 days of the sale or distribution.
7. Bought with assets of One Group.
8. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
------
56
<PAGE>
----------------
----------------
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Fund:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. YOU NEED TO
PARTICIPATE IN THE SYSTEMATIC WITHDRAWAL PLAN TO TAKE ADVANTAGE OF THIS
WAIVER. For information on the Systematic Withdrawal Plan, please see "Can
I Redeem on a Systematic Basis?"
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the Distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability
3. That represent a minimum required distribution from your One Group IRA
Account or other One Group qualifying retirement plan, but only if you are
at least age 70 1/2. Only your One Group assets are considered when
calculating that portion of your minimum required distribution that
qualifies for the waiver.
4. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class B shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the
exchange. Please read "Do I Pay a Sales Charge on an Exchange?".
If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Fund:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. YOU NEED TO
PARTICIPATE IN THE SYSTEMATIC WITHDRAWAL PLAN TO TAKE ADVANTAGE OF THIS
WAIVER. For information on the Systematic Withdrawal Plan, please see "Can I
Redeem on a Systematic Basis?".
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability
3. That represent a minimum required distribution from your One Group IRA
Account or other One Group qualifying retirement plan, but only if you are
at least age 70 1/2. Only your One Group assets are considered when
calculating that portion of your minimum required distribution that
qualifies for the waiver.
4. Exchanged in connection with plans of reorganization of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
------
57
<PAGE>
5. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the
exchange. Please read "Do I Pay a Sales Charge on an Exchange?"
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
Waiver Qualifications
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, call 1-800-480-4111 or contact
your Shareholder Servicing Agent. These waivers will not continue indefinitely
and may be discontinued at any time without notice. Partnerships and
corporations are not eligible for these fee waivers.
--------------------------------------------------------------------------------
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
. Class I shares of a Fund may be exchanged for Class A shares of that Fund or
for Class A or Class I shares of another One Group Fund.
. Class A shares of a Fund may be exchanged for Class I shares of that Fund or
for Class A or Class I shares of another One Group Fund, but only if you are
eligible to purchase those shares.
. Class B shares of a Fund may be exchanged for Class B shares of another One
Group Fund.
. Class C shares of a Fund may be exchanged for Class C shares of another One
Group Fund.
One Group Mutual Funds offer a Systematic Exchange Privilege which allows you
to automatically exchange shares of one fund to another on a monthly or
quarterly basis. This privilege is useful in dollar cost averaging. To
participate in the Systematic Exchange Privilege, please select it on your
account application. To learn more about it, please call 1-800-480-4111.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days
written notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
. State Street Bank and Trust Company receives the request by 4:00 p.m., ET.
. You have provided One Group with all of the information necessary to process
the exchange.
. You have received a current prospectus of the Fund or Funds in which you wish
to invest.
. You have contacted your Shareholder Servicing Agent, if necessary.
------
58
<PAGE>
Do I Pay A Sales Charge On An Exchange?
Generally, you will not pay a sales charge on an exchange. However:
. You will pay a sales charge if you own Class I shares of a Fund and you want
to exchange those shares for Class A shares, unless you qualify for a sales
charge waiver (see above).
. You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them for
shares of a Fund that does, in which case you would pay the sales charge
applicable to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that Fund's
sales charge and all other sales charges you have already paid.
. If you exchange Class B or Class C shares of a Fund, you will not pay a sales
charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you
exchanged or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class B or Class C shares is
carried over to your new shares.
Are Exchanges Taxable?
Generally:
. An exchange between classes of shares of the same Fund is not taxable for
federal income tax purposes.
. An exchange between Funds is considered a sale and generally results in a
capital gain or loss for federal income tax purposes.
. You should talk to your tax advisor before making an exchange.
Are There Limits On Exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
. To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity. EXCHANGE ACTIVITY IS EXCESSIVE IF IT EXCEEDS TWO
SUBSTANTIVE EXCHANGE REDEMPTIONS WITHIN 30 DAYS OF EACH OTHER.
. Excessive exchange activity will result in revocation of your exchange
privilege.
. In addition, One Group reserves the right to reject any exchange request
(even those that are not excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or otherwise adversely
affect other shareholders.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to exchanges, your account
value falls below the minimum required balance. For information on minimum
required balances, please read, "How Do I Open An Account?"
------
59
<PAGE>
--------------------------------------------------------------------------------
REDEEMING FUND SHARES
When Can I Redeem Shares?
You may redeem all or some of your shares on any day that the Fund is open for
business.
. Redemption requests received before 4:00 p.m. ET (or when the NYSE closes)
will be effective that day.
. All required documentation in the proper form must accompany a redemption
request. One Group may refuse to honor incomplete redemption requests.
How Do I Redeem Shares?
. You may use any of the following methods to redeem your shares:
1. You may send a written redemption request to your Shareholder Servicing
Agent, if applicable, or to State Street Bank and Trust Company at the
following address:
ONE GROUP MUTUAL FUNDS
C/O STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8528
BOSTON, MA 02266-8528
2. You may use the One Group website at www.onegroup.com; or
3. You may redeem over the telephone. Please see "Can I Redeem By Telephone?"
for more information.
. You may request redemption forms by calling 1-800-480-4111 or visiting
www.onegroup.com.
. One Group may require that the signature on your redemption request be
guaranteed by a participant in the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for shares worth $50,000 or less; and
2. the redemption is payable to the shareholder of record; and
3. the redemption check is mailed to the shareholder at the record address;
or
4. the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
. On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
. One Group may charge you a wire redemption fee. The current charge is $7.00.
. Your redemption proceeds will be paid within seven days after receipt of the
redemption request. However, the Funds will attempt to honor requests for
same day payment if the request is received before 4:00 p.m. ET. If
redemption requests are received after 4:00 p.m. ET, the Funds will attempt
to wire payment the next business day.
What Will My Shares Be Worth?
. If you own Class A and Class I shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that
day's NAV.
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60
<PAGE>
. If you own Class B or Class C shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that
day's NAV, minus the amount of any applicable CDSC.
Can I Redeem By Telephone?
Yes, if you selected this option on your Account Application Form.
. Contact your Shareholder Servicing Agent or call 1-800-480-4111 to relay your
redemption request.
. Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
. State Street Bank and Trust Company may charge you a wire redemption fee. The
current charge is $7.00.
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
Can I Redeem On A Systematic Basis?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each. This $10,000
minimum does not apply to minimum required distributions from your One Group
IRA or other qualifying retirement plan.
. Select the "Systematic Withdrawal Plan" option on the Account Application
Form.
. Specify the amount you wish to receive and the frequency of the payments.
. You may designate a person other than yourself as the payee.
. There is no charge for this service.
. If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A shares while
participating in a Systematic Withdrawal Plan. This is because Class A
shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated payee may
receive systematic payments. The applicable Class B or Class C sales
charge is waived provided your withdrawals do not exceed 10% of your
account value annually measured from the date you begin participating in
the Plan. SHARES RECEIVED FROM DIVIDEND AND CAPITAL GAINS REINVESTMENT ARE
INCLUDED IN CALCULATING THE 10%. WITHDRAWALS IN EXCESS OF 10% WILL SUBJECT
THE ENTIRE ANNUAL WITHDRAWAL TO THE APPLICABLE SALES CHARGE.
3. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from a One
Group IRA or other One Group qualifying retirement plan. Only One Group
assets are considered when calculating your minimum required distribution.
4. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
------
61
<PAGE>
----------------
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
. Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more, the Fund reserves the right to pay part or all of
your redemption proceeds in readily marketable securities instead of cash. If
payment is made in securities, the Fund will value the securities selected in
the same manner in which it computes its NAV. This process minimizes the
effect of large redemptions on the Fund and its remaining shareholders.
. If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds for seven (7) or more business days until payment has
been collected from your bank.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to redemptions, your account
value falls below the minimum required balance. The above provision does not
apply to accounts participating in the Systematic Withdrawal Plan. For
information on minimum required balances, please read, "How Do I Open An
Account?"
No CDSC will be charged on such redemptions.
. One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
. You generally will recognize a gain or loss on a redemption for federal
income tax purposes. You should talk to your tax advisor before making a
redemption.
------
62
<PAGE>
ONE GROUP(R)
------------------
--------------------------------------------------------------------------------
Shareholder Information
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each
Fund, and each class of shares within each Fund, vote separately on matters
relating solely to that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal voting rights on matters
that affect all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS. The Funds generally declare dividends on the last business day of
each month. Dividends are distributed on the first business day of each month.
Capital gains, if any, for all Funds are distributed at least annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payments in cash. The price of the shares
is the NAV determined immediately following the dividend record date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street. You also may call 1-800-480-4111 to
make this change.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES. Class B shares received as dividends
and capital gains distributions will be accounted for separately. Each time any
Class B shares (other than those in the sub-account) convert to Class A shares,
a percentage of the Class B shares in the sub-account will also convert to
Class A shares. (See "Conversion Feature.")
------
63
<PAGE>
Tax Treatment of Shareholders
--------------------------------------------------------------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange or redemption of Fund
shares generally will produce either a taxable gain or a loss. You are
responsible for any tax liabilities generated by your transactions.
Federal Taxation of Distributions
EXEMPT-INTEREST DIVIDENDS. If, at the close of each quarter of its taxable
year, at least 50% of the value of a Fund's assets consists of obligations the
interest on which is excludable from gross income, the Fund may pay "exempt-
interest dividends" to you. Generally, exempt-interest dividends are excludable
from gross income. However:
1. If you receive Social Security or Railroad Retirement benefits, you may be
taxed on a portion of such benefits if you receive exempt-interest dividends
from the Funds.
2. Receipt of exempt-interest dividends may result in liability for federal
alternative minimum tax and for state and local taxes, both for individual
and corporate shareholders.
Interest on Private Activity Bonds. The Municipal Income Fund, the Short-Term
Municipal Bond Fund, the Arizona Municipal Bond Fund, the West Virginia
Municipal Bond Fund, the Kentucky Municipal Bond Fund, the Louisiana Municipal
Bond Fund, the Ohio Municipal Bond Fund and the Michigan Municipal Bond Fund
may invest as much as 100% of their assets in municipal securities issued to
finance private activities, the interest on which is a tax preference item for
purposes of the federal alternative minimum tax ("Private Activity Bonds"). The
Intermediate Tax-Free Bond Fund and the Tax-Free Bond Fund may invest as much
as 20% of their assets in such Private Activity Bonds. As a result, Fund
shareholders who are subject to the federal alternative minimum tax may have
all or a portion of their income from those Funds subject to federal income
tax. Additionally, corporate shareholders will be required to take the interest
on municipal securities (including municipal securities of each Fund's
respective state) into account in determining their alternative minimum taxable
income. Persons who are substantial users of facilities financed by Private
Activity Bonds or who are "related persons" of such substantial users should
consult their tax advisors before investing in the Funds.
Investment Income and Capital Gains Dividends. Each Fund will distribute
substantially all of its net investment income (including, for this purpose,
the excess of net short-term capital gains over net long-term capital losses)
and net capital gains (i.e., the excess of net long-term capital gains over net
short-term capital losses) on at least an annual basis. Dividends you receive
from a Fund, other than "exempt-interest dividends," will be taxable to you,
whether reinvested or received in cash. Dividends from a Fund's net investment
income, if any, will be taxable as ordinary income and distributions from a
Fund's long-term capital gains will be taxable to you as such, regardless of
how long you have held the shares. Distributions are taxable to you even if
they are paid from income or gains earned by a Fund prior to your investment
(and thus were included in the price you paid).
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
State and Local Taxation of Distributions. Dividends that are derived from the
Funds' investments in U.S. government obligations may not be entitled to the
exemptions
------
64
<PAGE>
from state and local taxes that would be available if you purchased U.S.
government obligations directly.
The funds will notify you annually of the percentage of income and
distributions derived from U.S. government obligations. Unless otherwise
discussed below, investment income and capital gains dividends may be subject
to state and local taxes.
Louisiana Taxes. Distributions from the Louisiana Municipal Bond Fund which are
derived from interest on tax-exempt obligations of the state of Louisiana or
its political subdivisions and certain obligations of the United States or its
territories, are exempt from Louisiana income tax.
Arizona Taxes. Exempt-interest dividends from the Arizona Municipal Bond Fund
which are derived from interest on tax-exempt obligations of the state of
Arizona and its political subdivisions and certain obligations of the United
States or its territories are exempt from Arizona income tax. Other
distributions from the Fund, including those related to long-term and short-
term capital gains, will be subject to Arizona income tax. Arizona law does not
permit a deduction for interest paid or accrued on indebtedness incurred or
continued to purchase or carry obligations, the interest on which is exempt
from Arizona income tax.
West Virginia Taxes. Distributions from the West Virginia Municipal Bond Fund
which are derived from interest or dividends on obligations or securities of a
West Virginia state or local municipal governmental body generally are exempt
from West Virginia income tax. In addition, you will not pay that tax on the
portion of your income from the Fund which represents interest or dividends
received on obligations or securities of the United States and some of its
authorities, commissions or instrumentalities.
Kentucky Taxes. Dividends received from the Kentucky Municipal Bond Fund which
are derived from interest on Kentucky municipal securities are exempt from the
Kentucky individual income tax. Dividends paid from interest earned on
securities that are merely guaranteed by the federal government, repurchase
agreements collateralized by U.S. government obligations, or from interest
earned on obligations of other states are not exempt from Kentucky individual
income tax. Any distributions of net short-term and net long-term capital gains
earned by the Fund are includable in each Shareholder's Kentucky adjusted gross
income as dividend income and long-term capital gains, respectively, and are
both taxed at ordinary income tax rates.
Ohio Taxes. Dividends received from the Ohio Municipal Bond Fund which are
derived from interest on Ohio municipal securities are exempt from the Ohio
personal income tax. In addition, gains from the sale or transfer of certain
Ohio municipal securities are also exempt from Ohio income tax. Certain Ohio
municipalities may have retained the right to tax dividends from the Fund.
Corporate investors must include the Fund shares in the corporation's tax base
for purposes of the Ohio franchise tax net worth computation, but not for the
net income computation.
------
65
<PAGE>
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.
Tax Information
Information in the preceding paragraphs is based on the current law as well as
current policies of the various state Departments of Taxation, all of which may
change.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature. No
attempt has been made to present a complete explanation of the federal, state,
local or foreign tax treatment of the Funds or their shareholders.
--------------------------------------------------------------------------------
Shareholder Statements And Reports
One Group or your Shareholder Servicing Agent will send you transaction
confirmation statements and quarterly account statements. Please review these
statements carefully. One Group will correct errors if notified within one year
of the date printed on the transaction confirmation or account statement. Your
Shareholder Servicing Agent may have a different cut-off time.
To reduce expenses and conserve natural resources, One Group will deliver a
single copy of prospectuses and financial reports to individual investors who
share a residential address, provided they have the same last name or One Group
reasonably believes they are members of the same family. If you would like to
receive separate mailings, please call 1-800-480-4111 and One Group will begin
individual delivery within 30 days. If you would like to receive these
documents by e-mail, please visit www.onegroup.com and sign up for electronic
delivery.
If you are the record owner of your One Group shares (that is, you did not use
a Shareholder Servicing Agent to buy your shares), you may access your account
statements at www.onegroup.com.
In September and March you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
If you have any questions or need additional information, please write One
Group Mutual Funds at 1111 Polaris Parkway, Columbus, OH 43271-1235, call 1-
800-480-4111, or visit www.onegroup.com.
------
66
<PAGE>
ONE GROUP(R)
------------------
Management of One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor to
One Group Mutual Funds since its inception. In addition, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual
corporate, charitable and retirement accounts. As of June 30, 2000, Banc One
Investment Advisors, an indirect wholly-owned subsidiary of Bank One
Corporation, managed over $131 billion in assets.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each Fund. For the most recent fiscal year, the
Funds paid advisory fees at the following rates.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Short-Term Municipal Income
Fund .30%
----------------------------------------------------------------------
One Group(R) Intermediate Tax-Free Bond Fund .39%
----------------------------------------------------------------------
One Group(R) Tax-Free Bond Fund .40%
----------------------------------------------------------------------
One Group(R) Municipal Income Fund .35%
----------------------------------------------------------------------
One Group(R) Arizona Municipal Bond Fund .40%
----------------------------------------------------------------------
One Group(R) Kentucky Municipal Bond Fund .37%
----------------------------------------------------------------------
One Group(R) Louisiana Municipal Bond Fund .39%
----------------------------------------------------------------------
One Group(R) Michigan Municipal Bond Fund .40%
----------------------------------------------------------------------
One Group(R) Ohio Municipal Bond Fund .37%
----------------------------------------------------------------------
One Group(R) West Virginia Municipal Bond
Fund .38%
----------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
The Fund Managers
The Funds are managed by a team of portfolio managers, research analysts and
fixed income traders. The team works together to establish general duration and
sector strategies for the Funds. Each team member makes recommendations about
securities in the Funds. The research analysts and trading personnel provide
individual security and sector recommendations, while the portfolio managers
select and allocate individual securities in a manner designed to meet the
investment objectives of the Funds.
------
67
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Short-Term Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED MAY 4, 1998 TO
CLASS A JUNE 30, 2000 JUNE 30, 1999(A) DECEMBER 31, 1998(B)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.01 $10.15 $10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.38 0.19 0.22
Net realized and
unrealized gains (losses)
from investments (0.14) (0.15) 0.16
-------------------------------------------------------------------------------
Total from Investment
Activities 0.24 0.04 0.38
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.38) (0.18) (0.23)
Total Distributions (0.38) (0.18) (0.23)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PEriod $ 9.87 $10.01 $10.15
-------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 2.47% 0.37%(C) 3.89%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000) $ 3,053 $1,843 $ 559
Ratio of expenses to
average net assets 0.82% 0.86%(D) 0.86%(D)
Ratio of net investment
income to average net
assets 3.91% 3.48%(D) 3.53%(D)
Ratio of expenses to
average net assets* 1.24% 1.16%(D) 0.99%(D)
Portfolio turnover(E) 113.70% 74.84% 32.23%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Short
Municipal Bond Fund became the Short-Term Municipal Bond Fund. The Financial
Highlights for the periods prior to March 22, 1999, represent the Pegasus
Short Municipal Bond Fund. (B) Period from commencement of operations. (C) Not
annualized. (D) Annualized. (E) Portfolio turnover is calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED MAY 4, 1998 TO
CLASS B JUNE 30, 2000 JUNE 30, 1999(A) DECEMBER 31, 1998(B)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.05 $10.19 $10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.31 0.15 0.13
Net realized and
unrealized gains (losses)
from investments (0.11) (0.14) 0.21
-------------------------------------------------------------------------------
Total from Investment
Activities 0.20 0.01 0.34
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.31) (0.15) (0.15)
Total Distributions (0.31) (0.15) (0.15)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.94 $10.05 $10.19
-------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 2.08% 0.11%(C) 3.48%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000) $ 925 $ 226 $ 112
Ratio of expenses to
average net assets 1.47% 1.55%(D) 1.61%(D)
Ratio of net investment
income to average net
assets 3.24% 2.80%(D) 2.43%(D)
Ratio of expenses to
average net assets* 1.89% 1.80%(D) 1.68%(D)
Portfolio turnover(E) 113.70% 74.84% 32.23%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Short
Municipal Bond Fund became the Short-Term Municipal Bond Fund. The Financial
Highlights for the periods prior to March 22, 1999, represent the Pegasus
Short Municipal Bond Fund. (B) Period from commencement of operations. (C) Not
annualized. (D) Annualized. (E) Portfolio turnover is calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
------
68
<PAGE>
------------------
Short-Term Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED MAY 4, 1998 TO
CLASS I JUNE 30, 2000 JUNE 30, 1999(A) DECEMBER 31, 1998(B)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.02 $ 10.16 $ 10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.41 0.19 0.25
Net realized and
unrealized gains (losses)
from investments (0.12) (0.14) 0.16
-------------------------------------------------------------------------------
Total from Investment
Activities 0.29 0.05 0.41
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.41) (0.19) (0.25)
Total Distributions (0.41) (0.19) (0.25)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.90 $ 10.02 $ 10.16
-------------------------------------------------------------------------------
Total Return 2.93% 0.50%(C) 4.15%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000) $ 116,527 $132,902 $118,296
Ratio of expenses to
average net assets 0.57% 0.62%(D) 0.61%(D)
Ratio of net investment
income to average net
assets 4.09% 3.79%(D) 3.75%(D)
Ratio of expenses to
average net assets* 0.89% 0.80%(D) 0.70%(D)
Portfolio turnover(E) 113.70% 74.84% 32.23%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Short
Municipal Bond Fund became the Short-Term Municipal Bond Fund. The Financial
Highlights for the periods prior to March 22, 1999, represent the Pegasus
Short Municipal Bond Fund. (B) Period from commencement of operations. (C)
Not annualized. (D) Annualized. (E) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
------
69
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Intermediate Tax-Free Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------
CLASS A 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.67 $ 11.14 $ 10.91 $10.67 $ 10.63
------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.47 0.50 0.51 0.50
Net realized and unrealized gains
(losses) from investments (0.26) (0.30) 0.31 0.26 0.05
------------------------------------------------------------------------------
Total from Investment Activities 0.21 0.17 0.81 0.77 0.55
------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.47) (0.50) (0.51) (0.49)
Net realized gains - (0.17) (0.08) (0.02) (0.02)
Total Distributions (0.47) (0.64) (0.58) (0.53) (0.51)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.41 $ 10.67 $ 11.14 $10.91 $ 10.67
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 2.03% 1.45% 7.50% 7.39% 5.28%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $32,200 $34,725 $14,515 $8,457 $ 6,622
Ratio of expenses to average net
assets 0.84% 0.84% 0.85% 0.83% 0.79%
Ratio of net investment income to
average net assets 4.48% 4.28% 4.45% 4.75% 4.62%
Ratio of expenses to average net
assets* 1.15% 1.16% 1.16% 1.15% 1.22%
Portfolio turnover(A) 86.32% 108.41% 109.03% 86.89% 111.58%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------
CLASS B 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
net asset value, beginning of
period $10.69 $ 11.16 $ 10.93 $10.68 $ 10.65
-----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.40 0.40 0.43 0.45 0.43
Net realized and unrealized gains
(losses) from investments (0.25) (0.30) 0.31 0.27 0.04
-----------------------------------------------------------------------------
Total from Investment Activities 0.15 0.10 0.74 0.72 0.47
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.40) (0.40) (0.43) (0.45) (0.42)
Net realized gains - (0.17) (0.08) (0.02) (0.02)
Total Distributions (0.40) (0.57) (0.51) (0.47) (0.44)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.44 $ 10.69 $ 11.16 $10.93 $ 10.68
-----------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 1.46% 0.80% 6.81% 6.82% 4.48%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $7,597 $ 9,087 $ 5,659 $3,307 $ 2,439
Ratio of expenses to average net
assets 1.48% 1.49% 1.50% 1.47% 1.44%
Ratio of net investment income to
average net assets 3.81% 3.58% 3.80% 4.09% 3.97%
Ratio of expenses to average net
assets* 1.79% 1.81% 1.81% 1.78% 1.87%
Portfolio turnover(A) 86.32% 108.41% 109.03% 86.89% 111.58%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
70
<PAGE>
------------------
Intermediate Tax-Free Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.68 $ 11.15 $ 10.92 $ 10.67 $ 10.64
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.50 0.52 0.54 0.52
Net realized and
unrealized gains (losses)
from investments (0.27) (0.30) 0.31 0.27 0.04
-------------------------------------------------------------------------------
Total from Investment
Activities 0.22 0.20 0.83 0.81 0.56
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.50) (0.52) (0.54) (0.51)
Net realized gains - (0.17) (0.08) (0.02) (0.02)
Total Distributions (0.49) (0.67) (0.60) (0.56) (0.53)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.41 $ 10.68 $ 11.15 $ 10.92 $ 10.67
-------------------------------------------------------------------------------
Total Return 2.19% 1.71% 7.74% 7.76% 5.39%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000) $737,277 $1,013,839 $493,686 $451,089 $217,201
Ratio of expenses to
average net assets 0.59% 0.59% 0.60% 0.58% 0.54%
Ratio of net investment
income to average net
assets 4.72% 4.49% 4.70% 5.05% 4.87%
Ratio of expenses to
average net assets* 0.80% 0.81% 0.81% 0.81% 0.87%
Portfolio turnover(A) 86.32% 108.41% 109.03% 86.89% 111.58%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
71
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Tax-Free Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED YEAR ENDED DECEMBER 31, MARCH 1, 1995 TO
JUNE 30, JUNE 30, ------------------------- DECEMBER 31,
CLASS A 2000 1999(A) 1998 1997 1996 1995(B)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.44 $ 12.99 $ 12.87 $ 12.36 $ 12.64 $12.06
--------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.57 0.28 0.55 0.56 0.59 0.48
Net realized and
unrealized gains
(losses) from
investments (0.28) (0.53) 0.17 0.54 (0.18) 0.82
--------------------------------------------------------------------------------------------
Total from Investment
Activities 0.29 (0.25) 0.72 1.10 0.41 1.30
--------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.57) (0.29) (0.57) (0.59) (0.58) (0.48)
Net realized gains - (0.01) (0.03) - (0.01) (0.24)
In excess of net
realized gains - - - - (0.10) -
Total Distributions (0.57) (0.30) (0.60) (0.59) (0.69) (0.72)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 12.16 $ 12.44 $ 12.99 $ 12.87 $ 12.36 $12.64
--------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 2.47% (1.97)%(C) 5.74% 9.13% 3.36% 10.95%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $33,629 $38,253 $47,176 $34,729 $29,352 $7,426
Ratio of expenses to
average net assets 0.85% 0.87%(D) 0.88% 0.85% 0.83% 0.89%(D)
Ratio of net investment
income to average net
assets 4.72% 4.34%(D) 4.36% 4.65% 4.54% 4.57%(D)
Ratio of expenses to
average net assets* 1.00% 0.95%(D) 0.88% 0.85% 0.89% 1.04%(D)
Portfolio turnover(E) 44.41% 37.90% 22.05% 32.08% 64.51% 69.31%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus
Municipal Bond Fund became the Tax-Free Bond Fund. The Financial Highlights
for the periods prior to March 22, 1999, represent the Pegasus Municipal Bond
Fund. (B) Effective March 1, 1995, the Fund changed its fiscal year end from
February 28 to December 31. (C) Not annualized. (D) Annualized. (E) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
72
<PAGE>
------------------
Tax-Free Bond Fund
<TABLE>
<CAPTION>
SIX MONTHS APRIL 4,
YEAR ENDED ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, JUNE 30, ---------------------------- DECEMBER 31,
CLASS B 2000 1999(A) 1998 1997 1996 1995(B)(C)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.44 $ 12.99 $ 12.86 $ 12.36 $ 12.65 $ 12.17
--------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.23 0.45 0.46 0.52 0.34
Net realized and
unrealized gains
(losses) from
investments (0.28) (0.53) 0.18 0.54 (0.21) 0.72
--------------------------------------------------------------------------------------------
Total from Investment
Activities 0.21 (0.30) 0.63 1.00 0.31 1.06
--------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.24) (0.47) (0.50) (0.49) (0.34)
Net realized gains - (0.01) (0.03) - (0.01) (0.24)
In excess of net
realized gains - - - - (0.10) -
Total Distributions (0.49) (0.25) (0.50) (0.50) (0.60) (0.58)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 12.16 $ 12.44 $ 12.99 $ 12.86 $ 12.36 $ 12.65
--------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 1.80% (2.31)%(D) 4.98% 8.26% 2.56% 8.81%(D)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $ 3,456 $ 2,443 $ 2,142 $ 1,312 $ 672 $ 238
Ratio of expenses to
average net assets 1.50% 1.57%(E) 1.63% 1.60% 1.58% 1.66%(E)
Ratio of net investment
income to average net
assets 4.04% 3.64%(E) 3.61% 3.90% 3.79% 3.61%(E)
Ratio of expenses to
average net assets* 1.66% 1.61%(E) 1.63% 1.60% 1.70% 2.04%(E)
Portfolio turnover(F) 44.41% 37.90% 22.05% 32.08% 64.51% 69.31%
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Municipal
Bond Fund became the Tax-Free Bond Fund. The Financial Highlights for the
periods prior to March 22, 1999, represent the Pegasus Municipal Bond Fund.
(B) Re-offering date of Class B Shares. (C) Effective March 1, 1995, the Fund
changed its fiscal year end from February 28 to December 31. (D) Not
annualized. (E) Annualized. (F) Portfolio turnover is calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
<CAPTION>
1 SIX MONTHS MARCH 1,
YEAR ENDED ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, JUNE 30, ---------------------------- DECEMBER 31,
CLASS I 2000 1999(A) 1998 1997 1996 1995(B)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.44 $ 12.98 $ 12.86 $ 12.36 $ 12.63 $ 12.06
--------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.60 0.29 0.60 0.61 0.65 0.52
Net realized and
unrealized gains
(losses) from
investments (0.29) (0.52) 0.16 0.51 (0.20) 0.81
--------------------------------------------------------------------------------------------
Total from Investment
Activities 0.31 (0.23) 0.76 1.12 0.45 1.33
--------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.60) (0.30) (0.61) (0.62) (0.61) (0.52)
Net realized gains - (0.01) (0.03) - (0.01) (0.24)
In excess of net
realized gains - - - - (0.10) -
Total Distributions (0.60) (0.31) (0.64) (0.62) (0.72) (0.76)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 12.15 $ 12.44 $ 12.98 $ 12.86 $ 12.36 $ 12.63
--------------------------------------------------------------------------------------------
Total Return 2.64% (1.78)%(C) 6.01% 9.32% 3.76% 11.20%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $609,667 $795,839 $841,715 $355,814 $338,104 $240,160
Ratio of expenses to
average net assets 0.60% 0.63%(D) 0.63% 0.60% 0.58% 0.54%(D)
Ratio of net investment
income to average net
assets 4.96% 4.60%(D) 4.61% 4.90% 4.79% 4.95%(D)
Ratio of expenses to
average net assets* 0.66% 0.66%(D) 0.63% 0.60% 0.68% 0.67%(D)
Portfolio turnover(E) 44.41% 37.90% 22.05% 32.08% 64.51% 69.31%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Municipal
Bond Fund became the Tax-Free Bond Fund. The Financial Highlights for the
periods prior to March 22, 1999, represent the Pegasus Municipal Bond Fund.
(B) Effective March 1, 1995, the Fund changed its fiscal year end from
February 28 to December 31. (C) Not annualized. (D) Annualized. (E) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
73
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Municipal Income Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------
CLASS A 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.95 $ 10.14 $ 9.87 $ 9.69 $ 9.72
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.46 0.47 0.49 0.51 0.55
Net realized and unrealized
gains (losses) from
investments (0.46) (0.19) 0.27 0.18 (0.04)
-------------------------------------------------------------------------------
Total from Investment
Activities - 0.28 0.76 0.69 0.51
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.47) (0.49) (0.51) (0.54)
Total Distributions (0.46) (0.47) (0.49) (0.51) (0.54)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.49 $ 9.95 $ 10.14 $ 9.87 $ 9.69
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 0.06% 2.80% 7.84% 7.24% 5.35%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $144,335 $188,143 $101,805 $41,829 $25,787
Ratio of expenses to average
net assets 0.82% 0.82% 0.82% 0.82% 0.81%
Ratio of net investment income
to average net assets 4.79% 4.62% 4.83% 5.13% 5.45%
Ratio of expenses to average
net assets* 1.01% 1.01% 1.02% 1.03% 1.11%
Portfolio turnover(A) 100.61% 55.03% 69.76% 62.83% 83.17%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS B 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.91 $ 10.10 $ 9.84 $ 9.66 $ 9.69
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.40 0.41 0.42 0.44 0.47
Net realized and unrealized gains
(losses) from investments (0.46) (0.19) 0.26 0.18 (0.03)
-------------------------------------------------------------------------------
Total from Investment Activities (0.06) 0.22 0.68 0.62 0.44
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.40) (0.41) (0.42) (0.44) (0.47)
Total Distributions (0.40) (0.41) (0.42) (0.44) (0.47)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.45 $ 9.91 $ 10.10 $ 9.84 $ 9.66
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) (0.58)% 2.14% 7.04% 6.55% 4.65%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $90,118 $97,899 $56,911 $36,258 $23,204
Ratio of expenses to average net
assets 1.47% 1.47% 1.47% 1.47% 1.46%
Ratio of net investment income to
average net assets 4.16% 3.99% 4.18% 4.48% 4.80%
Ratio of expenses to average net
assets* 1.67% 1.67% 1.67% 1.67% 1.76%
Portfolio turnover(A) 100.61% 55.03% 69.76% 62.83% 83.17%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
74
<PAGE>
------------------
Municipal Income Fund
<TABLE>
<CAPTION>
NOVEMBER 4,
YEAR ENDED YEAR ENDED 1997 TO
JUNE 30, JUNE 30, JUNE 30,
CLASS C 2000 1999 1998(A)
-----------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.91 $ 10.09 $ 9.96
-----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.40 0.41 0.68
Net realized and unrealized gains (losses)
from investments (0.46) (0.18) 0.13
-----------------------------------------------------------------------------
Total from Investment Activities (0.06) 0.23 0.81
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.40) (0.41) (0.68)
Total Distributions (0.40) (0.41) (0.68)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.45 $ 9.91 $10.09
-----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (0.59)% 2.24% 8.28%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $17,296 $13,737 $2,216
Ratio of expenses to average net assets 1.46% 1.47% 1.47%(C)
Ratio of net investment income to average
net assets 4.14% 3.93% 4.18%(C)
Ratio of expenses to average net assets* 1.66% 1.66% 1.67%(C)
Portfolio turnover(D) 100.61% 55.03% 69.76%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.92 $ 10.11 $ 9.84 $ 9.66 $ 9.69
--------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.48 0.50 0.51 0.53 0.56
Net realized and unrealized
gains (losses) from
investments (0.46) (0.19) 0.27 0.18 (0.03)
--------------------------------------------------------------------------------
Total from Investment
Activities 0.02 0.31 0.78 0.71 0.53
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.50) (0.51) (0.53) (0.56)
Total Distributions (0.48) (0.50) (0.51) (0.53) (0.56)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.46 $ 9.92 $ 10.11 $ 9.84 $ 9.66
--------------------------------------------------------------------------------
Total Return 0.32% 3.06% 8.09% 7.49% 5.54%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $857,118 $744,647 $617,885 $408,577 $241,115
Ratio of expenses to average
net assets 0.57% 0.57% 0.57% 0.57% 0.56%
Ratio of net investment
income to average net
assets 5.07% 4.92% 5.08% 5.38% 5.70%
Ratio of expenses to average
net assets* 0.67% 0.67% 0.67% 0.68% 0.76%
Portfolio turnover(A) 100.61% 55.03% 69.76% 62.83% 83.17%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
75
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Arizona Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1997 TO
---------------------- JUNE 30,
CLASS A 2000 1999 1998 1997(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.67 $10.08 $ 9.99 $10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.43 0.44 0.46 0.15
Net realized and unrealized gains (losses)
from investments (0.21) (0.26) 0.16 (0.01)
-------------------------------------------------------------------------------
Total from Investment Activities 0.22 0.18 0.62 0.14
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.43) (0.44) (0.46) (0.15)
Net realized gains (0.07) (0.15) (0.07) -
Total Distributions (0.50) (0.59) (0.53) (0.15)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.39 $ 9.67 $10.08 $ 9.99
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 2.43% 1.69% 6.30% 1.40%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $2,391 $1,799 $1,321 $1,500
Ratio of expenses to average net assets 0.86% 0.86% 0.84% 0.85%(C)
Ratio of net investment income to average
net assets 4.64% 4.37% 4.53% 4.90%(C)
Ratio of expenses to average net assets* 1.01% 1.02% 1.01% 0.96%(C)
Portfolio turnover(D) 19.28% 16.29% 20.89% 5.66%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1997 TO
---------------------- JUNE 30,
CLASS B 2000 1999 1998 1997(A)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.75 $10.16 $10.09 $10.00
------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.37 0.37 0.13 -
Net realized and unrealized gains
(losses) from investments (0.22) (0.26) 0.14 0.09
------------------------------------------------------------------------------
Total from Investment Activities 0.15 0.11 0.27 0.09
------------------------------------------------------------------------------
Distributions:
Net investment income (0.37) (0.37) (0.13) -
Net realized gains (0.07) (0.15) (0.07) -
Total Distributions (0.44) (0.52) (0.20) -
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.46 $ 9.75 $10.16 $10.09
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 1.64% 1.04% 2.67% 0.90%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 713 $ 640 $ 290 $ - (C)
Ratio of expenses to average net assets 1.50% 1.50% 1.50% - (D)
Ratio of net investment income to average
net assets 3.93% 3.67% 3.88% - (D)
Ratio of expenses to average net assets* 1.66% 1.66% 1.64% - (D)
Portfolio turnover(E) 19.28% 16.29% 20.89% 5.66%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Amount is less
than $1,000. (D) Since net assets are less than $1,000, ratios have not been
presented. (E) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
------
76
<PAGE>
------------------
Arizona Municipal Bond Fund
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1997 TO
---------------------------- JUNE 30,
CLASS I 2000 1999 1998 1997(A)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.74 $ 10.15 $ 10.06 $ 10.00
-----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.46 0.46 0.49 0.23
Net realized and unrealized gains
(losses) from investments (0.21) (0.26) 0.16 0.06
-----------------------------------------------------------------------------
Total from Investment Activities 0.25 0.20 0.65 0.29
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.46) (0.49) (0.23)
Net realized gains (0.07) (0.15) (0.07) -
Total Distributions (0.53) (0.61) (0.56) (0.23)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.46 $ 9.74 $ 10.15 $ 10.06
-----------------------------------------------------------------------------
Total Return 2.66% 1.94% 6.58% 2.90%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $195,753 $233,360 $248,590 $255,755
Ratio of expenses to average net
assets 0.60% 0.61% 0.59% 0.59%(C)
Ratio of net investment income to
average net assets 4.82% 4.59% 4.79% 5.09%(C)
Ratio of expenses to average net
assets* 0.65% 0.67% 0.65% 0.66%(C)
Portfolio turnover(D) 19.28% 16.29% 20.89% 5.66%
</TABLE>
* During the period, certain fees were voluntarily reduced.
If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (A) Period from
commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among
the classes of shares issued.
------
77
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FINANCIAL HIGHLIGHTS
Kentucky Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------
CLASS A 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.13 $ 10.41 $10.21 $10.05 $ 9.93
------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.47 0.49 0.48 0.44
Net realized and unrealized gains
(losses) from investments (0.23) (0.28) 0.20 0.16 0.12
------------------------------------------------------------------------------
Total from Investment Activities 0.24 0.19 0.69 0.64 0.56
------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.47) (0.49) (0.48) (0.44)
Total Distributions (0.47) (0.47) (0.49) (0.48) (0.44)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.90 $ 10.13 $10.41 $10.21 $10.05
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 2.47% 1.79% 6.86% 6.46% 5.70%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $8,230 $10,075 $7,899 $5,554 $8,178
Ratio of expenses to average net
assets 0.86% 0.86% 0.85% 0.84% 0.93%
Ratio of net investment income to
average net assets 4.74% 4.50% 4.69% 4.66% 4.35%
Ratio of expenses to average net
assets* 1.04% 1.06% 1.04% 1.04% 1.37%
Portfolio turnover(A) 21.82% 6.30% 5.81% 13.30% 16.78%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------
CLASS B 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.06 $ 10.35 $10.15 $ 9.99 $ 9.87
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.41 0.40 0.42 0.41 0.38
Net realized and unrealized gains
(losses) from investments (0.22) (0.29) 0.20 0.16 0.13
-------------------------------------------------------------------------------
Total from Investment Activities 0.19 0.11 0.62 0.57 0.51
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.41) (0.40) (0.42) (0.41) (0.39)
Total Distributions (0.41) (0.40) (0.42) (0.41) (0.39)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.84 $ 10.06 $10.35 $10.15 $ 9.99
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 1.93% 1.05% 6.20% 5.81% 5.16%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $13,250 $15,135 $5,581 $2,399 $1,457
Ratio of expenses to average net
assets 1.51% 1.51% 1.51% 1.47% 1.58%
Ratio of net investment income to
average net assets 4.12% 3.85% 4.04% 4.05% 3.70%
Ratio of expenses to average net
assets* 1.69% 1.71% 1.70% 1.70% 2.02%
Portfolio turnover(A) 21.82% 6.30% 5.81% 13.30% 16.78%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
78
<PAGE>
------------------
Kentucky Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
CLASS I 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.12 $ 10.40 $ 10.20 $ 10.04 $ 9.92
--------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.50 0.51 0.50 0.50
Net realized and unrealized
gains (losses) from
investments (0.22) (0.28) 0.20 0.16 0.12
--------------------------------------------------------------------------------
Total from Investment
Activities 0.27 0.22 0.71 0.66 0.62
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.50) (0.51) (0.50) (0.50)
Total Distributions (0.49) (0.50) (0.51) (0.50) (0.50)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.90 $ 10.12 $ 10.40 $ 10.20 $ 10.04
--------------------------------------------------------------------------------
Total Return 2.83% 2.05% 7.11% 6.74% 6.35%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $124,778 $122,917 $122,220 $116,830 $30,300
Ratio of expenses to average
net assets 0.61% 0.61% 0.60% 0.59% 0.68%
Ratio of net investment
income to average net assets 5.00% 4.77% 4.94% 5.12% 4.60%
Ratio of expenses to average
net assets* 0.69% 0.71% 0.69% 0.72% 1.02%
Portfolio turnover(A) 21.82% 6.30% 5.81% 13.30% 16.78%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
79
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FINANCIAL HIGHLIGHTS
Louisiana Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------- SEVEN MONTHS ENDED YEAR ENDED
CLASS A 2000 1999 1998 1997 JUNE 30, 1996 (A) NOVEMBER 30, 1995
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.96 $ 10.26 $ 10.10 $ 9.93 $ 10.09 $ 9.38
-------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.46 0.45 0.47 0.47 0.24 0.50
Net realized and
unrealized gains
(losses) from
investments (0.21) (0.28) 0.16 0.17 (0.16) 0.71
-------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.25 0.17 0.63 0.64 0.08 1.21
-------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.45) (0.47) (0.47) (0.24) (0.50)
Net realized gains (0.01) (0.02) - - - -
Total Distributions (0.47) (0.47) (0.47) (0.47) (0.24) (0.50)
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.74 $ 9.96 $ 10.26 $ 10.10 $ 9.93 $ 10.09
-------------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 2.55% 1.67% 6.35% 6.55% 0.84%(B) 13.11%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $58,225 $75,958 $47,078 $48,498 $53,479 $206,119
Ratio of expenses to
average net assets 0.86% 0.86% 0.85% 0.87% 0.69%(C) 0.62%
Ratio of net investment
income to average
net assets 4.67% 4.40% 4.60% 4.66% 4.71%(C) 5.07%
Ratio of expenses to
average net assets* 1.18% 1.20% 1.18% 1.19% 0.86%(C) 0.77%
Portfolio turnover(D) 17.27% 19.67% 12.03% 17.39% 16.72% 28.00%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Paragon
Louisiana Tax-Free Fund became the Louisiana Municipal Bond Fund. The
Financial Highlights for the periods prior to March 26, 1996, represents the
Paragon Louisiana Tax-Free Fund. The per share data for the periods prior to
March 26, 1996, have been restated to reflect the impact of restatement of
net asset value from $10.67 to $10.00 effective March 26, 1996. (B) Not
annualized. (C) Annualized. (D) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
------
80
<PAGE>
------------------
Louisiana Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------- SEVEN MONTHS ENDED YEAR ENDED
CLASS B 2000 1999 1998 1997 JUNE 30, 1996 (A) NOVEMBER 30, 1995
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.97 $ 10.26 $10.10 $ 9.93 $10.09 $ 9.36
----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.39 0.39 0.41 0.40 0.21 0.42
Net realized and
unrealized gains
(losses) from
investments (0.21) (0.27) 0.16 0.17 (0.16) 0.73
----------------------------------------------------------------------------------------------
Total from Investment
Activities 0.18 0.12 0.57 0.57 0.05 1.15
----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.39) (0.39) (0.41) (0.40) (0.21) (0.42)
Net realized gains (0.01) (0.02) - - - -
Total Distributions (0.40) (0.41) (0.41) (0.40) (0.21) (0.42)
----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.75 $ 9.97 $10.26 $10.10 $ 9.93 $10.09
----------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 1.89% 1.11% 5.69% 5.87% 0.48%(B) 12.52%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
Period (000) $9,881 $10,866 $5,474 $3,835 $3,223 $2,115
Ratio of expenses to
average net assets 1.51% 1.51% 1.50% 1.51% 1.50%(C) 1.37%
Ratio of net investment
income to average net
assets 4.02% 3.74% 3.95% 4.02% 3.98%(C) 4.27%
Ratio of expenses to
average net assets* 1.83% 1.85% 1.83% 1.85% 1.70%(C) 1.52%
Portfolio turnover (D) 17.27% 19.67% 12.03% 17.39% 16.72% 28.00%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Paragon
Louisiana Tax-Free Fund became the Louisiana Municipal Bond Fund. The
Financial Highlights for the periods prior to March 26, 1996, represents the
Paragon Louisiana Tax-Free Fund. The per share data for the periods prior to
March 26, 1996, have been restated to reflect the impact of restatement of
net asset value from $10.70 to $10.00 effective March 26, 1996. (B) Not
annualized. (C) Annualized. (D) Portfolio turnover is calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, MARCH 26, 1996
------------------------------------ TO
CLASS I 2000 1999 1998 1997 JUNE 30, 1996(A)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.96 $ 10.26 $ 10.10 $ 9.93 $ 10.00
---------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.48 0.48 0.50 0.49 0.13
Net realized and
unrealized gains
(losses) from
investments (0.21) (0.28) 0.16 0.17 (0.07)
---------------------------------------------------------------------------------
Total from Investment
Activities 0.27 0.20 0.66 0.66 0.06
---------------------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.48) (0.50) (0.49) (0.13)
Net realized gains (0.01) (0.02) - - -
Total Distributions (0.49) (0.50) (0.50) (0.49) (0.13)
---------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.74 $ 9.96 $ 10.26 $ 10.10 $ 9.93
---------------------------------------------------------------------------------
Total Return 2.81% 1.92% 6.62% 6.81% 0.90%(B)(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $80,167 $106,294 $92,690 $113,338 $136,041
Ratio of expenses to
average net assets 0.61% 0.61% 0.60% 0.62% 0.71%(D)
Ratio of net investment
income to average net
assets 4.92% 4.66% 4.85% 4.91% 4.76%(D)
Ratio of expenses to
average net assets* 0.83% 0.85% 0.83% 0.84% 0.86%(D)
Portfolio turnover (E) 17.27% 19.67% 12.03% 17.39% 16.72%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from date reorganized as a fund of One Group Mutual Funds. (B) Not
annualized. (C) Represents total return for Class A Shares from December 1,
1995, through March 25, 1996, plus total return for Class I Shares for the
period March 26, 1996, through June 30, 1996. (D) Annualized. (E) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
81
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FINANCIAL HIGHLIGHTS
Michigan Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED ----------------------------------
CLASS A JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.63 $ 11.03 $ 10.93 $ 10.48 $ 10.60 $ 9.54
-------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.48 0.24 0.47 0.49 0.48 0.48
Net realized and
unrealized gains
(losses) from
investments (0.39) (0.40) 0.13 0.44 (0.14) 1.06
-------------------------------------------------------------------------------------------
Total from Investment
Activities 0.09 (0.16) 0.60 0.93 0.34 1.54
-------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.24) (0.48) (0.48) (0.46) (0.48)
Net realized gains (0.02) - (0.02) - - -
Total Distributions (0.50) (0.24) (0.50) (0.48) (0.46) (0.48)
-------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.22 $ 10.63 $ 11.03 $ 10.93 $ 10.48 $ 10.60
-------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 0.93% (1.47)%(B) 5.61% 9.15% 3.32% 16.49%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $30,626 $22,217 $22,876 $18,687 $18,575 $21,034
Ratio of expenses to
average net assets 0.86% 0.88%(C) 0.91% 0.92% 0.88% 0.79%
Ratio of net investment
income to average net
assets 4.72% 4.35%(C) 4.27% 4.59% 4.57% 4.71%
Ratio of expenses to
average net assets* 1.02% 0.96%(C) 0.92% 0.98% 0.96% 1.04%
Portfolio turnover(D) 33.34% 10.60% 23.33% 37.84% 24.49% 26.97%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus
Michigan Municipal Bond Fund became the Michigan Municipal Bond Fund. The
Financial Highlights for the periods prior to March 22, 1999, represent the
Pegasus Michigan Municipal Bond Fund. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
82
<PAGE>
------------------
Michigan Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 23,
DECEMBER 31, 1996 TO
YEAR ENDED SIX MONTHS ENDED ---------------- DECEMBER 31,
CLASS B JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996(B)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.28 $ 10.68 $ 10.59 $ 10.18 $ 10.00
---------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.42 0.20 0.39 0.38 0.07
Net realized and
unrealized gains
(losses) from
investments (0.37) (0.40) 0.12 0.44 0.17
---------------------------------------------------------------------------------------
Total from Investment
Activities 0.05 (0.20) 0.51 0.82 0.24
---------------------------------------------------------------------------------------
Distributions:
Net investment income (0.42) (0.20) (0.40) (0.41) (0.06)
Net realized gains (0.02) - (0.02) - -
Total Distributions (0.44) (0.20) (0.42) (0.41) (0.06)
---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.89 $ 10.28 $ 10.68 $ 10.59 $ 10.18
---------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 0.51% (1.86%)(C) 4.92% 8.26% 2.45%(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $10,106 $ 6,771 $ 1,940 $ 707 $ 110
Ratio of expenses to
average net assets 1.52% 1.59%(D) 1.66% 1.67% 1.69%(D)
Ratio of net investment
income to average net
assets 4.21% 3.64%(D) 3.52% 3.84% 2.01%(D)
Ratio of expenses to
average net assets* 1.69% 1.70%(D) 1.67% 1.73% 1.77%(D)
Portfolio turnover(E) 33.34% 10.60% 23.33% 37.84% 24.49%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus
Michigan Municipal Bond Fund became the Michigan Municipal Bond Fund. The
Financial Highlights for the periods prior to March 22, 1999, represent the
Pegasus Michigan Municipal Bond Fund. (B) Period from commencement of
operations. (C) Not annualized. (D) Annualized. (E) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED -----------------------------------
CLASS I JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.62 $ 11.03 $ 10.93 $ 10.48 $ 10.60 $ 9.54
--------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51 0.25 0.50 0.51 0.49 0.48
Net realized and
unrealized gains
(losses) from
investments (0.38) (0.41) 0.13 0.45 (0.14) 1.06
--------------------------------------------------------------------------------------------
Total from Investment
Activities 0.13 (0.16) 0.63 0.96 0.35 1.54
--------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.25) (0.51) (0.51) (0.47) (0.48)
Net realized gains (0.02) - (0.02) - - -
Total Distributions (0.53) (0.25) (0.53) (0.51) (0.47) (0.48)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.22 $ 10.62 $ 11.03 $ 10.93 $ 10.48 $ 10.60
--------------------------------------------------------------------------------------------
Total Return 1.28% (1.46%)(B) 5.94% 9.42% 3.44% 16.49%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $233,913 $309,445 $298,842 $61,768 $41,909 $32,419
Ratio of expenses to
average net assets 0.61% 0.66%(C) 0.66% 0.67% 0.77% 0.79%
Ratio of net investment
income to average net
assets 4.94% 4.60%(C) 4.52% 4.84% 4.68% 4.71%
Ratio of expenses to
average net assets* 0.67% 0.69%(C) 0.67% 0.73% 0.85% 1.04%
Portfolio turnover(D) 33.34% 10.60% 23.33% 37.84% 24.49% 26.97%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus
Michigan Municipal Bond Fund became the Michigan Municipal Bond Fund. The
Financial Highlights for the periods prior to March 22, 1999, represent the
Pegasus Michigan Municipal Bond Fund. (B) Not annualized. (C) Annualized. (D)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
------
83
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Ohio Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS A 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.78 $ 11.11 $ 10.91 $ 10.72 $ 10.68
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51 0.51 0.54 0.54 0.55
Net realized and unrealized gains
(losses) from investments (0.31) (0.33) 0.20 0.19 0.03
-------------------------------------------------------------------------------
Total from Investment Activities 0.20 0.18 0.74 0.73 0.58
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.51) (0.54) (0.54) (0.54)
Total Distributions (0.51) (0.51) (0.54) (0.54) (0.54)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.47 $ 10.78 $ 11.11 $ 10.91 $ 10.72
-------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 1.94% 1.59% 6.87% 6.95% 5.44%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $32,307 $26,876 $17,297 $16,114 $16,507
Ratio of expenses to average net
assets 0.85% 0.81% 0.79% 0.79% 0.82%
Ratio of net investment income to
average net assets 4.84% 4.57% 4.83% 4.96% 4.92%
Ratio of expenses to average net
assets* 1.18% 1.18% 1.18% 1.19% 1.30%
Portfolio turnover(A) 35.46% 13.69% 10.49% 7.45% 24.61%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------
CLASS B 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.86 $ 11.18 $ 10.98 $ 10.79 $10.75
------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.44 0.44 0.47 0.47 0.48
Net realized and unrealized gains
(losses) from investments (0.32) (0.32) 0.20 0.19 0.03
------------------------------------------------------------------------------
Total from Investment Activities 0.12 0.12 0.67 0.66 0.51
------------------------------------------------------------------------------
Distributions:
Net investment income (0.44) (0.44) (0.47) (0.47) (0.47)
Total Distributions (0.44) (0.44) (0.47) (0.47) (0.47)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.54 $ 10.86 $ 11.18 $ 10.98 $10.79
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 1.17% 1.01% 6.20% 6.26% 4.79%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $40,605 $49,703 $26,138 $14,316 $8,854
Ratio of expenses to average net
assets 1.50% 1.46% 1.44% 1.44% 1.47%
Ratio of net investment income to
average net assets 4.15% 3.89% 4.19% 4.33% 4.27%
Ratio of expenses to average net
assets* 1.83% 1.83% 1.83% 1.84% 1.95%
Portfolio turnover(A) 35.46% 13.69% 10.49% 7.45% 24.61%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
84
<PAGE>
------------------
Ohio Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
CLASS I 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.75 $ 11.08 $ 10.88 $ 10.69 $ 10.65
--------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.53 0.54 0.56 0.56 0.56
Net realized and unrealized
gains (losses) from
investments (0.31) (0.33) 0.20 0.19 0.04
--------------------------------------------------------------------------------
Total from Investment
Activities 0.22 0.21 0.76 0.75 0.60
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.53) (0.54) (0.56) (0.56) (0.56)
Total Distributions (0.53) (0.54) (0.56) (0.56) (0.56)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.44 $ 10.75 $ 11.08 $ 10.88 $ 10.69
--------------------------------------------------------------------------------
Total Return 2.20% 1.84% 7.13% 7.22% 5.69%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $126,362 $160,493 $149,890 $133,172 $80,611
Ratio of expenses to average
net assets 0.60% 0.56% 0.54% 0.54% 0.57%
Ratio of net investment
income to average net assets 5.10% 4.86% 5.09% 5.24% 5.17%
Ratio of expenses to average
net assets* 0.83% 0.83% 0.83% 0.84% 0.95%
Portfolio turnover(A) 35.46% 13.69% 10.49% 7.45% 24.61%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
85
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
West Virginia Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1997 TO
--------------------------- JUNE 30,
CLASS A 2000 1999 1998 1997(A)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.03 $ 10.36 $ 10.15 $10.00
------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.46 0.47 0.48 0.16
Net realized and unrealized gains
(losses) from investments (0.22) (0.32) 0.21 0.15
------------------------------------------------------------------------------
Total from Investment Activities 0.24 0.15 0.69 0.31
------------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.47) (0.48) (0.16)
Net realized gains - (B) (0.01) - -
Total Distributions (0.46) (0.48) (0.48) (0.16)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.81 $ 10.03 $ 10.36 $10.15
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 2.59% 1.37% 6.98% 3.08%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 3,677 $ 3,570 $ 2,024 $ 808
Ratio of expenses to average net
assets 0.86% 0.85% 0.85% 0.84%(D)
Ratio of net investment income to
average net assets 4.74% 4.42% 4.68% 4.94%(D)
Ratio of expenses to average net
assets* 1.03% 1.05% 1.07% 0.97%(D)
Portfolio turnover(E) 24.67% 15.24% 16.69% 6.21%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Amount is less than .01. (C)
Not annualized. (D) Annualized. (E) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1997 TO
--------------------------- JUNE 30,
CLASS B 2000 1999 1998 1997(A)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.03 $ 10.35 $ 10.12 $10.00
------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.40 0.40 0.42 0.14
Net realized and unrealized gains
(losses) from investments (0.23) (0.31) 0.23 0.12
------------------------------------------------------------------------------
Total from Investment Activities 0.17 0.09 0.65 0.26
------------------------------------------------------------------------------
Distributions:
Net investment income (0.40) (0.40) (0.42) (0.14)
Net realized gains - (B) (0.01) - -
Total Distributions (0.40) (0.41) (0.42) (0.14)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.80 $ 10.03 $ 10.35 $10.12
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 1.82% 0.80% 6.57% 2.64%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 6,772 $ 7,505 $ 3,352 $ 614
Ratio of expenses to average net
assets 1.51% 1.50% 1.50% 1.49%(D)
Ratio of net investment income to
average net assets 4.09% 3.79% 4.05% 4.08%(D)
Ratio of expenses to average net
assets* 1.68% 1.71% 1.72% 1.62%(D)
Portfolio turnover(E) 24.67% 15.24% 16.69% 6.21%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Amount is less than .01. (C)
Not annualized. (D) Annualized. (E) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
------
86
<PAGE>
------------------
West Virginia Municipal Bond Fund
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1997 TO
---------------------------- JUNE 30,
CLASS I 2000 1999 1998 1997(A)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.96 $ 10.28 $ 10.06 $ 10.00
-----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.49 0.50 0.22
Net realized and unrealized gains
(losses) from investments (0.23) (0.31) 0.22 0.06
-----------------------------------------------------------------------------
Total from Investment Activities 0.26 0.18 0.72 0.28
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.49) (0.50) (0.22)
Net realized gains - (B) (0.01) - -
Total Distributions (0.49) (0.50) (0.50) (0.22)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.73 $ 9.96 $ 10.28 $ 10.06
-----------------------------------------------------------------------------
Total Return 2.76% 1.71% 7.36% 2.84%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $91,975 $98,391 $102,413 $96,270
Ratio of expenses to average net
assets 0.61% 0.61% 0.60% 0.59%(D)
Ratio of net investment income to
average net assets 5.03% 4.74% 4.93% 5.04%(D)
Ratio of expenses to average net
assets* 0.68% 0.71% 0.72% 0.67%(D)
Portfolio turnover(E) 24.67% 15.24% 16.69% 6.21%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Amount is less than .01. (C)
Not annualized. (D) Annualized. (E) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
------
87
<PAGE>
ONE GROUP(R)
------------------
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Funds, as well
as the risks inherent in their use. Fixed income securities are primarily
influenced by market, credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
---------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
-------------------------------------------
<S> <C>
One Group(R) Short-Term
Municipal Bond Fund 1
-------------------------------------------
One Group(R) Intermediate Tax-
Free Bond Fund 2
-------------------------------------------
One Group(R) Tax-Free Bond Fund 3
-------------------------------------------
One Group(R) Municipal Income
Fund 4
-------------------------------------------
One Group(R) Arizona Municipal
Bond Fund 5
-------------------------------------------
One Group(R) Kentucky Municipal
Bond Fund 6
-------------------------------------------
One Group(R) Louisiana
Municipal Bond Fund 7
-------------------------------------------
One Group(R) Michigan Municipal
Bond Fund 8
-------------------------------------------
One Group(R) Ohio Municipal
Bond Fund 9
-------------------------------------------
One Group(R) West Virginia
Municipal Bond Fund 10
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS and 1-10 Market
CUBES.
------------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs and CATS. 1-10 Market
------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by 1-10 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae and Freddie Mac.
------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase or 1-10 Market
contract to purchase securities at a fixed price for delivery Leverage
at a future date. Liquidity
Credit
------------------------------------------------------------------------------
Investment Company Securities: Shares of other mutual funds, 1-10 Market
including One Group money market funds and shares of other
money market mutual funds for which Banc One Investment
Advisors or its affiliates serve as investment advisor or
administrator. Banc One Investment Advisors will waive certain
fees when investing in funds for which it serves as investment
advisor.
------------------------------------------------------------------------------
</TABLE>
------
88
<PAGE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
-------------------------------------------------------------------------------
<S> <C> <C>
Call and Put Options: A call option gives the buyer the right 1-10 Management
to buy, and obligates the seller of the option to sell, a Liquidity
security at a specified price at a future date. A put option Credit
gives the buyer the right to sell, and obligates the seller of Market
the option to buy, a security at a specified price at a future Leverage
date. The Funds will sell only covered call and secured put
options.
-------------------------------------------------------------------------------
Futures and Related Options: A contract providing for the 1-10 Management
future sale and purchase of a specified amount of a specified Market
security, class of securities or an index at a specified time Credit
in the future and at a specified price. Liquidity
Leverage
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term promissory 1-10 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered under the 1-10 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities. Credit
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations with 1-10 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations secured by real 1-10 Prepayment
estate loans and pools of loans. These include collateralized Market
mortgage obligations ("CMOs") and Real Estate Mortgage Credit
Investment Conduits ("REMICs"). Regulatory
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to puts and 1-10 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period of Management
time following demand by a Fund.
-------------------------------------------------------------------------------
Swaps, Caps and Floors: A Fund may enter into these 1-10 Management
transactions to manage its exposure to changing interest rates Credit
and other factors. Swaps involve an exchange of obligations by Liquidity
two parties. Caps and floors entitle a purchaser to a Market
principal amount from the seller of the cap or floor to the
extent that a specified index exceeds or falls below a
predetermined interest.
-------------------------------------------------------------------------------
New Financial Products: New options and futures contracts and 1-10 Management
other financial products continue to be developed and the Fund Credit
may invest in such options, contracts and products. Market
Liquidity
-------------------------------------------------------------------------------
</TABLE>
------
89
<PAGE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
-------------------------------------------------------------------------------
<S> <C> <C>
Structured Instruments: Debt securities issued by agencies and 1-10 Market
instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
currency exchange rates, interest rates, or one or more other Foreign
references indices. Investment
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state or 1-10 Credit
political subdivision to obtain funds for various public Political
purposes. Municipal securities include private activity bonds Tax
and industrial development bonds, as well as General Market
Obligation Notes, Anticipation Notes, Bond Tax Anticipation Regulatory
Notes, Revenue Anticipation Notes, Project Notes, other short-
term tax-exempt obligations, municipal leases, participations
in pools of municipal securities, obligations of municipal
housing authorities and single family revenue bonds.
-------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative multi-class 1-10 Prepayment
mortgage securities which are usually structured with two Market
classes of shares that receive different proportions of the Credit
interest and principal from a pool of mortgage assets. These Regulatory
include IOs and POs.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company 1-10 Prepayment
receivables, home equity loans, truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivables or other assets. Regulatory
-------------------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other debt that pay no 1-10 Credit
interest, but are issued at a discount from their value at Market
maturity. When held to maturity, their entire return equals
the differences between their issue price and their maturity
value.
-------------------------------------------------------------------------------
Inverse Floating Rate Instruments: Floating rate debt 1-10 Credit
instruments with interest rates that reset in the opposite Market
direction from the market rate of interest to which the Leverage
inverse floater is indexed.
-------------------------------------------------------------------------------
Loan Participations and Assignments: Participations in, or 1-10 Market
assignments of municipal securities, including municipal Credit
leases. Political
Liquidity
Tax
</TABLE>
------
90
<PAGE>
--------------------------------------------------------------------------------
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise be unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to actual
default as its credit status deteriorates and the probability of default
rises.
. Leverage Risk. The risk associated with securities or practices that multiply
small index or market movements into large changes in value. Leverage is
often associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
Fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching between
the derivative and underlying security, and there can be no assurance that a
Fund's hedging transactions will be effective.
Speculative. To the extent that a derivative is not used as a hedge, the
Fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater than
the derivative's original cost.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities instead
or forego an investment opportunity, any of which could have a negative
effect on fund management or performance. This includes the risk of missing
out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
. Management Risk. The risk that a strategy used by a Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. Finally, key information about a security or market
may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
------
91
<PAGE>
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
. Foreign Investment Risk. Risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other obligations are prepaid, a Fund may have to reinvest
in securities with a lower yield. Further, with early prepayment, a Fund may
fail to recover any premium paid, resulting in an unexpected capital loss.
. Tax Risk. The risk that the issuer of the securities will fail to comply with
certain requirements of the Internal Revenue Code, which could cause adverse
tax consequences. Also, the risk that the tax treatment of municipal or other
securities could be changed by Congress thereby affecting the value of
outstanding securities.
. Regulatory Risk. The risk associated with federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
------
92
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semi-
annual/annual reports or the SAI, request other information or discuss your
questions about the Funds by calling 1 800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
or visiting
WWW.ONEGROUP.COM
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information also
may be obtained, after paying a copying charge, by electronic request at the
following e-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
(Investment Company Act File No. 811-4236)
TOG-F-230
[LOGO OF ONE GROUP MUTUAL FUNDS]
<PAGE>
One Group(R) Investor Funds
Prospectus
November 1, 2000
[LOGO OF ONE GROUP MUTUAL FUNDS]
One Group(R) Investor Conservative Growth Fund
One Group(R) Investor Balanced Fund
One Group(R) Investor Growth & Income Fund
One Group(R) Investor Growth Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SHARES OF ANY OF THE FUNDS AS AN INVESTMENT OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING
A CRIME.
<PAGE>
Table of
Contents
<TABLE>
<CAPTION>
Fund Summaries: Investments, Risk &
Performance
<S> <C>
One Group Investor Conservative Growth
Fund 2
-------
One Group Investor Balanced Fund 6
-------
One Group Investor Growth & Income Fund 10
-------
One Group Investor Growth Fund 14
-------
</TABLE>
<TABLE>
<CAPTION>
More About the Funds
<S> <C>
Principal Investment
Strategies 18
-------
Investment Risks 23
-------
Investment Policies 24
-------
Temporary Defensive
Positions 25
-------
Portfolio Turnover 25
-------
</TABLE>
<TABLE>
<CAPTION>
How to Do Business with One Group Mutual
Funds
<S> <C>
Purchasing Fund Shares 26
-------
Sales Charges 29
-------
Sales Charge Reductions and Waivers 32
-------
Exchanging Fund Shares 34
-------
Redeeming Fund Shares 36
-------
</TABLE>
<TABLE>
<CAPTION>
Shareholder Information
<S> <C>
Dividend Policies 40
-------
Tax Treatment of
Shareholders 41
-------
Shareholder Statements
and Reports 42
-------
</TABLE>
<TABLE>
<CAPTION>
Management of One Group Mutual
Funds
<S> <C>
The Advisor 43
-------
The Fund Managers 43
-------
</TABLE>
<TABLE>
<S> <C>
Financial Highlights 44
-------
Appendix A: Underlying Funds 52
-------
Appendix B: Investment Practices 59
-------
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Conservative
Growth Fund
What is the goal of One Group Investor Conservative Growth Fund?
The Fund seeks income and capital appreciation by investing primarily in a
diversified group of One Group mutual funds which invest primarily in fixed
income and equity securities.
What are the Main Investment Strategies of One Group Investor Conservative
Growth Fund?
One Group Investor Conservative Growth Fund is a "Fund of Funds." The Fund's
investment strategy is to invest in a diversified group of other One Group
mutual funds. Because this is a conservative growth fund, the majority of the
Fund's assets will be invested in One Group bond funds, although a portion of
its assets also will be invested in One Group equity and money market funds.
The Fund's investment return is diversified by its investment in the underlying
mutual funds which invest in growth and income stocks, foreign securities, debt
securities, and cash or cash equivalents. For more information about the Fund's
investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
Who should invest in One Group Investor Conservative Growth Fund?
Shares are available for long-term investors, including tax-advantaged
retirement accounts. The Fund should not be used for short-term trading
purposes.
What are the main risks of investing in One Group Investor Conservative Growth
Fund?
The main risks of investing in the One Group Investor Conservative Growth Fund
and the circumstances likely to adversely affect your investment are described
below. The share price of One Group Investor Conservative Growth Fund will
change every day in response to market conditions. You may lose money if you
invest in One Group Investor Conservative Growth Fund. For additional
information on risk, please read "Investment Risks."
------
2
<PAGE>
------------------
----------------
Investor Conservative Growth Fund
MAIN RISKS
Investments in Mutual Funds. The Fund's investments are concentrated in
underlying One Group funds, so the Fund's investment performance is directly
related to the performance of the underlying funds. The Fund's net asset value
will change with changes in the equity and bond markets and the value of the
mutual funds in which it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the underlying funds. As a
result, the Fund does not have the same flexibility to invest as a mutual fund
without such constraints. In addition, the Fund indirectly pays a portion of
the expenses incurred by the underlying Funds.
Equity Funds. Equity funds invest primarily in equity securities (such as
stocks) that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of economic
or political changes or changes in a company's financial condition. Equity
securities also are subject to "stock market risks," meaning that stock prices
in general may decline over short or extended periods of time. When the value
of the stocks held by an underlying One Group equity fund goes down, the value
of your investment in One Group Investor Conservative Growth Fund will be
affected.
Fixed Income Funds. Bond funds invest primarily in fixed income securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. The value of your investment in One Group Investor
Conservative Growth Fund will change as the value of investments of the
underlying One Group funds increases and decreases.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
3
<PAGE>
ONE GROUP(R)
FUND SUMMARY
Investor Conservative Growth Fund
How has the One Group Investor Conservative Growth Fund performed?
By showing the variability of the One Group Investor Conservative Growth Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the
Investor Conservative Growth Fund is not necessarily an indication of how the
Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I
--------------------------------------------------------------------------------
[GRAPH]
1997 12.50%
1998 11.71%
1999 4.51%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.76%.
--------------------------------------------------------------------------------
Best Quarter: 6.21% 2Q1997 Worst Quarter: -1.56% 3Q1999
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total return and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF SINCE 12/10/96
CLASS
<S> <C> <C> <C>
Class A 12/10/96 -1.23% 6.87%
Class B 12/10/96 -1.56% 7.20%
Class C 7/1/97 2.43% 8.00%
Class I 12/10/96 4.51% 9.18%
Lehman Brothers Intermediate
Aggregate Bond Index/2/ 0.99% 5.71%
Lipper Mix/3/ 5.53% 9.15%
</TABLE>
/1/For periods prior to 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 difference in expenses and sales charges.
/2/The Lehman Brothers Intermediate Aggregate Bond Index is an unmanaged index
comprised of U.S. government, mortgage, corporate and asset-backed
securities with maturities of one to ten years. The performance of the index
does not reflect the deduction of expenses associated with a mutual fund,
such as management fees. By contrast, the performance of the One Group
Investor Conservative Growth Fund reflects the deduction of these expenses
as well as the deduction of sales charges on Class A shares and contingent
deferred sales charges on Class B and Class C shares.
/3/The Lipper Mix consists of the average monthly returns of the Lipper 1000
Index (20%), the Lipper International Index (5%), and the Lipper
Intermediate U.S. Government Index (75%). The Lipper Universe consists of
the equally weighted average monthly returns for all the funds within the
category.
------
4
<PAGE>
------------------
Investor Conservative Growth Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .05% .05% .05% .05%
------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------
Other Expenses .21% .21% .21% .21%
------------------------------------------------------------------
Total Annual Fund Operating
Expenses/4/ .61% 1.26% 1.26% .26%
------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement (.16%) (.06%) (.06%) (.06%)
------------------------------------------------------------------
Net Expenses/5/ .45% 1.20% 1.20% .20%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/The Fund indirectly pays a portion of the expenses incurred by the
underlying funds. After combining the total operating expenses of the Fund
with those of the underlying funds, the estimated average weighted expense
ratio would be 1.16% for Class A shares, 1.91% for Class B shares, 1.91% for
Class C shares and .91% for Class I shares.
/5/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .45% for Class A shares, 1.20% for Class B
shares, 1.20% for Class C shares and .20% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown.
There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 569 $ 622 $ 122 $ 222 $ 122 $ 20
------------------------------------------------------------------------------
3 Years 695 694 394 394 394 78
------------------------------------------------------------------------------
5 Years 832 886 686 686 686 140
------------------------------------------------------------------------------
10 Years 1,233 1,337 1,337 1,517 1,517 325
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $584
Class B (with re-
demption) $628
Class B (no re-
demption) $128
Class C (with re-
demption) $228
Class C (no re-
demption) $128
Class I $_27
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
5
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Balanced Fund
What is the goal of One Group Investor Balanced Fund?
The Fund seeks high total return consistent with the preservation of capital by
investing primarily in a diversified group of One Group mutual funds which
invest primarily in equity and fixed income securities.
What are the main investment strategies of One Group Investor Balanced Fund?
One Group Investor Balanced Fund is a "Fund of Funds." The Fund's investment
strategy is to invest in a diversified group of other One Group mutual funds.
Because this is a balanced fund, approximately half of the Fund's assets will
be invested in One Group equity funds and approximately half will be invested
in One Group bond funds, although a portion of One Group Investor Balanced
Fund's assets also will be invested in a One Group money market fund. The
Fund's investment return is diversified by its investment in the underlying
mutual funds which invest in growth and income stocks, foreign securities, debt
securities, and cash or cash equivalents. For more information about the Fund's
investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
Who should invest in One Group Investor Balanced Fund?
Shares are available for long-term investors, including tax-advantaged
retirement accounts. The Fund should not be used for short-term trading
purposes.
What are the main risks of investing in One Group Investor Balanced Fund?
The main risks of investing in One Group Investor Balanced Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of One Group Investor Balanced Fund will change every day in
response to market conditions. You may lose money if you invest in One Group
Investor Balanced Fund. For additional information on risk, please read
"Investment Risks."
------
6
<PAGE>
------------------
----------------
Investor Balanced Fund
MAIN RISKS
Investments in Mutual Funds. The Fund's investments are concentrated in
underlying One Group funds, so the Fund's investment performance is directly
related to the performance of the underlying funds. The Fund's net asset value
will change with changes in the equity and bond markets and the value of the
mutual funds in which it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the underlying funds. As a
result, the Fund does not have the same flexibility to invest as a mutual fund
without such constraints. In addition, the Fund indirectly pays a portion of
the expenses incurred by the underlying Funds.
Equity Funds. Equity funds invest primarily in equity securities (such as
stocks) that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of economic
or political changes or changes in a company's financial condition. Equity
securities also are subject to "stock market risk," meaning that stock prices
in general may decline over short or extended periods of time. When the value
of the stocks held by an underlying One Group equity fund goes down, the value
of your investment in One Group Investor Balanced Fund will be affected.
Fixed Income Funds. Bond funds invest primarily in fixed income securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. The value of your investment in One Group Investor
Balanced Fund will change as the value of investments of the underlying One
Group funds increases and decreases.
Index Funds. An index fund's investment objective is to track the performance
of a specified index. Therefore, securities may be purchased, retained and sold
by an index fund at times when an actively managed fund would not do so. If the
value of securities that are heavily weighted on an index change, you can
expect a greater risk of loss than may be the case if a fund were not fully
invested in such securities.
Foreign Securities. Funds investing in foreign securities are subject to
special risks in addition to those of U.S. investments. These risks include
political and economic risks, currency fluctuations, higher transaction costs,
delayed settlement, and less stringent investor protection and disclosure
standards of some foreign markets. These risks can make foreign investments
more volatile and potentially less liquid than U.S. investments.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
7
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Investor Balanced Fund
How has the One Group Investor Balanced Fund performed?
By showing the variability of the One Group Investor Balanced Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the
Investor Balanced Fund is not necessarily an indication of how the Fund will
perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1997 16.93%
1998 16.25%
1999 8.62%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.11%.
--------------------------------------------------------------------------------
Best Quarter: 10.33% 4Q1998 Worst Quarter: - 3.34% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 12/10/96
<S> <C> <C> <C>
Class A 12/10/96 2.67% 11.16%
-------------------------------------------------------------------
Class B 12/10/96 2.58% 11.64%
-------------------------------------------------------------------
Class C 7/1/97 6.51% 12.35%
-------------------------------------------------------------------
Class I 12/10/96 8.62% 13.44%
-------------------------------------------------------------------
Lehman Brothers Intermediate
Aggregate Bond Index/2/ 0.99% 5.71%
-------------------------------------------------------------------
Lipper Mix/3/ 10.87% 12.55%
-------------------------------------------------------------------
</TABLE>
/1/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 difference in expenses and sales
charges.
/2/The Lehman Brothers Intermediate Aggregate Bond Index is an unmanaged index
comprised of U.S. government, mortgage, corporate and asset-backed
securities with maturities of one to ten years. The performance of the index
does not reflect the deduction of expenses associated with a mutual fund,
such as management fees. By contrast, the performance of the One Group
Investor Balanced Fund reflects the deduction of these expenses as well as
the deduction of sales charges on Class A shares and contingent deferred
sales charges on Class B and Class C shares.
/3/The Lipper Mix consists of the average monthly returns of the Lipper 1000
Index (40%), the Lipper International Index (5%), and the Lipper
Intermediate U.S. Government Index (55%). The Lipper Universe consists of
the equally weighted average monthly returns for all the funds within the
category.
------
8
<PAGE>
------------------
Investor Balanced Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------------------------
(fees paid
directly from
your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales
Charge (Load)
Imposed on
Purchases 5.25% NONE NONE NONE
-----------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred
Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
-----------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption
Fee NONE NONE NONE NONE
-----------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------------------------
<CAPTION>
ANNUAL FUND
OPERATING
EXPENSES
-----------------------------------------------------------------------------------
(expenses that are deducted from Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .05% .05% .05% .05%
-----------------------------------------------------------------------------------
Distribution
[and/or Service]
(12b-1)
Fees .35% 1.00% 1.00% NONE
-----------------------------------------------------------------------------------
Other Expenses .22% .22% .22% .22%
-----------------------------------------------------------------------------------
Total Annual
Fund Operating
Expenses/4/ .62% 1.27% 1.27% .27%
-----------------------------------------------------------------------------------
Fee Waiver
and/or Expense
Reimbursement (.17%) (.07%) (.07%) (.07%)
-----------------------------------------------------------------------------------
Net Expenses/5/ .45% 1.20% 1.20% .20%
-----------------------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/The Fund indirectly pays a portion of the expenses incurred by the
underlying funds. After combining the total operating expenses of the Fund
with those of the underlying funds, the estimated average weighted expense
ratio would be 1.23% for Class A shares, 1.98% for Class B shares, 1.98% for
Class C shares and .98% for Class I shares.
/5/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .45% for Class A shares, 1.20% for Class B
shares, 1.20% for Class C shares and .20% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 569 $ 622 $ 122 $ 222 $ 122 $ 20
------------------------------------------------------------------------------
3 Years 697 696 396 396 396 80
------------------------------------------------------------------------------
5 Years 837 890 690 690 690 145
------------------------------------------------------------------------------
10 Years 1,243 1,348 1,348 1,528 1,528 336
------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $ 585
Class B (with
redemption) $ 629
Class B (no
redemption) $ 129
Class C (with
redemption) $ 229
Class C (no
redemption) $ 129
Class I $ 28
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
9
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Growth & Income Fund
----------------
What is the goal of One Group Investor Growth & Income Fund?
The Fund seeks long-term capital appreciation and growth of income by investing
primarily in a diversified group of One Group mutual funds which invest
primarily in equity securities.
What are the main investment strategies of One Group Investor Growth & Income
Fund?
One Group Investor Growth & Income Fund is a "Fund of Funds." The Fund's
investment strategy is to invest in a diversified group of other One Group
mutual funds. Because this is a growth and income fund, the majority of the
Fund's assets will be invested in One Group equity and bond funds, although a
portion of its assets also will be invested in One Group money market funds.
The Fund's investment return is diversified by its investment in the underlying
mutual funds which invest in growth and income stocks, foreign securities, debt
securities, and cash or cash equivalents. For more information about the Fund's
investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
Who should invest in One Group Investor Growth & Income Fund?
Shares are available for long-term investors, including tax-advantaged
retirement accounts. The Fund should not be used for short-term trading
purposes.
What are the main risks of investing in One Group Investor Growth & Income
Fund?
The main risks of investing in the One Group Investor Growth & Income Fund and
the circumstances likely to adversely affect your investment are described
below. The share price of One Group Investor Growth & Income Fund will change
every day in response to market conditions. You may lose money if you invest in
One Group Investor Growth & Income Fund. For additional information on risk,
please read "Investment Risks."
MAIN RISKS
Investments in Mutual Funds. The Fund's investments are concentrated in
underlying One Group funds, so the Fund's investment performance is directly
related to the performance of the underlying funds. The Fund's net asset value
will change with changes in the equity and bond markets and the value of the
mutual funds in which it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the underlying funds. As a
result, the Fund does not have the same flexibility to invest as a mutual fund
without such constraints. In addition, the Fund indirectly pays a portion of
the expenses incurred by the underlying Funds.
Equity Funds. Equity funds invest primarily in equity securities (such as
stocks) that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of economic
or political changes or changes in a company's financial condition. Equity
securities also are subject to "stock market risk," meaning that stock prices
in general may decline over short or extended periods of time. When the value
of the stocks held by an underlying One Group equity fund goes down, the value
of your investment in One Group Investor Growth & Income Fund will be affected.
------
10
<PAGE>
------------------
Investor Growth & Income Fund
Fixed Income Funds. Bond funds invest primarily in fixed income securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. The value of your investment in One Group Investor Growth
& Income Fund will change as the value of investments of the underlying One
Group funds increases and decreases.
Index Funds. An index fund's investment objective is to track the performance
of a specified index. Therefore, securities may be purchased, retained and sold
by an index fund at times when an actively managed fund would not do so. If the
value of securities that are heavily weighted on an index change, you can
expect a greater risk of loss than may be the case if a fund were not fully
invested in such securities.
Securities of Technology Companies. The stock price of technology companies
tends to be more volatile than the stock price of companies in other
industries. In addition, the valuation of many technology stocks could be high
when considered by such traditional measures of value as price-to-earnings
ratios. Competitive pressures also may have a significant effect on the
financial condition of technology-sensitive companies. Further, because of the
rapid pace of technological development, products and services produced by
companies in which the underlying Fund invests may become obsolete or have
relatively short product cycles. As a result, the underlying Fund's value and
its returns may be considerably more volatile and pose greater risks than the
values and returns of other mutual funds that invest in companies in the
technology sector.
Smaller Companies. Investments in smaller, newer companies may be riskier than
investments in larger, more established companies. Small companies may be more
vulnerable to economic, market and industry changes. Because economic events
have a greater impact on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause unexpected and frequent
decreases in the value of the underlying Fund's investment. Finally, emerging
companies in the technology sector may not be profitable and may not anticipate
earning profits in the foreseeable future.
Foreign Securities. Funds investing in foreign securities are subject to
special risks in addition to those of U.S. investments. These risks include
political and economic risks, currency fluctuations, higher transaction costs,
delayed settlement, and less stringent investor protection and disclosure
standards of some foreign markets. These risks can make foreign investments
more volatile and potentially less liquid than U.S. investments.
Emerging Markets. The risks associated with foreign securities are magnified in
countries in "emerging markets." These countries may have relatively unstable
governments and less established market economies than developed countries.
Emerging markets may face greater social, economic, regulatory and political
uncertainties. These risks make emerging market securities more volatile and
less liquid than securities issued in more developed countries.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
11
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Investor Growth & Income Fund
How has the One Group Investor Growth & Income Fund performed?
By showing the variability of the One Group Investor Growth & Income Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the
Investor Growth & Income Fund is not necessarily an indication of how the Fund
will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I
--------------------------------------------------------------------------------
[GRAPH]
1997 20.87%
1998 19.10%
1999 12.06%
/1/ For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.51%.
--------------------------------------------------------------------------------
Best Quarter: 14.92% 4Q1998 Worst Quarter: -6.51% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 12/10/96
<S> <C> <C> <C>
Class A 12/10/96 5.71% 14.70%
Class B 12/10/96 5.92% 15.11%
Class C 7/1/97 10.00% 15.90%
Class I 12/10/96 12.06% 16.77%
S&P SuperComposite 1500
Index/2/ 20.26% 26.41%
Lipper Mix/3/ 16.39% 15.90%
</TABLE>
/1/ 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 difference in expenses and sales
charges.
/2/ The S&P SuperComposite 1500 Index is an unmanaged index generally
representative of large and small companies in the U.S. stock market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as management fees. By contrast, the
performance of the One Group Investor Growth & Income Fund reflects the
deduction of these expenses as well as the deduction of sales charges on
Class A shares and contingent deferred sales charges on Class B and Class C
shares.
/3/ The Lipper Mix consists of the average monthly returns of the Lipper 1000
Index (60%), the Lipper International Index (5%), and the Lipper
Intermediate U.S. Government Bond Index (35%). The Lipper Universe consists
of the equally weighted average monthly returns for all the funds within
the category.
------
12
<PAGE>
------------------
Investor Growth & Income Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
------------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .05% .05% .05% .05%
------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------
Other Expenses .23% .23% .23% .23%
------------------------------------------------------------------
Total Annual Fund Operating
Expenses/4/ .63% 1.28% 1.28% .28%
------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement (.18%) (.08%) (.08%) (.08%)
------------------------------------------------------------------
Net Expenses/5/ .45% 1.20% 1.20% .20%
------------------------------------------------------------------
</TABLE>
/1/ If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/ Except for purchases of $1 million or more. Please see "Sales Charges."
/3/ Expense information has been restated to reflect current fees.
/4/ The Fund indirectly pays a portion of the expenses incurred by the
underlying funds. After combining the total operating expenses of the Fund
with those of the underlying funds, the estimated average weighted expense
ratio would be 1.29% for Class A shares, 2.04% for Class B shares, 2.04%
for Class C shares and 1.04% for Class I shares.
/5/ Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .45% for Class A shares, 1.20% for Class
B shares, 1.20% for Class C shares and .20% for Class I shares for the
period beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 569 $ 622 $ 122 $ 222 $ 122 $ 20
------------------------------------------------------------------------------
3 Years 699 698 398 398 398 82
------------------------------------------------------------------------------
5 Years 841 895 695 695 695 149
------------------------------------------------------------------------------
10 Years 1,254 1,359 1,359 1,538 1,538 348
------------------------------------------------------------------------------
</TABLE>
/1/ Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $586
Class B (with redemption) $630
Class B (no redemption) $130
Class C (with redemption) $230
Class C (no redemption) $130
Class I $ 29
</TABLE>
/2/ Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
13
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Growth Fund
What is the goal of One Group Investor Growth Fund?
The Fund seeks long-term capital appreciation by investing primarily in a
diversified group of One Group mutual funds which invest primarily in equity
securities.
What are the main investment strategies of One Group Investor Growth Fund?
One Group Investor Growth Fund is a "Fund of Funds." The Fund's investment
strategy is to invest in a diversified group of other One Group mutual funds.
Because this is a growth fund, the majority of the Fund's assets will be
invested in One Group equity funds, although a portion of its assets also will
be invested in One Group bond and money market funds. The Fund's investment
return is diversified by its investment in the underlying mutual funds which
invest in growth and income stocks, foreign securities, debt securities, and
cash or cash equivalents. For more information about the Fund's investment
strategies, please read "More About The Funds" and "Principal Investment
Strategies."
Who should invest in One Group Investor Growth Fund?
Shares are available for long-term investors, including tax-advantaged
retirement accounts. The Fund should not be used for short-term trading
purposes.
What are the main risks of investing in One Group Investor Growth Fund?
The main risks of investing in the One Group Investor Growth Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of One Group Investor Growth Fund will change every day in
response to market conditions. You may lose money if you invest in One Group
Investor Growth Fund. For additional information on risk, please read
"Investment Risks."
MAIN RISKS
Investments in Mutual Funds. The Fund's investments are concentrated in
underlying One Group funds, so the Fund's investment performance is directly
related to the performance of the underlying funds. The Fund's net asset value
will change with changes in the equity and bond markets and the value of the
mutual funds in which it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the underlying funds. As a
result, the Fund does not have the same flexibility to invest as a mutual fund
without such constraints. In addition, the Fund indirectly pays a portion of
the expenses incurred by the underlying funds.
Equity Funds. Equity funds invest primarily in equity securities (such as
stocks) that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of economic
or political changes or changes in a company's financial condition. Equity
securities also are subject to "stock market risk," meaning that stock prices
in general may decline over short or extended periods of time. When the value
of the stocks held by an underlying One Group equity fund goes down, the value
of your investment in One Group Investor Growth Fund will be affected.
------
14
<PAGE>
------------------
Investor Growth Fund
Fixed Income Funds. Bond funds invest primarily in fixed income securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. The value of your investment in One Group Investor Growth
Fund will change as the value of investments of the underlying One Group funds
increases and decreases.
Index Funds. An index fund's investment objective is to track the performance
of a specified index. Therefore, securities may be purchased, retained and sold
by an index fund at times when an actively managed fund may not do so. If the
value of securities that are heavily weighted on an index change, you can
expect a greater risk of loss than would be the case if a fund were not fully
invested in such securities.
Securities of Technology Companies: The stock price of technology companies
tends to be more volatile than the stock price of companies in other
industries. In addition, the valuation of many technology stocks could be high
when considered by such traditional measures of value as price-to-earnings
ratios. Competitive pressures also may have a significant effect on the
financial condition of technology-sensitive companies. Further, because of the
rapid pace of technological development, products and services produced by
companies in which the underlying Fund invests may become obsolete or have
relatively short product cycles. As a result, the underlying Fund's value and
its returns may be considerably more volatile and pose greater risks than the
values and returns of other mutual funds that do their investments in companies
in the technology sector.
Smaller Companies. Investments in smaller, newer companies may be riskier than
investments in larger, more established companies. Small companies may be more
vulnerable to economic, market and industry changes. Because economic events
have a greater impact on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause unexpected and frequent
decreases in the value of the underlying Fund's investment. Finally, emerging
companies in the technology sector may not be profitable and may not anticipate
earning profits in the foreseeable future.
Foreign Securities. Funds investing in foreign securities are subject to
special risks in addition to those of U.S. investments. These risks include
political and economic risks, currency fluctuations, higher transaction costs,
delayed settlement, and less stringent investor protection and disclosure
standards of some foreign markets. These risks can make foreign investments
more volatile and potentially less liquid than U.S. investments.
Emerging Markets. The risks associated with foreign securities are magnified in
countries in "emerging markets." These countries may have relatively unstable
governments and less established market economies than developed countries.
Emerging markets may face greater social, economic, regulatory, and political
uncertainties. These risks make emerging market securities more volatile and
less liquid than securities issued in more developed countries.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
15
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Investor Growth Fund
How has the One Group Investor Growth Fund performed?
By showing the variability of the One Group Investor Growth Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the Investor Growth Fund
is not necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown
do not reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown.
Bar Chart (per calendar year)/1/ -- Class I
--------------------------------------------------------------------------------
[GRAPH]
1997 25.07%
1998 21.76%
1999 16.00%
/1/ For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 6.43%.
--------------------------------------------------------------------------------
Best Quarter: 19.73% 4Q1998 Worst Quarter: -9.92% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total return and are not the same as actual year-
by-year results. The average annual returns shown on the Average Annual Total
Return Table do include applicable sales charges.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 12/10/96
<S> <C> <C> <C>
Class A 12/10/96 9.69% 17.68%
Class B 12/10/96 9.80% 18.66%
Class C 7/1/97 13.87% 19.33%
Class I 12/10/96 16.00% 20.26%
S&P SuperComposite 1500
Index/2/ 20.26% 26.41%
Lipper Mix/3/ 22.65% 19.05%
</TABLE>
/1/ 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 difference in expenses and sales
charges.
/2/ The S&P SuperComposite 1500 Index is an unmanaged index generally
representative of large and small companies in the U.S. stock market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as management fees. By contrast, the
performance of the One Group Investor Growth Fund reflects the deduction of
these expenses as well as the deduction of sales charges on Class A shares
and contingent deferred sales charges on Class B and Class C shares.
/3/ The Lipper Mix consists of the average monthly returns of the Lipper 1000
Index (75%), the Lipper International Index (10%) and the Lipper
Intermediate U.S. Government Bond Index (15%). The Lipper Universe consists
of the equally weighted average monthly returns for all the funds within
the category.
------
16
<PAGE>
------------------
Investor Growth Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your
investment)/1/ CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 5.25% NONE NONE NONE
--------------------------------------------------------------------
(as a percentage of offering
price)
Maximum Deferred Sales Charge
(Load) NONE/2/ 5.00% 1.00% NONE
--------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(expenses that are deducted from
Fund assets)/3/ CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .05% .05% .05% .05%
--------------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .35% 1.00% 1.00% NONE
--------------------------------------------------------------------
Other Expenses .28% .28% .28% .28%
--------------------------------------------------------------------
Total Annual Fund Operating
Expenses/4/ .68% 1.33% 1.33% .33%
--------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement (.23%) (.13%) (.13%) (.13%)
--------------------------------------------------------------------
Net Expenses/5/ .45% 1.20% 1.20% .20%
--------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Except for purchases of $1 million or more. Please see "Sales Charges."
/3/Expense information has been restated to reflect current fees.
/4/The Fund indirectly pays a portion of the expenses incurred by the
underlying funds. After combining the total operating expenses of the Fund
with those of the underlying funds, the estimated average weighted expense
ratio would be 1.31% for Class A shares, 2.06% for Class B shares, 2.06% for
Class C shares and 1.06% for Class I shares.
/5/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .45% for Class A shares, 1.20% for Class B
shares, 1.20% for Class C shares and .20% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C CLASS I
ASSUMING ASSUMING ASSUMING ASSUMING
REDEMPTION AT NO REDEMPTION AT NO
THE END OF REDEMPTION THE END OF REDEMPTION
EACH PERIOD EACH PERIOD
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 569 $ 622 $ 122 $ 222 $ 122 $ 20
----------------------------------------------------------------------------
3 Years 709 709 409 409 409 93
----------------------------------------------------------------------------
5 Years 862 916 716 716 716 172
----------------------------------------------------------------------------
10 Years 1,306 1,411 1,411 1,590 1,590 405
----------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $591
Class B (with re-
demption) $635
Class B (no re-
demption) $135
Class C (with re-
demption) $235
Class C (no re-
demption) $135
Class I $ 34
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B Shares
represents a combination of Class A and Class B operating expenses.
------
17
<PAGE>
ONE GROUP(R)
------------------
More About the Funds
Each of the four funds described in this prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of the Funds" and the Statement of Additional Information.
--------------------------------------------------------------------------------
Principal Investment Strategies
The mutual funds described in this prospectus are designed to provide
diversification across the three major asset classes: stocks, bonds and cash or
cash equivalents. Diversification is achieved by investing in other One Group
mutual funds. A brief description of these underlying One Group funds can be
found in Appendix A. The Funds attempt to take advantage of the most attractive
types of stocks and bonds by shifting their asset allocation to favor mutual
funds that focus on the most promising securities. The principal investment
strategies that are used to meet each Fund's investment objective are described
in "Fund Summaries: Investments, Risk & Performance" in the front of this
prospectus. They are also described below.
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund also may use strategies that are not
described below, but which are described in the Statement of Additional
Information.
------
18
<PAGE>
ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND. The Fund is diversified between
stocks and bonds, with an emphasis on bonds.
1. From 20% to 40% of the Fund's total assets are invested in One Group equity
funds.
2. From 60% to 80% of its total assets are invested in One Group bond funds.
3. Up to 10% of its total assets are invested in a One Group money market fund.
. The Fund also is diversified across a variety of mutual funds, which in
turn invest in different industries, economic sectors and geographic
regions. The Fund invests its assets in the underlying mutual funds within
the following ranges:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND NAME FUND HOLDINGS
----------------------------------------------
<S> <C>
Prime Money Market Fund 0-10%
----------------------------------------------
Short-Term Bond Fund 0-70%
----------------------------------------------
Intermediate Bond Fund 0-70%
----------------------------------------------
Income Bond Fund 0-70%
----------------------------------------------
Bond Fund 0-70%
----------------------------------------------
High Yield Bond Fund 0-15%
----------------------------------------------
Government Bond Fund 0-70%
----------------------------------------------
Ultra Short-Term Bond Fund 0-70%
----------------------------------------------
Mid Cap Value Fund 0-20%
----------------------------------------------
Mid Cap Growth Fund 0-20%
----------------------------------------------
International Equity Index Fund 0-20%
----------------------------------------------
Diversified International Fund 0-20%
----------------------------------------------
Large Cap Growth Fund 0-20%
----------------------------------------------
Large Cap Value Fund 0-20%
----------------------------------------------
Diversified Mid Cap Fund 0-20%
----------------------------------------------
Diversified Equity Fund 0-20%
----------------------------------------------
Small Cap Growth Fund 0-20%
----------------------------------------------
Small Cap Value Fund 0-20%
----------------------------------------------
Equity Income Fund 0-20%
----------------------------------------------
Equity Index Fund 0-20%
</TABLE>
. The Fund also may hold cash and cash equivalents.
------
19
<PAGE>
ONE GROUP INVESTOR BALANCED FUND. The Fund invests in both stock and bond
mutual funds--stock funds for long-term growth potential and bond funds for
principal stability and current income.
1. From 40% to 60% of the Fund's total assets are invested in One Group equity
funds.
2. From 40% to 60% of its total assets are invested in One Group bond funds.
3. Up to 10% of its total assets are invested in a One Group money market fund.
. The Fund also is diversified across a variety of mutual funds, which in
turn invest in different industries, economic sectors and geographic
regions. The Fund invests its assets in the underlying mutual funds within
the following ranges:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND NAME FUND HOLDINGS
----------------------------------------------
<S> <C>
Prime Money Market Fund 0-10%
----------------------------------------------
Short-Term Bond Fund 0-50%
----------------------------------------------
Intermediate Bond Fund 0-50%
----------------------------------------------
Income Bond Fund 0-50%
----------------------------------------------
Bond Fund 0-50%
----------------------------------------------
High Yield Bond Fund 0-30%
----------------------------------------------
Government Bond Fund 0-50%
----------------------------------------------
Ultra Short-Term Bond Fund 0-50%
----------------------------------------------
Mid Cap Value Fund 0-30%
----------------------------------------------
Mid Cap Growth Fund 0-30%
----------------------------------------------
International Equity Index Fund 0-30%
----------------------------------------------
Diversified International Fund 0-30%
----------------------------------------------
Large Cap Growth Fund 0-40%
----------------------------------------------
Large Cap Value Fund 0-50%
----------------------------------------------
Diversified Mid Cap Fund 0-30%
----------------------------------------------
Diversified Equity Fund 0-40%
----------------------------------------------
Small Cap Growth Fund 0-30%
----------------------------------------------
Small Cap Value Fund 0-30%
----------------------------------------------
Equity Income Fund 0-40%
----------------------------------------------
Equity Index Fund 0-40%
</TABLE>
. The Fund also may hold cash and cash equivalents.
------
20
<PAGE>
ONE GROUP INVESTOR GROWTH & INCOME FUND. The Fund is diversified between stocks
and bonds, with an emphasis on stocks.
1. From 60% to 80% of the Fund's total assets are invested in One Group equity
funds.
2. From 20% to 40% of its total assets are invested in One Group bond funds.
3. Up to 10% of its total assets are invested in a One Group money market fund.
. The Fund also is diversified across a variety of mutual funds, which in
turn invest in different industries, economic sectors and geographic
regions. The Fund invests its assets in the underlying mutual funds within
the following ranges:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND NAME FUND HOLDINGS
----------------------------------------------
<S> <C>
Prime Money Market Fund 0-10%
----------------------------------------------
Short-Term Bond Fund 0-30%
----------------------------------------------
Intermediate Bond Fund 0-30%
----------------------------------------------
Income Bond Fund 0-30%
----------------------------------------------
Bond Fund 0-30%
----------------------------------------------
High Yield Bond Fund 0-30%
----------------------------------------------
Government Bond Fund 0-30%
----------------------------------------------
Ultra Short-Term Bond Fund 0-30%
----------------------------------------------
Mid Cap Value Fund 0-40%
----------------------------------------------
Mid Cap Growth Fund 0-40%
----------------------------------------------
International Equity Index Fund 0-40%
----------------------------------------------
Diversified International Fund 0-40%
----------------------------------------------
Large Cap Growth Fund 0-50%
----------------------------------------------
Large Cap Value Fund 0-60%
----------------------------------------------
Diversified Mid Cap Fund 0-40%
----------------------------------------------
Diversified Equity Fund 0-60%
----------------------------------------------
Small Cap Growth Fund 0-40%
----------------------------------------------
Small Cap Value Fund 0-40%
----------------------------------------------
Equity Income Fund 0-60%
----------------------------------------------
Equity Index Fund 0-60%
----------------------------------------------
Technology Fund 0-10%
</TABLE>
. The Fund also may hold cash and cash equivalents.
------
21
<PAGE>
ONE GROUP INVESTOR GROWTH FUND. The Fund is diversified between stocks and
bonds, with a heavy emphasis on stocks.
1. From 80% to 100% of the Fund's total assets are invested in One Group equity
funds.
2. Up to 20% of its total assets are invested in One Group bond funds.
3. Up to 10% of its total assets are invested in a One Group money market fund.
. The Fund also is diversified across a variety of mutual funds, which in
turn invest in different industries, economic sectors and geographic
regions. The Fund invests its assets in the underlying mutual funds within
the following ranges:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND NAME FUND HOLDINGS
----------------------------------------------
<S> <C>
Prime Money Market Fund 0-10%
----------------------------------------------
Short-Term Bond Fund 0-20%
----------------------------------------------
Intermediate Bond Fund 0-20%
----------------------------------------------
Income Bond Fund 0-20%
----------------------------------------------
Bond Fund 0-20%
----------------------------------------------
High Yield Bond Fund 0-20%
----------------------------------------------
Government Bond Fund 0-20%
----------------------------------------------
Ultra Short-Term Bond Fund 0-20%
----------------------------------------------
Mid Cap Value Fund 0-40%
----------------------------------------------
Mid Cap Growth Fund 0-40%
----------------------------------------------
International Equity Index Fund 0-40%
----------------------------------------------
Diversified International Fund 0-40%
----------------------------------------------
Large Cap Growth Fund 0-50%
----------------------------------------------
Large Cap Value Fund 0-60%
----------------------------------------------
Diversified Mid Cap Fund 0-40%
----------------------------------------------
Diversified Equity Fund 0-50%
----------------------------------------------
Small Cap Growth Fund 0-40%
----------------------------------------------
Small Cap Value Fund 0-40%
----------------------------------------------
Equity Income Fund 0-50%
----------------------------------------------
Equity Index Fund 0-50%
----------------------------------------------
Technology Fund 0-10%
</TABLE>
. The Fund also may hold cash and cash equivalents.
------
22
<PAGE>
--------------------------------------------------------------------------------
Investment Risks
The main risks of investing in the Funds are described in the Fund Summaries.
Additional risks are described below.
DERIVATIVES. The underlying Funds invest in securities that may be considered
to be derivatives. These securities may be more volatile than other
investments. Derivatives present, to varying degrees, market, credit, leverage,
liquidity, and management risks. A Fund's use of derivatives may cause the Fund
to recognize higher amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use such instruments.
WHAT IS A DERIVATIVE?
Derivatives are securities or
contracts (like futures and
options) that derive their value
from the performance of
underlying assets or securities.
JUNK BONDS. One Group High Yield Bond and One Group Income Bond Fund invest in
debt securities that are considered to be speculative. These securities are
issued by companies which are highly leveraged, less creditworthy or
financially distressed. While these investments generally provide a higher
yield than higher rated debt securities, the high degree of risk involved in
these investments can result in substantial or total losses. The market price
of these securities can change suddenly and unexpectedly.
CREDIT RISK. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the underlying funds.
Such default could result in losses to the underlying funds and to the Fund. In
addition, the credit quality of securities held by the Fund may be lowered if
an issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it difficult for the Fund to
sell the security.
PREPAYMENT AND CALL RISK. Some of the underlying funds may invest a portion of
their assets in mortgage-backed securities. These securities are subject to
prepayment and call risk. The issuers of mortgage-backed and other callable
securities may be able to repay principal in advance, especially when interest
rates fall. Changes in prepayment rates can affect the return on investment and
yield of mortgage-backed securities. When mortgages are prepaid, a fund may
have to reinvest in securities with a lower yield. A fund also may fail to
recover additional amounts (i.e., premiums) paid for securities with higher
interest rates, resulting in unexpected capital loss.
INTERNATIONAL FUNDS. Foreign securities are subject to special risks. These
risks may include future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits, currency controls,
higher transaction costs and delayed settlements of transactions. Securities of
some foreign companies are less liquid, and their prices more volatile, than
securities of comparable U.S. companies. Additionally, there may be less public
information available about foreign issuers. Since the underlying funds may
invest in securities denominated in foreign currencies, changes in exchange
rates also may affect the value of investments in the underlying funds.
------
23
<PAGE>
EMERGING MARKETS. The risks associated with foreign securities are magnified in
countries in "emerging markets." These countries may have relatively unstable
governments and less established market economies than developed countries.
Emerging markets may face greater social, economic, regulatory and political
uncertainties. These risks make emerging market securities more volatile and
less liquid than securities issued in more developed countries.
SMALLER COMPANIES. Investments by funds in smaller, newer companies may be
riskier than investments in larger, more-established companies. Securities of
smaller companies tend to be less liquid than securities of large companies. In
addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their debt
securities and/or stock price. This may cause unexpected and frequent decreases
in the value of underlying funds investing in small companies, and may affect
your investment in the funds.
--------------------------------------------------------------------------------
Investment Policies
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
the majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
Each Fund may not:
1. Purchase an issuer's securities if as a result more then 5% of its total
assets would be invested in the securities of that issuer or the Fund would
own more than 10% of the outstanding voting securities of any of that
issuer. This does not include securities issued or guaranteed by the United
States, its agencies or instrumentalities, securities of other registered
investment companies and repurchase agreements involving these securities.
This restriction applies with respect to 75% of a Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Make loans, except that a Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending.
Additional investment policies are set forth in the Statement of Additional
Information.
------
24
<PAGE>
--------------------------------------------------------------------------------
Temporary Defensive Positions
For liquidity and to respond to unusual market conditions, the Funds may invest
all or most of their assets in short-term fixed income securities for temporary
defensive purposes. These types of securities are known as "cash equivalents."
These investments may result in a lower yield than lower-quality or longer-term
investments and may prevent the Funds from meeting their investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash equivalents are highly
liquid, high-quality instruments
with maturities of three months
or less on the date they are
purchased. They include
securities issued by the U.S.
government, its agencies and
instrumentalities, repurchase
agreements (other than equity
repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper
(rated in one of the two highest
rating categories), variable rate
master demand notes, money market
mutual funds and bank money
market deposit accounts.
While the Funds are engaged in a temporary defensive position, they will not be
pursuing their investment objectives. Therefore, the Funds will pursue a
temporary defensive position only when market conditions warrant.
--------------------------------------------------------------------------------
Portfolio Turnover
Portfolio turnover may vary greatly from year to year, as well as within a
particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Funds and may result in additional tax consequences to you. The
portfolio turnover rate for each Fund for the fiscal year ended June 30, 2000,
is shown in "Financial Highlights." To the extent portfolio turnover results in
short-term capital gains, such gains will generally be taxed at ordinary income
tax rates.
------
25
<PAGE>
ONE GROUP(R)
------------------
-----------------
How to Do Business with
One Group Mutual Funds
--------------------------------------------------------------------------------
Purchasing Fund Shares
Where Can I Buy Shares?
You may purchase Fund shares:
. Directly from One Group through The One Group Services Company (the
"Distributor"), and
. From Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or 401(k)
plan sponsors, or other intermediaries. Shares purchased this way will be
held for you by the Shareholder Servicing Agent.
When Can I Buy Shares?
. Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends and days on which the New
York Stock Exchange ("NYSE") is closed, including the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas Day.
. Purchase requests received before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close before 4 p.m. ET. When
that happens, purchase requests received after the NYSE closes will be
effective the following business day.
. If a Shareholder Servicing Agent holds your shares, it is the responsibility
of the Shareholder Servicing Agent to send your purchase or redemption order
to the Fund. Your Shareholder Servicing Agent may have an earlier cut-off
time for purchase and redemption requests.
. The Distributor can reject a purchase order if it does not think that it is
in the best interests of a Fund and/or its shareholders to accept the order.
. Shares are electronically recorded. Therefore, certificates will not be
issued.
What Kind Of Shares Can I Buy?
One Group offers the following classes of shares:
. Class A, Class B and Class C shares are available to the general public.
. Class I shares are available to institutional investors, such as
corporations, pension and profit sharing plans, and foundations; and any
organization authorized to act in a fiduciary, advisory, custodial or agency
capacity. We will refer to these entities as "Intermediaries."
------
26
<PAGE>
. When deciding what class of shares to buy, you should consider the amount of
your investment, the length of time you intend to hold the shares, and the
sales charges and expenses applicable to each class of shares. If you intend
to hold your shares for seven or more years, Class A shares may be more
appropriate for you. If you intend to hold your shares for less than seven
years, you may want to consider Class B or Class C shares. Sales charges are
discussed in the section of this prospectus entitled "Sales Charges."
One Group Fund Direct IRA 403(b). One Group offers retirement plans. These
plans allow participants to defer taxes while their retirement savings grow.
Call 1-800-480-4111 for an Adoption Agreement.
How Much Do Shares Cost?
. Shares are sold at net asset value ("NAV") plus a sales charge, if any.
. Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
. NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
. A Fund's NAV changes every day. NAV is calculated each business day following
the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will close
before 4:00 p.m. ET. When that happens, NAV will be calculated as of the time
the NYSE closes.
How Do I Open An Account?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
. The minimum initial investment for all classes except Class I shares is
$1,000 per Fund ($100 for employees of Bank One Corporation and its
affiliates). The minimum initial investment for an IRA and 403(b) is $250.
. The minimum initial investment for Class I shares is $200,000 per Fund.
. You are required to maintain a minimum account balance equal to the
minimum initial investment in each Fund.
. Subsequent investments must be at least $25 per Fund.
. You may purchase no more than $249,999 of Class B shares. This is because
Class A shares offer a reduced sales charge on purchases of $250,000 or
more and have lower expenses. The section of this prospectus entitled
"What Kind of Shares Can I Buy?" provides information that can help you
choose the appropriate share class.
. These minimums may be waived.
3. Complete the Account Application Form. Be sure to sign up for all of the
account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
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27
<PAGE>
4. Send the completed application and a personal check (unless you choose to
pay by wire) to:
ONE GROUP MUTUAL FUNDS
P.O.BOX 8528
BOSTON, MA 02266-8528
If you choose to pay by wire, please call 1-800-480-4111.
Contributions to Fund Direct IRAs should be made payable to "One Group Mutual
Funds for the Benefit of (your name)."
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual or company and endorsed to
One Group are considered third party checks.
All checks must be payable to one of the following:
. One Group Mutual Funds; or
. The specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. If you redeem shares purchased by check, One Group will delay forwarding
your redemption proceeds until payment has been collected from your bank.
One Group generally receives payment within seven (7) business days of
purchase.
7. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
8. If you have any questions, contact your Shareholder Servicing Agent or call
1-800-480-4111.
Can I Purchase Shares Over The Telephone?
Yes. Simply select this option on your Account Application Form and then:
. Contact your Shareholder Servicing Agent or call 1-800-480-4111 to relay your
purchase instructions.
. Authorize a bank transfer or initiate a wire transfer to the following wire
address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP INVESTOR GROWTH FUND -- A)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: JOHN SMITH & MARY SMITH, JTWROS)
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28
<PAGE>
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. You may revoke your right to make purchases over the telephone by sending a
letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
Can I Automatically Invest On A Systematic Basis?
Yes. You may purchase additional Class A, Class B and Class C shares by making
automatic monthly investments from your bank account. To establish a Systematic
Investment Plan:
. Select the "Systematic Investment Plan" option on the Account Application
Form.
. Provide the necessary information about the bank account from which your
investments will be made.
. Shares purchased under a Systematic Investment Plan may not be redeemed for
five (5) business days.
. One Group currently does not charge for this service, but may impose a charge
in the future. However, your bank may impose a charge for debiting your bank
account.
. You may revoke your election to make systematic investments by calling 1-800-
480-4111 or by sending a letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
Conversion Feature
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
. After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares.
. You will not be assessed any sales charges or fees for conversion of shares,
nor will you be subject to any federal income tax.
. Because the share price of the Class A shares may be higher than that of the
Class B shares at the time of conversion, you may receive fewer Class A
shares; however, the dollar value will be the same.
. If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together.
--------------------------------------------------------------------------------
Sales Charges
The Distributor compensates Shareholder Servicing Agents who sell shares of One
Group. Compensation comes from sales charges, 12b-1 fees, and payments by
Distributor and the Funds' investment advisor from their own resources. The
tables below show the sales charges for each class of shares and the percentage
of your investment that is paid as a commission to a Shareholder Servicing
Agent.
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29
<PAGE>
----------------
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SALES CHARGE COMMISSION
AMOUNT SALES CHARGE AS A PERCENTAGE AS A PERCENTAGE
OF AS A PERCENTAGE OF YOUR OF OFFERING
PURCHASES OFFERING PRICE INVESTMENT PRICE
<S> <C> <C> <C>
Less than $50,000 5.25% 5.54% 4.75%
--------------------------------------------------------------------------
$50,000-$99,999 4.50% 4.71% 4.05%
--------------------------------------------------------------------------
$100,000-$249,999 3.50% 3.63% 3.05%
--------------------------------------------------------------------------
$250,000-$499,999 2.50% 2.56% 2.05%
--------------------------------------------------------------------------
$500,000-$999,999 2.00% 2.04% 1.60%
--------------------------------------------------------------------------
$1,000,000* NONE NONE NONE
--------------------------------------------------------------------------
</TABLE>
* If you purchase $1 million or more of Class A shares and are not assessed a
sales charge at the time of purchase, you will be charged the equivalent of
1% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase and 0.50% of the purchase price if you redeem
within two years of purchase, unless the Distributor receives notice before
you invest indicating that your Shareholder Servicing Agent is waiving its
commission.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A PERCENTAGE
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
--------------------------------------
1-2 4.00%
--------------------------------------
2-3 3.00%
--------------------------------------
3-4 3.00%
--------------------------------------
4-5 2.00%
--------------------------------------
5-6 1.00%
--------------------------------------
MORE THAN 6 NONE
--------------------------------------
</TABLE>
The Distributor pays a commission of 4.00% of the original purchase price to
Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A PERCENTAGE
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 1.00%
--------------------------------------
AFTER FIRST YEAR NONE
--------------------------------------
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from the Distributor.
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30
<PAGE>
How the CDSC is Calculated
. The Fund assumes that all purchases made in a given month were made on the
first day of the month.
. The CDSC is based on the current market value or the original cost of the
shares, whichever is less.
. No CDSC is imposed on share appreciation, nor is a CDSC assessed on shares
acquired through reinvestment of dividends or capital gains distributions.
. To keep your CDSC as low as possible, the Fund first will redeem the shares
acquired through dividend reinvestment followed by shares you have held for
the longest time and thus have the lowest CDSC.
. If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of One Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including the
period of time you have held those shares) will be applied to One Group
shares you receive in the reorganization.
12B-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees. These fees are called "12b-1
fees." 12b-1 fees are paid by One Group to the Distributor as compensation for
its services and expenses. The Distributor in turn pays all or part of the 12b-
1 fee to Shareholder Servicing Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net assets of
the Fund, which is currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the average daily net
assets of the Fund. This will cause expenses for Class B and Class C shares
to be higher and dividends to be lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
12b-1 fees, together with the CDSC, help the Distributor sell Class B and Class
C shares without an "up-front" sales charge by defraying the costs of advancing
brokerage commissions and other expenses paid to Shareholder Servicing Agents.
. The Distributor may use up to .25% of the fees for shareholder servicing and
up to .75% for distribution. During the last fiscal year, the Distributor
received 12b-1 fees totaling .25% of its average daily net assets of Class A,
and 1.00% and 1.00% of the average daily net assets of Class B and Class C
shares, respectively.
. The Distributor may pay 12b-1 fees to its affiliates and to Banc One
Investment Advisors and its affiliates (or any sub-advisor) for brokerage and
other agency transactions.
Because 12b-1 fees are paid out of Fund assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
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31
<PAGE>
--------------------------------------------------------------------------------
Sales Charge
Reductions and Waivers
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the higher of the market value or
original purchase price of any Class A, Class B or Class C shares of a Fund
(except a money market fund) that you (and your spouse and minor children)
already own to the amount of your next Class A purchase for purposes of
calculating the sales charge. An Intermediary also may take advantage of
this option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more funds over the next 13 months and pay the same
sales charge that you would have paid if all shares were purchased at once.
A percentage of your investment will be held in escrow until the full amount
covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your investment
representative. To determine if you are eligible for the accumulation
privilege, call 1-800-480-4111. These programs may be terminated or amended at
any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge has
been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and their
spouses and immediate family members) of:
. One Group Mutual Funds.
. Bank One Corporation and its subsidiaries and affiliates.
. The Distributor and its subsidiaries and affiliates.
. State Street Bank and Trust Company and its subsidiaries and affiliates.
. Broker/dealers who have entered into dealer agreements with One Group and
their subsidiaries and affiliates.
. An investment sub-advisor of a fund of One Group and such sub-advisor's
subsidiaries and affiliates.
4. Bought by:
. Affiliates of Bank One Corporation and certain accounts (other than IRA
accounts) for which an Intermediary acts in a fiduciary, advisory, agency,
or custodial capacity or Accounts which participate in select affinity
programs with Bank One Corporation and its affiliates and subsidiaries.
. Accounts as to which a bank or broker-dealer charges an asset allocation
fee, provided the bank or broker-dealer has an agreement with the
Distributor.
. Certain retirement and deferred compensation plans and trusts used to fund
those plans, including, but not limited to, those defined in sections
401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi trusts."
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32
<PAGE>
----------------
. Shareholder Servicing Agents who have a dealer arrangement with the
Distributor, who place trades for their own accounts or for the accounts of
their clients and who charge a management, consulting or other fee for
their services, as well as clients of such Shareholder Servicing Agents who
place trades for their own accounts if the accounts are linked to the
master account of such Shareholder Servicing Agents.
5. Bought with proceeds from the sale of Class I shares of a One Group Fund or
acquired in an exchange of Class I shares of a Fund for Class A shares of
the same Fund, but only if the purchase is made within 60 days of the sale
or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund, including
Class A shares of a One Group Fund, for which a sales charge was paid, but
only if the purchase is made within 60 days of the sale or distribution.
Appropriate documentation may be required.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the sale or
distribution and, at the time of the distribution, the employee benefit plan
had plan assets invested in a One Group Fund.
8. Bought with assets of One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12-month
period. Shares received from dividend and capital gains reinvestment are
included in calculating the amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver. For information on the Systematic Withdrawal Plan, please see "Can I
Redeem on a Systematic Basis?".
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the Distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability.
3. That represent a minimum required distribution from your One Group IRA
Account or other One Group qualifying retirement plan, but only if you are
at least age 70 1/2. Only your One Group assets are considered when
calculating that portion of your minimum required distribution that
qualifies for the waiver.
4. Exchanged in connection with plans of reorganization of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class B shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the exchange.
Please see "Do I Pay a Sales Charge on an Exchange?."
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
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33
<PAGE>
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating the amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver. For information on the Systematic Withdrawal Plan, please see "Can I
Redeem on a Systematic Basis?".
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability.
3. That represent a minimum required distribution from your One Group IRA
Account or other One Group qualifying retirement plan, but only if you are
at least age 70 1/2. Only your One Group assets are considered when
calculating that portion of your minimum required distribution that
qualifies for the waiver.
4. Exchanged in connection with plans of reorganization of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the exchange.
Please see "Do I Pay a Sales Charge on an Exchange?."
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
Waiver Qualifications
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, call 1-800-480-4111 or contact
your Shareholder Servicing Agent. These waivers will not continue indefinitely
and may be discontinued at any time without notice.
--------------------------------------------------------------------------------
Exchanging Fund Shares
What Are My Exchange Privileges?
You may make the following exchanges:
. Class I shares of a Fund may be exchanged for Class A shares of that Fund or
for Class A or Class I shares of another One Group Fund.
. Class A shares of a Fund may be exchanged for Class I shares of that Fund or
for Class A or Class I shares of another One Group Fund, but only if you are
eligible to purchase those shares.
. Class B shares of a Fund may be exchanged for Class B shares of another One
Group Fund.
. Class C shares of a Fund may be exchanged for Class C shares of another One
Group Fund.
------
34
<PAGE>
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one Fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in the
Systematic Exchange Privilege, please select it on your Account Application. To
learn more about it, please call 1-800-480-4111.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days
written notice.
When Are Exchanges Processed?
Exchanges are processed the same business day they are received, provided:
. State Street Bank and Trust Company receives the request by 4:00 p.m., ET.
. You have provided One Group with all of the information necessary to process
the exchange.
. You have received a current prospectus of the Fund or Funds in which you
wish to invest.
. You have contacted your Shareholder Servicing Agent, if necessary.
Do I Pay A Sales Charge On An Exchange?
Generally, you will not pay a sales charge on an exchange. However:
. You will pay a sales charge if you own Class I shares of a Fund and you want
to exchange those shares for Class A shares, unless you qualify for a sales
charge waiver (see above).
. You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them for
shares of a Fund that does, in which case you would pay the sales charge
applicable to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that
Fund's sales charge and all other sales charges you have already paid.
. If you exchange Class B or Class C shares of a Fund, you will not pay a sales
charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you
exchanged, or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class B or Class C shares
is carried over to your new shares.
Are Exchanges Taxable?
Generally:
. An exchange between classes of shares of the same Fund is not taxable for
federal income tax purposes.
. An exchange between Funds is considered a sale and generally results in a
capital gain or loss for federal income tax purposes.
. You should talk to your tax advisor before making an exchange.
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35
<PAGE>
Are There Limits On Exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
. To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity. Exchange activity is excessive if it exceeds
two substantive exchange redemptions within 30 days of each other.
. Excessive exchange activity will result in revocation of your exchange
privilege.
. In addition, One Group reserves the right to reject any exchange request
(even those that are not excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or otherwise adversely
affect other shareholders.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to exchanges, your account
value falls below the minimum required balance. For information on minimum
required balances, please read, "How Do I Open An Account?"
--------------------------------------------------------------------------------
Redeeming Fund Shares
When Can I Redeem Shares?
You may redeem all or some of your shares on any day that the Funds are open
for business.
. Redemption requests received before 4:00 p.m. ET (or when the NYSE closes)
will be effective that day.
. All required documentation in the proper form must accompany a redemption
request. One Group may refuse to honor incomplete redemption requests.
How Do I Redeem Shares?
. You may use any of the following methods to redeem your shares:
1. You may send a written redemption request to your Shareholder Servicing
Agent, if applicable, or to State Street Bank and Trust Company at the
following address:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
2. You may use the One Group website at www.onegroup.com; or
3. You may redeem over the telephone. Please see "Can I Redeem By
Telephone?" for more information.
. All requests for redemptions from IRA accounts must be in writing.
. You may request redemption forms by calling 1-800-480-4111 or visiting
www.onegroup.com.
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36
<PAGE>
. One Group may require that the signature on your redemption request be
guaranteed by a participant in the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for shares worth $50,000 or less; and
2. the redemption is payable to the shareholder of record; and
3. the redemption check is mailed to the shareholder at the record address
or the redemption is payable by wire or bank transfer (ACH) to a pre-
existing bank account.
. On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated bank; or
2. your Shareholder Servicing Agent.
. One Group may charge you a wire redemption fee. The current charge is $7.00.
. Your redemption proceeds ordinarily will be paid within seven days after
receipt of the redemption request. The Funds will attempt to honor requests
for same day payment if the request is received by 4:00 p.m. ET. If
redemption requests are received after 4:00 p.m. ET, the Funds will attempt
to wire payment the next business day.
What Will My Shares Be Worth?
. If you own Class A or Class I shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that
day's NAV.
. If you own Class B or Class C shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that
day's NAV, minus the amount of any applicable CDSC.
Can I Redeem By Telephone?
Yes, if you selected this option on your Account Application Form.
. Contact your Shareholder Servicing Agent or call 1-800-480-4111 to relay
your redemption request.
. Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
. State Street Bank and Trust Company may charge you a wire redemption fee.
The current charge is $7.00.
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. Redemptions from your IRA account may not be made by telephone.
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37
<PAGE>
Can I redeem on a systematic basis?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each. This $10,000
minimum does not apply to minimum required distributions from your One Group
IRA or other qualifying retirement plan.
. Select the "Systematic Withdrawal Plan" option on the Account Application
Form.
. Specify the amount you wish to receive and the frequency of the payments.
. You may designate a person other than yourself as the payee.
. There is no charge for this service.
. If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A shares
while participating in a Systematic Withdrawal Plan. This is because
Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated payee may
receive systematic payments. The applicable Class B and Class C sales
charge is waived provided your withdrawals do not exceed 10% of your
account value annually, measured from the date you begin participating in
the Plan. Shares received from dividend and capital gains reinvestment
are included in calculating the 10%. Withdrawals in excess of 10% will
subject the entire annual withdrawal to the applicable sales charge.
3. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from a One
Group IRA or other One Group qualifying retirement plan. Only One Group
assets are considered when calculating your minimum required
distribution.
4. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
. Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more, the Fund reserves the right to pay part or all of
your redemption proceeds in readily marketable securities instead of cash.
If payment is made in securities, the Fund will value the securities
selected in the same manner in which it computes its NAV. This process
minimizes the effect of large redemptions on the Fund and its remaining
shareholders.
. If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to redemptions, your account
value falls below the minimum required balance. The above provision does not
apply to accounts participating in the Systematic Withdrawal Plan. For
information on minimum required balances, please read, "How Do I Open An
Account?"
------
38
<PAGE>
No CDSC will be charged on such redemptions.
. One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
. You generally will recognize a gain or loss on a redemption for federal
income tax purposes. You should talk to your tax advisor before making a
redemption.
------
39
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
Shareholder Information
--------------------------------------------------------------------------------
Voting Rights
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each
Fund, and each class of shares within each Fund, vote separately on matters
relating solely to that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal voting rights on matters
that affect all shareholders equally.
Dividend Policies
DIVIDENDS. The Funds generally declare dividends quarterly. The Investor
Conservative Growth Fund, however, generally declares dividends monthly.
Dividends are distributed on the first business day of the next month after
they are declared. Capital gains, if any, for all Funds are distributed at
least annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payment in cash. The price of the shares
is the NAV determined immediately following the dividend record date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street. You also may call 1-800-480-4111 to
make this change.
------
40
<PAGE>
SPECIAL DIVIDEND RULES FOR CLASS B SHARES. Class B shares received as dividends
and capital gains distributions will be accounted for separately. Each time any
Class B shares (other than those in the sub-account) convert to Class A shares,
a percentage of the Class B shares in the sub-account will also convert to
Class A shares. (See "Conversion Feature.")
Tax Treatment of Shareholders
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange, or redemption of Fund
shares generally will produce either a taxable gain or a loss. You are
responsible for any tax liabilities generated by your transactions.
Taxation of Distributions
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses and net capital gains [i.e., the excess of net
long-term capital gains over net short-term capital losses]) on at least an
annual basis. Dividends you receive from a Fund, whether reinvested or received
in cash, will be taxable to you. Dividends from a Fund's net investment income
will be taxable as ordinary income and distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
A Fund's use of a fund-of-funds structure could affect the amount, timing and
character of distributions to you. See "Additional Tax Information Concerning
the Funds of Funds" in the Statement of Additional Information.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
Taxation of Retirement Plans
Distributions by the Funds to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for tax-
exempt treatment or by an individual who has received shares as a distribution
from a retirement plan, the distributions will be taxable to the plan or
individual as described in "Taxation of Distributions." If you are considering
purchasing shares with qualified retirement plan assets, you should consult
your tax advisor for a more complete explanation of the federal, state, local
and (if applicable) foreign tax consequences of making such an investment.
Tax Information
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the federal, state,
local or foreign tax treatment of the Funds or their shareholders.
------
41
<PAGE>
Shareholder Statements and Reports
One Group or your Shareholder Servicing Agent will send you transaction
confirmation statements and quarterly account statements. Please review these
statements carefully. One Group will correct errors if notified within one year
of the date printed on the transaction confirmation or account statement. Your
Shareholder Servicing Agent may have a different cut-off time.
To reduce expenses and conserve natural resources, One Group will deliver a
single copy of prospectuses and financial reports to individual investors who
share a residential address, provided they have the same last name or One Group
reasonably believes they are members of the same family. If you would like to
receive separate mailings, please call 1-800-480-4111 and One Group will begin
individual delivery within 30 days. If you would like to receive these
documents by e-mail, please visit www.onegroup.com and sign up for electronic
delivery.
If you are the record owner of your One Group shares (that is, you did not use
a Shareholder Servicing Agent to buy your shares), you may access your account
statements at www.onegroup.com.
In March and September, you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
If you have any questions or need additional information, please write One
Group Mutual Funds at 1111 Polaris Parkway, Columbus, OH 43271-1235, call 1-
800-480-4111 or visit www.onegroup.com.
------
42
<PAGE>
ONE GROUP(R)
------------------
Management of One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor to
the Trust since its inception. In addition, Banc One Investment Advisors serves
as investment advisor to other mutual funds and individual corporate,
charitable and retirement accounts. As of June 30, 2000, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $131 billion in assets.
--------------------------------------------------------------------------------
The Sub-Advisors
Banc One High Yield Partners, LLC, 8044 Montgomery Road, Suite 382, Cincinnati,
Ohio 45236, is the sub-advisor to the High Yield Bond Fund and the Income Bond
Fund. Banc One High Yield Partners was formed in June 1998 to provide
investment advisory services related to high-yield, high-risk investments to
the High Yield Bond Fund and other advisory clients. Banc One High Yield
Partners is controlled by Banc One Investment Advisors and Pacholder
Associates, Inc. As of June 30, 2000, Banc One High Yield Partners had
approximately $357 million in assets under management.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Investor Conservative Growth
Fund .02%
---------------------------------------------------------------------
One Group(R) Investor Balanced Fund .02%
---------------------------------------------------------------------
One Group(R) Investor Growth & Income Fund .02%
---------------------------------------------------------------------
One Group(R) Investor Growth Fund .02%
---------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
The Fund Managers
No single person is responsible for managing the assets of the Funds. Rather,
investment decisions for the Funds are made by committee. Banc One Investment
Advisors also serves as the advisor to the underlying mutual funds, for which
it receives a fee.
------
43
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Investor Conservative Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
DECEMBER 10,
YEAR ENDED JUNE 30, 1996 THROUGH
---------------------------- JUNE 30,
CLASS A 2000 1999 1998 1997(A)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 11.18 $ 11.04 $. 10.32 $10.00
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.49 0.44 0.43 0.22
Net realized and unrealized gains
(losses) from investments (0.03) 0.29 0.82 0.32
------------------------------------------------------------------------------
Total from Investment Activities 0.46 0.73 1.25 0.54
------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.46) (0.43) (0.22)
Net realized gains (0.08) (0.13) (0.10) --
Total Distributions (0.57) (0.59) (0.53) (0.22)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.07 $ 11.18 $ 11.04 $10.32
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 4.27% 6.77% 12.38% 5.46%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 31,225 $ 9,714 $ 12,538 $1,299
Ratio of expenses to average net
assets 0.45% 0.45% 0.45% 0.47%(C)
Ratio of net investment income to
average net assets 4.46% 4.07% 4.12% 4.76%(C)
Ratio of expenses to average net
assets* 0.65% 0.67% 0.82% 3.05%(C)
Portfolio turnover(D) 23.76% 9.73% 3.22% 28.46%
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<CAPTION>
DECEMBER 10,
YEAR ENDED JUNE 30, 1996 THROUGH
---------------------------- JUNE 30,
CLASS B 2000 1999 1998 1997(A)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 11.19 $ 11.05 $ 10.33 $10.00
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.41 0.36 0.37 0.19
Net realized and unrealized gains
(losses) from investments (0.03) 0.29 0.81 0.33
------------------------------------------------------------------------------
Total from Investment Activities 0.38 0.65 1.18 0.52
------------------------------------------------------------------------------
Distributions:
Net investment income (0.41) (0.38) (0.36) (0.19)
Net realized gains (0.08) (0.13) (0.10) --
Total Distributions (0.49) (0.51) (0.46) (0.19)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.08 $ 11.19 $ 11.05 $10.33
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 3.48% 6.10% 11.53% 5.30%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $117,926 $121,348 $ 39,489 $2,616
Ratio of expenses to average net
assets 1.20% 1.20% 1.20% 1.21%(C)
Ratio of net investment income to
average net assets 3.70% 3.33% 3.37% 4.06%(C)
Ratio of expenses to average net
assets* 1.30% 1.32% 1.47% 3.52%(C)
Portfolio turnover(D) 23.76% 9.73% 3.22% 28.46%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
44
<PAGE>
------------------
[GRAPHIC]
Investor Conservative Growth Fund
<TABLE>
<CAPTION>
YEAR ENDED JULY 1,
JUNE 30, 1997 THROUGH
--------------- JUNE 30,
CLASS C 2000 1999 1998(A)
------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.17 $11.03 $ 10.33
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.41 0.36 0.35
Net realized and unrealized gains (losses) from
investments (0.03) 0.29 0.81
------------------------------------------------------------------------------
Total from Investment Activities 0.38 0.65 1.16
------------------------------------------------------------------------------
Distributions:
Net investment income (0.41) (0.38) (0.36)
Net realized gains (0.08) (0.13) (0.10)
Total Distributions (0.49) (0.51) (0.46)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.06 $11.17 $ 11.03
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.48% 6.00% 11.48%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 7,207 $8,742 $ 3,788
Ratio of expenses to average net assets 1.20% 1.20% 1.20%
Ratio of net investment income to average net
assets 3.70% 3.32% 3.39%
Ratio of expenses to average net assets* 1.30% 1.33% 1.47%
Portfolio turnover(B) 23.76% 9.73% 3.22%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
DECEMBER 10,
YEAR ENDED JUNE 30, 1996 THROUGH
------------------------- JUNE 30,
CLASS I 2000 1999 1998 1997(A)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.20 $ 11.06 $ 10.33 $ 10.00
-----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.52 0.47 0.46 0.26
Net realized and unrealized gains
(losses) from investments (0.03) 0.28 0.82 0.33
-----------------------------------------------------------------------------
Total from Investment Activities 0.49 0.75 1.28 0.59
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.52) (0.48) (0.45) (0.26)
Net realized gains (0.08) (0.13) (0.10) -
Total Distributions (0.60) (0.61) (0.55) (0.26)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.09 $ 11.20 $ 11.06 $ 10.33
-----------------------------------------------------------------------------
Total Return 4.52% 7.01% 12.70% 6.00%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $52,294 $37,131 $30,352 $15,038
Ratio of expenses to average net
assets 0.20% 0.20% 0.20% 0.20%(C)
Ratio of net investment income to
average net assets 4.66% 4.31% 4.43% 4.92%(C)
Ratio of expenses to average net
assets* 0.30% 0.32% 0.56% 1.46%(C)
Portfolio turnover(D) 23.76% 9.73% 3.22% 28.46%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
45
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Investor Balanced Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
DECEMBER
10,
YEAR ENDED JUNE 30, 1996 THROUGH
--------------------------- JUNE 30,
CLASS A 2000 1999 1998 1997(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.24 $ 11.83 $ 10.66 $ 10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.47 0.42 0.34 0.17
Net realized and unrealized gains
(losses) from investments 0.30 0.79 1.39 0.66
-------------------------------------------------------------------------------
Total from Investment Activities 0.77 1.21 1.73 0.83
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.48) (0.34) (0.17)
Net realized gains (0.03) (0.32) (0.22) -
Total Distributions (0.49) (0.80) (0.56) (0.17)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.52 $ 12.24 $ 11.83 $ 10.66
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.43% 10.70% 16.62% 8.41%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $219,684 $177,336 $32,605 $ 2,176
Ratio of expenses to average net
assets 0.45% 0.45% 0.45% 0.47%(C)
Ratio of net investment income to
average net assets 3.82% 3.27% 3.01% 3.78%(C)
Ratio of expenses to average net
assets* 0.62% 0.61% 0.66% 1.12%(C)
Portfolio turnover(D) 20.99% 13.51% 9.71% 12.20%
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<CAPTION>
DECEMBER 10,
YEAR ENDED JUNE 30, 1996 THROUGH
--------------------------- JUNE 30,
CLASS B 2000 1999 1998 1997(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.24 $ 11.82 $ 10.65 $ 10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.37 0.33 0.26 0.16
Net realized and unrealized gains
(losses) from investments 0.30 0.81 1.39 0.65
-------------------------------------------------------------------------------
Total from Investment Activities 0.67 1.14 1.65 0.81
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.37) (0.40) (0.26) (0.16)
Net realized gains (0.03) (0.32) (0.22) -
Total Distributions (0.40) (0.72) (0.48) (0.16)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.51 $ 12.24 $ 11.82 $ 10.65
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.58% 10.01% 15.85% 8.22%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $298,942 $229,671 $70,463 $ 5,672
Ratio of expenses to average net
assets 1.20% 1.20% 1.20% 1.22%(C)
Ratio of net investment income to
average net assets 3.04% 2.78% 2.26% 2.93%(C)
Ratio of expenses to average net
assets* 1.27% 1.26% 1.31% 1.73%(C)
Portfolio turnover(D) 20.99% 13.51% 9.71% 12.20%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
46
<PAGE>
[GRAPHIC]
------------------
Investor Balanced Fund
<TABLE>
<CAPTION>
JULY 1,
YEAR ENDED JUNE 30, 1997 THROUGH
-------------------- JUNE 30,
CLASS C 2000 1999 1998(A)
------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.19 $ 11.77 $ 10.63
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.37 0.32 0.26
Net realized and unrealized gains (losses)
from investments 0.30 0.81 1.37
------------------------------------------------------------------------------
Total from Investment Activities 0.67 1.13 1.63
------------------------------------------------------------------------------
Distributions:
Net investment income (0.37) (0.39) (0.27)
Net realized gains (0.03) (0.32) (0.22)
Total Distributions (0.40) (0.71) (0.49)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.46 $ 12.19 $ 11.77
------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.59% 10.04% 15.66%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 16,095 $ 14,963 $ 6,653
Ratio of expenses to average net assets 1.20% 1.20% 1.20%
Ratio of net investment income to average
net assets 3.08% 2.85% 2.24%
Ratio of expenses to average net assets* 1.27% 1.26% 1.30%
Portfolio turnover(B) 20.99% 13.51% 9.71%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
DECEMBER 10,
YEAR ENDED JUNE 30, 1996 THROUGH
------------------------- JUNE 30,
CLASS I 2000 1999 1998 1997 (A)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.24 $ 11.81 $ 10.63 $ 10.00
-----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.53 0.47 0.37 0.21
Net realized and unrealized gains
(losses) from investments 0.27 0.79 1.39 0.63
-----------------------------------------------------------------------------
Total from Investment Activities 0.80 1.26 1.76 0.84
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.51) (0.36) (0.21)
Net realized gains (0.03) (0.32) (0.22) -
Total Distributions (0.52) (0.83) (0.58) (0.21)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.52 $ 12.24 $ 11.81 $ 10.63
-----------------------------------------------------------------------------
Total Return 6.69% 11.16% 17.02% 8.48%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $56,229 $84,447 $93,557 $72,155
Ratio of expenses to average net
assets 0.20% 0.20% 0.20% 0.20%(C)
Ratio of net investment income to
average net assets 4.10% 3.85% 3.31% 3.84%(C)
Ratio of expenses to average net
assets* 0.27% 0.26% 0.32% 0.56%(C)
Portfolio turnover (D) 20.99% 13.51% 9.71% 12.20%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
47
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Investor Growth & Income Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, DECEMBER 10, 1996
------------------------------ THROUGH
CLASS A 2000 1999 1998 JUNE 30, 1997 (A)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 13.40 $ 12.69 $ 11.02 $ 10.00
--------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.39 0.36 0.22 0.12
Net realized and unrealized
gains (losses) from
investments 0.65 1.27 1.95 1.02
--------------------------------------------------------------------------------
Total from Investment
Activities 1.04 1.63 2.17 1.14
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.39) (0.45) (0.22) (0.12)
Net realized gains (0.09) (0.47) (0.28) -
Total Distributions (0.48) (0.92) (0.50) (0.12)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 13.96 $ 13.40 $ 12.69 $ 11.02
--------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 7.85% 13.62% 20.18% 11.50%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $ 299,207 $ 245,151 $ 39,874 $ 4,262
Ratio of expenses to average
net assets 0.45% 0.45% 0.45% 0.46%(C)
Ratio of net investment
income to average net
assets 2.91% 1.54% 1.91% 2.67%(C)
Ratio of expenses to average
net assets* 0.63% 0.62% 0.67% 1.26%(C)
Portfolio turnover(D) 21.50% 17.87% 11.38% 18.07%
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<CAPTION>
YEAR ENDED JUNE 30, DECEMBER 10, 1996
------------------------------ THROUGH
CLASS B 2000 1999 1998 JUNE 30, 1997(A)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 13.36 $ 12.64 $ 11.00 $ 10.00
--------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.29 0.26 0.14 0.09
Net realized and unrealized
gains (losses) from
investments 0.64 1.29 1.92 1.00
--------------------------------------------------------------------------------
Total from Investment
Activities 0.93 1.55 2.06 1.09
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.29) (0.36) (0.14) (0.09)
Net realized gains (0.09) (0.47) (0.28) -
Total Distributions (0.38) (0.83) (0.42) (0.09)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 13.91 $ 13.36 $ 12.64 $ 11.00
--------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 7.04% 12.93% 19.13% 11.02%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $ 362,151 $ 221,088 $ 85,468 $ 8,896
Ratio of expenses to average
net assets 1.20% 1.20% 1.20% 1.21%(C)
Ratio of net investment
income to average net
assets 2.13% 2.12% 1.15% 1.94%(C)
Ratio of expenses to average
net assets* 1.28% 1.27% 1.32% 1.89%(C)
Portfolio turnover(D) 21.50% 17.87% 11.38% 18.07%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
48
<PAGE>
------------------
Investor Growth & Income Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE JULY 1,
30, 1997 THROUGH
---------------- JUNE 30,
CLASS C 2000 1999 1998(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.25 $ 12.54 $ 10.93
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.29 0.26 0.14
Net realized and unrealized gains (losses) from
investments 0.64 1.28 1.90
-------------------------------------------------------------------------------
Total from Investment Activities 0.93 1.54 2.04
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.29) (0.36) (0.15)
Net realized gains (0.09) (0.47) (0.28)
Total Distributions (0.38) (0.83) (0.43)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.80 $ 13.25 $ 12.54
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.10% 12.94% 19.08%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $16,944 $12,347 $ 6,429
Ratio of expenses to average net assets 1.20% 1.20% 1.20%
Ratio of net investment income to average net
assets 2.18% 2.20% 1.14%
Ratio of expenses to average net assets* 1.28% 1.27% 1.31%
Portfolio turnover(B) 21.50% 17.87% 11.38%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
DECEMBER 10,
YEAR ENDED JUNE 30, 1996 THROUGH
--------------------------- JUNE 30,
CLASS I 2000 1999 1998 1997(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.29 $ 12.57 $ 10.93 $ 10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.43 0.35 0.25 0.15
Net realized and unrealized gains
(losses) from investments 0.63 1.32 1.92 0.93
-------------------------------------------------------------------------------
Total from Investment Activities 1.06 1.67 2.17 1.08
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.42) (0.48) (0.25) (0.15)
Net realized gains (0.09) (0.47) (0.28) -
Total Distributions (0.51) (0.95) (0.53) (0.15)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.84 $ 13.29 $ 12.57 $ 10.93
-------------------------------------------------------------------------------
Total Return 8.10% 14.11% 20.34% 10.87%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $207,040 $209,770 $98,060 $43,660
Ratio of expenses to average net
assets 0.20% 0.20% 0.20% 0.20%(C)
Ratio of net investment income to
average net assets 3.14% 3.70% 2.17% 2.78%(C)
Ratio of expenses to average net
assets* 0.28% 0.27% 0.34% 0.66%(C)
Portfolio turnover(D) 21.50% 17.87% 11.38% 18.07%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
49
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Investor Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than that
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, DECEMBER 10,
CLASS A --------------------------- 1996 THROUGH
1999 1998 2000 JUNE 30, 1997 (A)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.30 $ 13.33 $ 11.21 $ 10.00
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.33 0.29 0.10 0.07
Net realized and unrealized
gains (losses) from
investments 1.09 1.74 2.47 1.21
------------------------------------------------------------------------------
Total from Investment
Activities 1.42 2.03 2.57 1.28
------------------------------------------------------------------------------
Distributions:
Net investment income (0.31) (0.40) (0.10) (0.07)
Net realized gains (0.16) (0.66) (0.35) -
Total Distributions (0.47) (1.06) (0.45) (0.07)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.25 $ 14.30 $ 13.33 $ 11.21
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 10.04% 16.40% 23.44% 12.84%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $140,449 $100,789 $55,057 $ 4,439
Ratio of expenses to average
net assets 0.45% 0.45% 0.45% 0.46%(C)
Ratio of net investment income
to average net assets 2.25% 2.08% 0.78% 1.82%(C)
Ratio of expenses to average
net assets* 0.67% 0.66% 0.70% 1.62%(C)
Portfolio turnover(D) 28.66% 14.62% 4.05% 18.49%
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<CAPTION>
YEAR ENDED JUNE 30, DECEMBER 10, 1996
--------------------------- THROUGH JUNE 30,
CLASS B 2000 1999 1998 1997(A)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.44 $ 13.47 $ 11.34 $ 10.00
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.24 0.20 0.02 0.04
Net realized and unrealized
gains (losses) from
investments 1.07 1.76 2.48 1.34
------------------------------------------------------------------------------
Total from Investment
Activities 1.31 1.96 2.50 1.38
------------------------------------------------------------------------------
Distributions:
Net investment income (0.24) (0.33) (0.02) (0.04)
Net realized gains (0.16) (0.66) (0.35) -
Total Distributions (0.40) (0.99) (0.37) (0.04)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.35 $ 14.44 $ 13.47 $ 11.34
------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 9.14% 15.57% 22.52% 13.88%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $302,162 $168,823 $70,515 $ 7,651
Ratio of expenses to average
net assets 1.20% 1.20% 1.20% 1.20%(C)
Ratio of net investment income
to average net assets 1.41% 1.44% 0.04% 0.97%(C)
Ratio of expenses to average
net assets* 1.32% 1.31% 1.35% 2.18%(C)
Portfolio turnover(D) 28.66% 14.62% 4.05% 18.49%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
50
<PAGE>
------------------
Investor Growth Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE JULY 1,
30, 1997 THROUGH
---------------- JUNE 30,
CLASS C 2000 1999 1998(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.30 $ 13.34 $11.25
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.24 0.18 0.02
Net realized and unrealized gains (losses) from
investments 1.05 1.77 2.45
-------------------------------------------------------------------------------
Total from Investment Activities 1.29 1.95 2.47
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.24) (0.33) (0.03)
Net realized gains (0.16) (0.66) (0.35)
Total Distributions (0.40) (0.99) (0.38)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.19 $ 14.30 $13.34
-------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 9.08% 15.65% 22.42%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $19,404 $15,071 $8,772
Ratio of expenses to average net assets 1.20% 1.20% 1.20%
Ratio of net investment income to average net
assets 1.52% 1.50% 0.04%
Ratio of expenses to average net assets* 1.32% 1.31% 1.35%
Portfolio turnover(B) 28.66% 14.62% 4.05%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
DECEMBER 10,
YEAR ENDED JUNE 30, 1996 THROUGH
-------------------------- JUNE 30,
CLASS I 2000 1999 1998 1997(A)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.39 $ 13.39 $ 11.25 $ 10.00
------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.40 0.32 0.12 0.09
Net realized and unrealized gains
(losses) from investments 1.04 1.77 2.49 1.25
------------------------------------------------------------------------------
Total from Investment Activities 1.44 2.09 2.61 1.34
------------------------------------------------------------------------------
Distributions:
Net investment income (0.34) (0.43) (0.12) (0.09)
Net realized gains (0.16) (0.66) (0.35) -
Total Distributions (0.50) (1.09) (0.47) (0.09)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.33 $ 14.39 $ 13.39 $ 11.25
------------------------------------------------------------------------------
Total Return 10.17% 16.84% 23.81% 13.50%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $73,483 $100,566 $86,355 $31,318
Ratio of expenses to average net
assets 0.20% 0.20% 0.20% 0.20%(C)
Ratio of net investment income to
average net assets 2.77% 2.57% 1.04% 1.70%(C)
Ratio of expenses to average net
assets* 0.32% 0.31% 0.36% 0.77%(C)
Portfolio turnover(D) 28.66% 14.62% 4.05% 18.49%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
51
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The following is a brief description of the principal investment policies of
each of the underlying funds.
--------------------------------------------------------------------------------
One Group Prime Money Market Fund
One Group Prime Money Market Fund seeks current income with liquidity and
stability of principal by investing exclusively in high-quality, short-term
money market instruments. These instruments include corporate notes, commercial
paper, funding agreements, certificates of deposit, bank obligations and
deposit notes. The Fund will concentrate in the financial services industry,
including asset-backed commercial paper programs. The Fund intends to comply
with the regulations of the Securities and Exchange Commission applicable to
money market funds using the amortized cost method for calculating net asset
value. These regulations impose certain quality, maturity and diversification
restraints on investments by the Fund. Under these regulations, the Fund will
invest only in U.S. dollar-denominated securities, will maintain an average
maturity on a dollar-weighted basis of 90 days or less, and will acquire only
"eligible securities" that present minimal credit risks and are treated as
having a maturity of 397 days or less.
--------------------------------------------------------------------------------
One Group Short-Term Bond Fund
One Group Short-Term Bond Fund seeks current income consistent with
preservation of capital through investment in high- and medium-grade fixed-
income securities. The Fund normally invests at least 80% of total assets in
debt securities of all types with short to intermediate maturities. Debt
securities include bonds, notes and other obligations. At least 65% of the
Fund's total assets will consist of bonds rated in one of the four investment
grade categories at the time of investment, or if unrated, determined by Banc
One Investment Advisors to be of comparable quality, some of which may be
subject to repurchase agreements. Many investments will satisfy both
requirements. Under normal market conditions, it is anticipated that the Fund's
average weighted maturity ordinarily will be three years or less taking into
account expected amortization and prepayment of principal on certain
investments, although for temporary defensive purposes the effective average
weighted maturity may exceed three years. The Fund may also purchase taxable or
tax-exempt municipal securities. Up to 20% of the Fund's total assets may be
invested in preferred stocks.
--------------------------------------------------------------------------------
One Group Intermediate Bond Fund
One Group Intermediate Bond Fund seeks current income consistent with the
preservation of capital through investments in high- and medium-grade fixed-
income securities with intermediate maturities. The Fund will normally invest
at least 80% of its total assets in debt securities of all types. Debt
securities include
------
52
<PAGE>
bonds, notes and other obligations. At least 65% of the Fund's total assets
will consist of bonds rated in one of the four investment grade categories at
the time of investment, or if unrated, determined by Banc One Investment
Advisors to be of comparable quality, and at least 50% of total assets will
consist of obligations issued by the U.S. government or its agencies and
instrumentalities, some of which may be subject to repurchase agreements. Many
investments will satisfy both requirements. The Fund also may invest in more
speculative debt securities if they present attractive opportunities and are
rated in the lowest investment grade category. The Fund may also purchase
taxable or tax-exempt municipal securities. Under normal market conditions, it
is anticipated that the Fund's average weighted maturity will range between
three and ten years. Up to 20% of the Fund's total assets may be invested in
preferred stocks.
--------------------------------------------------------------------------------
One Group Income Bond Fund
One Group Income Bond Fund seeks a high level of current income by investing
primarily in a diversified portfolio of high-, medium- and low-grade debt
securities. The Fund normally will invest at least 70% of its total assets in
debt securities of all types rated as investment grade at the time of
investment or, if unrated, determined by Banc One Investment Advisors to be of
comparable quality. In addition, up to 30% of the Fund's total assets may be
invested in convertible securities, preferred stock, loan participations and
debt securities rated below investment grade or, if unrated, determined by Banc
One Investment Advisors to be of comparable quality. Securities rated below
investment grade are called "high yield bonds," "non-investment grade bonds"
and "junk bonds." These securities are rated in the fifth or lower rating
categories, for example, BB or lower by Standard & Poor's Corporation ("S&P")
and Ba or lower by Moody's Investors Service, Inc. ("Moody's"), and are
considered to have speculative characteristics. Even though it may invest in
debt securities in all rating categories, the Fund will not invest more than
20% of its total assets in securities rated below the fifth rating category. As
a matter of fundamental policy, at least 65% of the Fund's total assets will
consist of bonds. The Fund also may purchase taxable or tax-exempt municipal
securities.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range between five and 20 years. The Fund may shorten
its effective weighted average maturity to as little as two years if deemed
appropriate for temporary defensive purposes.
--------------------------------------------------------------------------------
One Group Bond Fund
One Group Bond Fund seeks to maximize total return by investing primarily in a
diversified portfolio of intermediate- and long-term debt securities. The Fund
invests in all types of debt securities rated as investment grade, as well as
convertible securities, preferred stock and loan participations. The Fund's
average weighted maturity will normally range between four and 12 years,
although the Fund may shorten its weighted average if deemed appropriate for
temporary defensive purposes. The Fund invests at least 65% of its total assets
in debt securities of all types with intermediate to long maturities. As a
matter of fundamental policy, at least 65% of the Fund's total assets will
consist of bonds. The Fund also may purchase taxable or tax-exempt municipal
securities.
------
53
<PAGE>
--------------------------------------------------------------------------------
One Group High Yield Bond Fund
The Fund seeks a high level of current income by investing primarily in a
diversified portfolio of debt securities which are rated below investment grade
or unrated. Capital appreciation is a secondary objective. The Fund invests in
all types of high yield, high risk debt securities. The Fund also may invest in
convertible securities, preferred stock, common stock and loan participations.
The Fund's weighted average maturity will normally range between five and 10
years, although the Fund may shorten its weighted average maturity to as little
as two years if deemed appropriate for temporary defensive purposes. The Fund
normally invests at least 80% of the Fund's total assets in debt securities
which are rated below investment grade or unrated, although the Fund may invest
up to 100% of the Fund's total assets in such securities. Securities rated
below investment grade are called "high yield bonds," "non-investment grade
bonds," "below investment grade bonds" and "junk bonds." These securities are
rated in the fifth or lower rating categories (for example, BB or lower by S&P
and Ba or lower by Moody's Investors Service, Inc.), and are considered to be
speculative. The Fund also may invest up to 20% of its total assets in other
securities, including investment grade debt securities. As a matter of
fundamental policy, at least 65% of the Fund's total assets will consist of
bonds.
--------------------------------------------------------------------------------
One Group Government Bond Fund
One Group Government Bond Fund seeks a high level of current income with
liquidity and safety of principal. The Fund will limit its investments to
securities issued by the U.S. government and its agencies and instrumentalities
or related to securities issued by the U.S. government and its agencies and
instrumentalities. At least 65% of the total assets of the Fund will be
invested in obligations guaranteed as to principal and interest by the U.S.
government or its agencies and instrumentalities, some of which may be subject
to repurchase agreements, and other securities representing an interest in or
collateralized by mortgages that are issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The average weighted maturity of
the Fund is expected to be between three and 15 years, however, the Fund's
average weighted remaining maturity may be outside this range if warranted by
market conditions. The balance of the Fund's assets may be invested in debt
securities and taxable or tax-exempt municipal securities.
--------------------------------------------------------------------------------
One Group Ultra Short-Term Bond Fund
One Group Ultra Short-Term Bond Fund seeks a high level of current income
consistent with low volatility of principal by investing in a diversified
portfolio of short-term investment grade securities. The Fund normally invests
at least 80% of its total assets in debt securities of all types, including
money market instruments. In addition, up to 20% of the Fund's total assets may
be invested in other securities, including preferred stock. The Fund will
invest in adjustable rate mortgage pass-through securities and other securities
representing an interest in or collateralized by mortgages with periodic
interest rate resets, some of which may be subject to repurchase agreements.
These securities often are issued or guaranteed by the U.S. government, its
agencies or instrumentalities. However, the Fund also may purchase mortgage-
backed securities that are issued by non-governmental entities. Such securities
may or may not have private insurer guarantees as to timely payments. The Fund
also may purchase mortgage and interest rate swaps and interest rate floors and
caps. The Fund also may employ other investment techniques to enhance
------
54
<PAGE>
returns, such as loans of fund securities, mortgage dollar rolls, repurchase
agreements, options contracts and reverse repurchase agreements. The Fund will
maintain a maximum duration of approximately two years.
--------------------------------------------------------------------------------
One Group Mid Cap Value Fund
One Group Mid Cap Value Fund seeks capital appreciation with the secondary goal
of achieving current income by investing primarily in equity securities. The
Fund will invest mainly in equity securities with below-market average price-
to-earnings and price-to-book value ratios. The issuer's soundness and earnings
prospects also will be considered. In seeking to achieve the objective of
capital appreciation, Banc One Investment Advisors looks at anticipated changes
that could positively impact the value of the company such as new products,
deployment of new technologies, cost cutting efforts and changes in management.
As a secondary consideration, Banc One Investment Advisors looks for companies
that have the potential to increase their dividends over time. If Banc One
Investment Advisors determines that a company's fundamentals are declining or
that the company's ability to pay dividends has been impaired, it likely will
eliminate the Fund's holding of the company's stock. The Fund normally invests
at least 80% of its total assets in equity securities consisting of common
stocks and debt securities and preferred stocks that are convertible into
common stocks. The Fund also may enter into options and futures transactions.
The balance of the Fund's assets will be held in cash equivalents.
--------------------------------------------------------------------------------
One Group International Equity Index Fund
One Group International Equity Index Fund seeks to provide investment results
that correspond to the aggregate price and dividend performance of the
securities in the Gross Domestic Product Weighted Morgan Stanley Capital
International Europe, Australasia and Far East Index ("MSCI EAFE GDP Index" or
"EAFE GDP Index")./1/ The Fund normally will invest at least 65% of the value
of its total assets in foreign equity securities, which are representative of
the Index and secondarily in stock index futures. The Fund's investments will
consist of common stocks (including sponsored and unsponsored American
Depositary Receipts) and preferred stocks, securities convertible into common
stocks (only if they are listed on registered exchanges or actively traded in
the over-the-counter market), warrants and depositary receipts. No more than
10% of the Fund's net assets will be held in cash or cash equivalents. The Fund
may invest up to 10% of its net assets in securities of emerging international
markets. A substantial portion of the Fund's assets will be denominated in
foreign currencies.
--------------------------------------------------------------------------------
One Group Diversified International Fund
One Group Diversified International Fund seeks long-term capital growth by
investing primarily in equity securities of foreign issuers. The Fund invests
primarily in the securities of companies located in Europe, Asia and Latin
America. The Fund also will invest in other regions and countries that present
attractive investment opportunities, including developing countries. In
selecting a country for investment, Banc One Investment Advisors analyzes the
global economic and political situation, as well as the securities markets of
selected countries. In selecting individual securities, Banc One Investment
Advisors selects a representative sampling of the companies comprising the
individual country's stock market index. Banc One Investment Advisors uses its
best judgment, experience and certain quantitative techniques to determine the
countries in which the Fund will invest, as well as the
/1/ "MSCI EAFE GDP Index" is a registered service mark of Morgan Stanley
Capital International, which does not sponsor and is in no way affiliated with
the Fund.
------
55
<PAGE>
amount invested in each country. Fund assets will be invested in at least three
countries. The Fund will invest at least 65% of its total assets in foreign
equity securities, consisting of common stocks (including American Depositary
Receipts), preferred stocks, rights, warrants, convertible securities, foreign
currencies and options on foreign currency, and other equity securities. Up to
20% of the Fund's total assets may be invested in U.S. government securities,
other investment grade fixed income securities, cash and cash equivalents.
--------------------------------------------------------------------------------
One Group Large Cap Growth Fund
One Group Large Cap Growth Fund seeks long-term capital appreciation and growth
of income by investing primarily in equity securities. The Fund will normally
invest at least 65%, of the value of its total assets in equity securities
consisting of common stocks, warrants and any rights to purchase common stocks.
To achieve its objective, the Fund will invest primarily in equity securities
of large, well established companies with weighted average capitalization in
excess of the market median capitalization of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index")./2/ The Fund may invest the
remainder of its assets in nonconvertible fixed income securities, repurchase
agreements, options and futures contracts, securities issued by the U.S.
government and its agencies and instrumentalities, and cash equivalents.
--------------------------------------------------------------------------------
One Group Large Cap Value Fund
One Group Large Cap Value Fund seeks capital appreciation with the incidental
goal of achieving current income by investing primarily in equity securities.
The Fund will invest in equity securities of large-capitalization companies
that are believed to be selling below their long-term investment values. The
average weighted market capitalization of the companies in which the Fund
invests will normally exceed the median market capitalization of the S&P 500
Index. In addition, the Fund may invest in stock of companies which have
"breakup" values well in excess of current market values or which have uniquely
undervalued corporate assets. The Fund normally will invest at least 65% of the
value of its total assets in equity securities consisting of common stocks and
debt securities and preferred stocks which are convertible into common stocks.
The remainder of the Fund's assets will be held in cash equivalents.
--------------------------------------------------------------------------------
One Group Mid Cap Growth Fund
One Group Mid Cap Growth Fund seeks growth of capital and, secondarily, current
income by investing primarily in equity securities. The Fund invests in
securities that have the potential to produce above-average earnings growth per
share over a one-to-three year period. Typically, the Fund acquires shares of
established companies with a history of above-average growth, as well as those
companies expected to enter periods of above-average growth. Not all the
securities purchased by the Fund will pay dividends. The Fund also invests in
smaller companies in emerging growth industries. At least 80% of the value of
its total assets will be invested in equity securities consisting of common
stocks and debt securities and preferred stocks that are convertible into
common stocks. The Fund also may enter into options and futures transactions.
The remainder of the Fund's assets will be held in cash equivalents.
/2/"S&P 500" is a registered trademark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund.
------
56
<PAGE>
--------------------------------------------------------------------------------
One Group Diversified Mid Cap Fund
One Group Diversified Mid Cap Fund seeks long-term capital growth by investing
primarily in equity securities of companies with intermediate capitalizations.
The Fund invests primarily in equity securities of companies with market
capitalizations of $500 million to $10 billion. Banc One Investment Advisors
believes that there are many companies of this size with strong growth
potential, stable market share, and an ability to quickly respond to new
business opportunities, all of which increase their likelihood of obtaining
superior levels of profitability and investment returns. The Fund normally
invests at least 65% of its total assets in common and preferred stock, rights,
warrants, convertible securities and other equity securities. While the Fund
invests primarily in securities of U.S. companies, up to 25% of its total
assets may be invested in equity securities of foreign issuers. Up to 20% of
the Fund's total assets may be invested in U.S. government securities, other
investment grade fixed income securities, cash and cash equivalents.
--------------------------------------------------------------------------------
One Group Diversified Equity Fund
One Group Diversified Equity Fund seeks long-term capital growth and growth of
income with a secondary objective of providing a moderate level of current
income. The Fund invests primarily in common stocks of companies that have good
fundamentals and reasonable valuations with the potential for continued
earnings growth over time. The Fund uses a multi-style approach, meaning that
it may invest across varied capitalization levels targeting both value and
growth oriented companies. Because the Fund seeks return over the long term,
Banc One Investment Advisors will not attempt to time the market. The Fund
normally will invest at least 65% of the value of its total assets in
securities with the characteristics described above.
Although the Fund intends to invest all of its assets in such securities, up to
35% of its total assets may be held in cash or invested in U.S. government
securities, other investment grade fixed-income securities, cash and cash
equivalents.
--------------------------------------------------------------------------------
One Group Small Cap Growth Fund
One Group Small Cap Growth Fund seeks long-term capital growth primarily by
investing in a portfolio of equity securities of small-capitalization and
emerging growth companies. The Fund invests primarily in a portfolio of common
stocks, debt securities, preferred stocks, convertible securities, warrants and
other equity securities of small-capitalization companies. Generally, Banc One
Investment Advisors selects a portfolio of companies with a capitalization
equivalent to the median market capitalization of the S&P Small-Cap 600
Index,/3/ although the Fund may occasionally hold securities of companies whose
market capitalizations are considerably larger if doing so contributes to the
Fund's investment objective. At least 65% of the value of the Fund's total
assets normally will be invested in securities with the characteristics
described above. Up to 35% of its total assets may be held in cash or invested
in U.S. government securities, other investment grade fixed-income securities
and cash equivalents.
/3/"S&P Small-Cap 600" is a registered trademark of Standard & Poor's
Corporation, which does not sponsor and is in no way affiliated with the
Fund.
------
57
<PAGE>
--------------------------------------------------------------------------------
One Group Small Cap Value Fund
One Group Small Cap Value Fund seeks long-term capital growth by investing
primarily in equity securities of small-capitalization companies. The Fund
invests mainly in equity securities of small domestic companies with market
capitalizations of $100 million to $3 billion. In reviewing investment
opportunities, Banc One Investment Advisors uses a value-oriented approach.
Companies are selected based upon such valuation characteristics as price-to-
earnings, price-to-book and price-to-cash flow ratios which are at a discount
to market averages. Banc One Investment Advisors also evaluates companies based
on market value, balance sheet strength, management depth and quality, market
and industry position, normalized return on capital and recent transactions
involving similar businesses. Stocks are sold based on price considerations or
when they are no longer expected to appreciate in value.
While the Fund invests primarily in securities of U.S. companies, up to 25% of
its total assets may be invested in equity securities of foreign issuers. Up to
20% of the Fund's total assets may be invested in U.S. government securities,
other investment grade fixed income securities, cash and cash equivalents.
--------------------------------------------------------------------------------
One Group Equity Income Fund
One Group Equity Income Fund seeks current income through regular payment of
dividends with the secondary goal of achieving capital appreciation by
investing primarily in equity securities. The Fund attempts to keep its
dividend yield above the S&P 500 Index by investing in common stocks of
corporations which regularly pay dividends, although continued payment of
dividends cannot be assured. The Fund will invest primarily in stocks with
favorable, long-term fundamental characteristics, but stocks of companies that
are out of favor in the financial community also may be purchased. The Fund
normally invests at least 65% of the value of its total assets in equity
securities consisting of common stocks, and debt securities and preferred
stocks which are convertible into common stocks. The Fund also may enter into
options and futures transactions. The balance of the Fund's assets will be held
in cash equivalents.
--------------------------------------------------------------------------------
One Group Equity Index Fund
One Group Equity Index Fund seeks investment results that correspond to the
aggregate price and dividend performance of the securities in the S&P 500
Index. The Fund normally invests in many of the stocks which comprise the S&P
500 Index and secondarily in stock index futures. Cash reserves will not
normally exceed 10% of the Fund's net assets. Banc One Investment Advisors
generally selects stocks for the Fund in the order of their weightings in the
S&P 500 Index beginning with the heaviest weighted stocks. The percentage of
the Fund's assets to be invested in each stock is approximately the same as the
percentage it represents in the S&P 500 Index.
--------------------------------------------------------------------------------
One Group Technology Fund
One Group Technology Fund mainly invests in equity securities of companies that
have developed, or are expected to develop, products, processes or services
that will provide significant technological advances and improvements. These
companies may include, for example, companies that develop, produce or
distribute products in the computer, electronics and communications sectors. In
selecting investments, the Fund generally will invest in companies (regardless
of size) whose stocks appear to be trading below their true value.
------
58
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
Appendix B
--------------------------------------------------------------------------------
Investment Practices
The underlying funds invest in a variety of securities and employ a number of
investment techniques. Each security and technique involves certain risks. What
follows is a list of some of the securities and techniques utilized by the
Funds, as well as the risks inherent in their use. For a more complete
discussion, see the Statement of Additional Information. Following the table is
a more complete discussion of risk.
<TABLE>
--------------------------------------------
<CAPTION>
Fund Name Fund Code
------------------------------------------
<S> <C>
One Group(R) Prime Money
Market Fund 1
------------------------------------------
One Group(R) Short-Term Bond
Fund 2
------------------------------------------
One Group(R) Intermediate Bond
Fund 3
------------------------------------------
One Group(R) Income Bond Fund 4
------------------------------------------
One Group(R) Bond Fund 5
------------------------------------------
One Group(R) High Yield Bond
Fund 6
------------------------------------------
One Group(R) Government Bond
Fund 7
------------------------------------------
One Group(R) Ultra Short-Term
Bond Fund 8
------------------------------------------
One Group(R) Mid Cap Value
Fund 9
------------------------------------------
One Group(R) International
Equity Index Fund 10
------------------------------------------
One Group(R) Diversified
International Fund 11
------------------------------------------
One Group(R) Large Cap Growth
Fund 12
------------------------------------------
One Group(R) Large Cap Value
Fund 13
------------------------------------------
One Group(R) Mid Cap Growth
Fund 14
------------------------------------------
One Group(R) Diversified Mid
Cap Fund 15
------------------------------------------
One Group(R) Diversified
Equity Fund 16
------------------------------------------
One Group(R) Small Cap Growth
Fund 17
------------------------------------------
One Group(R) Small Cap Value
Fund 18
------------------------------------------
One Group(R) Equity Income
Fund 19
------------------------------------------
One Group(R) Equity Index Fund 20
------------------------------------------
One Group(R) Technology Fund 21
</TABLE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS and CUBES. 1-21 Market
-------------------------------------------------------------------------------
Treasury Receipts: TRs, TIGRs and CATS. 1-21 Market
-------------------------------------------------------------------------------
U.S.Government Agency Securities: Securities issued by agencies 1-21 Market
and instrumentalities of the U.S. government. These include Ginnie Credit
Mae, Fannie Mae and Freddie Mac.
-------------------------------------------------------------------------------
</TABLE>
------
59
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Certificates of Deposit: Negotiable instruments with a 1-6, 8-21 Market
stated maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank 1-6, 8-21 Liquidity
in exchange for the deposit of funds. Credit
-------------------------------------------------------------------------------
Common Stock: Shares of ownership of a company. 6, 9-21 Market
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security and the 1-21 Credit
simultaneous commitment to return the security to the Market
seller at an agreed upon price on an agreed upon date. Liquidity
This is treated as a loan.
-------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a security and 1-21 Market
the simultaneous commitment to buy the security back at Leverage
an agreed upon price on an agreed upon date. This is
treated as a borrowing by a Fund.
-------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% of a 1-21 Credit
Fund's total assets. In return, the Fund will receive Market
cash, other securities and/or letters of credit. Leverage
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase 1-21 Market
or contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other mutual 1-21 Market
funds, including One Group money market funds and shares
of other money market mutual funds for which Banc One
Investment Advisors or its affiliates serve as investment
advisor or administrator. The Government Bond Fund will
purchase only shares of investment companies which invest
exclusively in U.S.Treasury and other agency obligations.
Banc One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment
advisor.
-------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock that can 3-6, 8-21 Market
convert to common stock. Credit
-------------------------------------------------------------------------------
Call and Put Options: A call option gives the buyer the 2-21 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price at a future date. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security at Leverage
a specified price at a future date. The Funds will sell
only covered call and secured put options.
-------------------------------------------------------------------------------
</TABLE>
------
60
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Futures and Related Options: A contract providing for 2-21 Management
the future sale and purchase of a specified amount of Market
a specified security, class of securities or an index Credit
at a specified time in the future and at a specified Liquidity
price. Leverage
-------------------------------------------------------------------------------
Real Estate Investment Trusts ("REITS"): Pooled 2-6, 9-21 Liquidity
investment vehicles which invest primarily in income- Management
producing real estate or real estate related loans or Market
interest. Prepayment
Tax
Regulatory
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time 8-21 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1-6, 8-21 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few days Market
to nine months.
-------------------------------------------------------------------------------
Foreign Securities: Stocks or debt issued by foreign 1-6, 8-21 Market
companies, as well as commercial paper of foreign Political
issuers and obligations of foreign banks, overseas Liquidity
branches of U.S.banks and supranational entities. Foreign
Includes American Depositary Receipts, Global Investment
Depositary Receipts, American Depositary Securities
and European Depositary Receipts.
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered 1-6, 8-21 Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities. Credit
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations 1-21 Market
with interest rates which are reset daily, weekly, Credit
quarterly or some other period and which may be Liquidity
payable to the Fund on demand.
-------------------------------------------------------------------------------
Warrants: Securities, typically issued with preferred 1, 6, 10-13, Market
stock or bonds, that give the holder the right to buy 15-18, 20, 21 Credit
a proportionate amount of common stock at a specified
price.
-------------------------------------------------------------------------------
Preferred Stock: A class of stock that generally pays 2-6, 9-21 Market
a dividend at a specified rate and has preference
over common stock in the payment of dividends and in
liquidation.
-------------------------------------------------------------------------------
</TABLE>
------
61
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Mortgage-Backed Securities: Debt obligations secured by 1-8, 15, Prepayment
real estate loans and pools of loans. These include 18, 21 Market
collateralized mortgage obligations ("CMOs"), and Real Credit
Estate Mortgage Investment Conduits ("REMICs")., Regulatory
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to puts 1-6, 8 Market
and standby commitments to purchase the securities at a Liquidity
fixed price (usually with accrued interest) within a Management
fixed period of time following demand by a Fund.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company 1-6, 8, 11, Prepayment
receivables, home equity loans, truck and auto loans, 15, 18 Market
leases, credit card receivables and other securities Credit
backed by other types of receivable or other assets. Regulatory
-------------------------------------------------------------------------------
Mortgage Dollar Rolls: A transaction in which a Fund 2-8, 11, Prepayment
sells securities for delivery in a current month and 15, 18 Market
simultaneously contracts with the same party to Regulatory
repurchase similar but not identical securities on a
specified future date.
-------------------------------------------------------------------------------
Adjustable Rate Mortgage Loans ("ARMS"): Loans in a 2-8 Prepayment
mortgage pool which provide for a fixed initial Market
mortgage interest rate for a specified period of time, Credit
after which the rate may be subject to periodic Regulatory
adjustments.
-------------------------------------------------------------------------------
Corporate Debt Securities: Corporate bonds and non- 2-6, 8, Market
convertible debt securities. 12, 21 Credit
-------------------------------------------------------------------------------
Swaps, Caps and Floors: A Fund may enter into these 2-21 Market
transactions to manage its exposure to changing Management
interest rates and other factors. Swaps involve an Credit
exchange of obligations by two parties. Caps and floors Liquidity
entitle a purchaser to a principal amount from the
seller of the cap or floor to the extent that a
specified index exceeds or falls below a predetermined
interest rate or amount.
-------------------------------------------------------------------------------
New Financial Products: New options and futures 2-21 Management
contracts, and other financial products continue to be Credit
developed and the Fund may invest in such options, Market
contracts and products. Liquidity
-------------------------------------------------------------------------------
</TABLE>
------
62
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Structured Instruments: Debt securities issued by 2-19 Market
agencies and instrumentalities of the U.S. government, Management
banks, municipalities, corporations and other Liquidity
businesses whose interest and/or principal payments Credit Foreign
are indexed to foreign currency exchange rates, Investment
interest rates, or one or more other referenced
indices.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state or 1-6, 8 Market
political subdivision to obtain funds for various Credit
public purposes. Municipal securities include private Political
activity bonds and industrial development bonds, as Tax
well as General Obligation Notes, Tax Anticipation Regulatory
Notes, Bond Anticipation Notes, Revenue Anticipation
Notes, Project Notes, other short-term tax-exempt
obligations, municipal leases and obligations of
municipal housing authorities and single family
revenue bonds.
-------------------------------------------------------------------------------
Obligations of Supranational Agencies: Obligations of 10, 11, Credit
supranational agencies which are chartered to promote 15, 18 Foreign
economic development and are supported by various Investment
governments and governmental agencies.
-------------------------------------------------------------------------------
Currency Futures and Related Options: The Fund may 10, 11 Management
engage in transactions in financial futures and Liquidity
related options, which are generally described above. Credit
The Fund will enter into these transactions in foreign Market
currencies and for hedging purposes only. Political
Leverage
Foreign
Investment
-------------------------------------------------------------------------------
Forward Foreign Exchange Transactions: Contractual 10, 11 Management
agreement to purchase or sell one specified currency Liquidity
for another currency at a specified future date and Credit
price. The Fund will enter into forward foreign Market
exchange transactions for hedging purposes only. Political
Leverage
Foreign
Investment
-------------------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other debt that 2-8, 11, Credit
pay no interest, but are issued at a discount from 15, 18 Market
their value at maturity. When held to maturity, their Zero Coupon
entire return equals the difference between their
issue price and their maturity value.
-------------------------------------------------------------------------------
Zero-Fixed-Coupon Debt Securities: Zero-coupon debt 2-8 Credit
securities which convert on a specified date to Market
interest-bearing debt securities. Zero Coupon
-------------------------------------------------------------------------------
</TABLE>
------
63
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Stripped Mortgage-Backed Securities: Derivative multi-class 2-8 Prepayment
mortgage securities usually structured with two classes of Market
shares that receive different proportions of the interest Credit
and principal from a pool of mortgage-backed obligations. Regulatory
These include IOs and POs.
-------------------------------------------------------------------------------
Inverse Floating Rate Instruments: Floating rate debt 2-8 Market
instruments with interest rates that reset in the opposite Leverage
direction from the market rate of interest to which the Credit
inverse floater is indexed.
-------------------------------------------------------------------------------
Loan Participations and Assignments: Participations in, or 2-6, 8 Credit
assignments of all or a portion of loans to corporations or Political
to governments of the less developed countries ("LDCs"). Foreign
Investment
Market
Liquidity
-------------------------------------------------------------------------------
Fixed Rate Mortgage Loans: Investments in fixed rate 2-8 Credit
mortgage loans or mortgage pools which bear simple interest Prepayment
at fixed annual rates and have short to long final Regulatory
maturities. Market
-------------------------------------------------------------------------------
Short-Term Funding Agreements Funding agreements issued by 1-6, 8 Credit
banks and highly rated U.S. insurance companies such as Liquidity
Guaranteed Investment Contracts (GICs) and Bank Investment Market
Contracts (BICs).
-------------------------------------------------------------------------------
Index Shares: Ownership in unit investment trusts and other 9-21 Market
pooled investment vehicles that hold a portfolio of
securities or stocks designed to track the price performance
and dividend yield of a particular index, such as Standard
and Poor's Depository Receipts ("SPDR's") and NASDAQ 100's.
-------------------------------------------------------------------------------
Extendable Commercial Notes: Variable rate notes which 1 Market
normally mature within a short period of time (e.g., one Credit
month) but which may be extended by the issuer for a maximum Liquidity
maturity of 13 months.
-------------------------------------------------------------------------------
Participation Interests: Interests in municipal securities, 1 Credit
including municipal leases, from financial institutions such Tax
as commercial and investment banks, savings and loan
associations and insurance companies. These interests may
take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect
ownership that allows the Funds to treat the income from the
investment as exempt from federal income tax.
</TABLE>
------
64
<PAGE>
Investment Risks
--------------------------------------------------------------------------------
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the underlying funds may fluctuate, as will the
value of the Fund's investments in the underlying funds. Ultimately, the value
of your investment will be affected. Certain investments are more susceptible
to these risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price and liquidity of a security can be adversely affected
prior to actual default as its credit status deteriorates and the probability
of default rises.
. Leverage Risk. The risk associated with securities or practices that multiply
small index or market movements into large changes in value. Leverage is
often associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
Fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching between
the derivative and underlying security, and there can be no assurance that a
Fund's hedging transactions will be effective.
Speculative. To the extent that a derivative is not used as a hedge, the
Fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater than
the derivative's original cost.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities instead
or forego an investment opportunity, any of which could have a negative
effect on fund management or performance. This includes the risk of missing
out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
. Management Risk. The risk that a strategy used by a Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. Finally, key information about a security or market
may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizures of foreign deposits, changes in tax or trade
statutes and governmental collapse and war.
------
65
<PAGE>
. Foreign Investment Risk. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early prepayment, a Fund may
fail to recover additional amounts (i.e., premiums) paid for securities with
higher interest rates, any premium paid, resulting in an unexpected capital
loss.
. Tax Risk. The risk that the issuer of the securities will fail to comply with
certain requirements of the Internal Revenue Code, which could cause adverse
tax consequences. Also, the risk that the tax treatment of municipal or other
securities could be changed by Congress thereby affecting the value of
outstanding securities.
. Regulatory Risk. The risk associated with federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
. Zero Coupon Risk. The risk associated with changes in interest rates. The
market prices of securities structured as zero coupon or pay-in-kind
securities are generally affected to a greater extent by interest rate
changes. These securities tend to be more volatile than securities which pay
interest periodically. This risk is similar to Market Risk, which is
described above.
------
66
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Funds, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
How Can I Get More Information? You can get a free copy of the semi-
annual/annual reports or the SAI, request other information or discuss your
questions about the Funds by calling 1-800-480-4111, or by writing the Funds
at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
OR VISITING
WWW.ONEGROUP.COM
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information also
may be obtained, after paying a copying charge, by electronic request at the
following e-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
[LOGO OF ONE GROUP MUTUAL FUNDS]
TOG-F-125
------
<PAGE>
Money Market Funds
PROSPECTUS
November 1, 2000
[LOGO OF ONE GROUP]
One Group(R) Prime Money Market Fund
One Group(R) U.S. Treasury Securities Money Market Fund
One Group(R) Treasury Prime Money Market Fund
One Group(R) U.S. Government Securities Money Market Fund
One Group(R) Municipal Money Market Fund
One Group(R) Michigan Municipal Money Market Fund
One Group(R) Ohio Municipal Money Market Fund
The Securities and Exchange Commission has not approved or disapproved
the shares of any of the Funds as an investment or determined whether
this prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
<PAGE>
Table of
CONTENTS
<TABLE>
<CAPTION>
Fund Summaries: Investments, Risk &
Performance
<S> <C>
One Group Prime Money Market Fund 2
---
One Group U.S. Treasury Securities Money
Market Fund 5
---
One Group Treasury Prime Money Market Fund 8
---
One Group U.S. Government Securities Money
Market Fund 10
---
One Group Municipal Money Market Fund 12
---
One Group Michigan Municipal Money Market
Fund 15
---
One Group Ohio Municipal Money Market Fund 19
---
</TABLE>
<TABLE>
<CAPTION>
More About the Funds
<S> <C>
Principal Investment
Strategies 23
---
Investment Risks 26
---
Investment Policies 27
---
Portfolio Quality and
Maturity 28
---
Temporary Defensive
Positions 29
---
</TABLE>
<TABLE>
<CAPTION>
How to Do Business with One Group
Mutual Funds
<S> <C>
Purchasing Fund Shares 30
---
Sales Charges 34
---
Sales Charge Reductions and Waivers 36
---
Exchanging Fund Shares 37
---
Redeeming Fund Shares 39
---
</TABLE>
<TABLE>
<CAPTION>
Shareholder Information
<S> <C>
Voting Rights 42
---
Dividend Policies 42
---
Tax Treatment of
Shareholders 43
---
Shareholder Statements and
Reports 44
---
</TABLE>
<TABLE>
<CAPTION>
Management of
One Group
Mutual Funds
<S> <C>
The Advisor 45
---
Advisory Fees 45
---
</TABLE>
<TABLE>
<CAPTION>
Financial
Highlights 46
<S> <C>
---
<CAPTION>
Appendix
A:
Investment
Practices 55
<S> <C>
---
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
[LOGO OF ONE GROUP]
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
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1
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Prime Money Market Fund
What is the Goal of the Prime Money Market Fund?
The Fund seeks current income with liquidity and stability of principal.
What are the Prime Money Market Fund's Main Investment Strategies?
The Fund invests exclusively in high-quality, short-term money market
instruments. These instruments include corporate notes, commercial paper,
funding agreements, certificates of deposit and bank obligations. The Fund will
concentrate in the financial services industry, including asset-backed
commercial paper programs. The Fund will comply with SEC rules applicable to
all money market funds, including Rule 2a-7 under the Investment Company Act of
1940. For more information about the Prime Money Market Fund's investment
strategies, please read "More About the Funds" and "Principal Investment
Strategies."
What are the Main Risks of Investing in the Prime Money Market Fund?
The main risks of investing in the Prime Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
MAIN RISKS
Credit Risk. Because the Fund only invests in high-quality obligations and
limits its average maturity to 90 days or less, credit risk is minimized.
Nonetheless, if an issuer fails to pay interest or principal, the value of your
investment in the Fund could decline. Because the Fund invests in securities
that are backed by "credit enhancements" such as letters of credit, the value
of your investment in the Fund also could decrease if the value of the
securities in the portfolio decreases in response to the declining credit
quality of a credit enhancement provider.
Concentration. The Fund will invest a significant portion of its assets in the
securities of companies in the financial services industry. Because of the
Fund's greater exposure to that industry, economic, political and regulatory
developments affecting the financial services industry will have a
disproportionate impact on the Fund. These developments include changes in
interest rates, earlier than expected repayments by borrowers, an inability to
achieve the same yield on the reinvestment of prepaid obligations and federal
and state laws which may restrict the remedies that a lender has when a
borrower defaults on a loan.
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
2
<PAGE>
------------------
FUND SUMMARY
Prime Money Market Fund
How has the Prime Money Market Fund Performed?
By showing the variability of the Prime Money Market Fund's performance from
year to year, the chart and table below help show the risk of investing in the
Fund. Please remember that the past performance of the Prime Money Market Fund
is not necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in the Fund's total returns and are not the same
as actual year- by-year results.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 7.90%
1991 5.88%
1992 3.58%
1993 2.97%
1994 4.09%
1995 5.83%
1996 5.20%
1997 5.32%
1998 5.30%
1999 4.95%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.47 %.
--------------------------------------------------------------------------------
Best Quarter: 1.95% 2Q1990 Worst Quarter: .72% 2Q1993
--------------------------------------------------------------------------------
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS
DATE OF
CLASS
<S> <C> <C> <C> <C>
Class A 2/18/92 4.69% 5.06% 4.82%
Class B 11/12/96 3.91% 4.28% 4.04%
Class C 5/31/00 3.91% 4.28% 4.04%
Service Class 4/16/99 4.38% 4.75% 4.51%
Class I 8/1/85 4.95% 5.32% 5.09%
</TABLE>
/1/For periods prior to the commencement of operations of Class A on 2/18/92,
Class A performance is based on Class I share performance from 1/1/87 to
2/17/92. For periods prior to the commencement of operations of Class B on
11/12/96, Class B performance is based on Class A from 1/1/87 to 11/11/96.
For periods prior to the commencement of operations of Class C on 5/31/00,
Class C performance is based on Class B from 1/1/87 to 5/30/00. For periods
prior to the commencement of operations of Service Class on 4/16/99, Service
Class performance is based on Class A from 1/1/87 to 4/15/99. All prior class
performance has been adjusted to reflect the differences in expenses and
sales charges between classes.
To obtain current yield information, call toll-free 1-800-480-4111 or visit
www.onegroup.com.
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3
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Prime Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(fees paid directly
from your SERVICE
investment)/1/ CLASS A CLASS B CLASS C CLASS CLASS I
--------------------------------------------------------------------
Maximum Sales Charge
(Load) Imposed on
Purchases NONE NONE NONE NONE NONE
--------------------------------------------------------------------
(as a percentage of
offering price)
--------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) NONE 5.00% 1.00% NONE NONE
--------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
--------------------------------------------------------------------
Redemption Fee NONE NONE NONE NONE NONE
--------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE NONE
--------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(expenses that are
deducted from Fund SERVICE
assets)/2/ CLASS A CLASS B CLASS C CLASS CLASS I
--------------------------------------------------------------------
Investment Advisory
Fees .35% .35% .35% .35% .35%
--------------------------------------------------------------------
Distribution [and/or
Service] (12b-1) Fees .25% 1.00% 1.00% .75% NONE
--------------------------------------------------------------------
Other Expenses .20% .20% .20% .20% .20%
--------------------------------------------------------------------
Total Annual Fund
Operating Expenses .80% 1.55% 1.55% 1.30% .55%
--------------------------------------------------------------------
Fee Waiver and/or
Expense
Reimbursement/3/ (.03%) (.03%) (.03%) (.23%) (.03%)
--------------------------------------------------------------------
Net Expenses .77% 1.52% 1.52% 1.07% .52%
--------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .77% for Class A shares, 1.52% for Class B
shares, 1.52% for Class C shares, 1.07% for Service Class shares and .52% for
Class I shares for the period beginning November 1, 2000, and ending on
October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2 CLASS B/2 CLASS C CLASS C SERVICE CLASS I
CLASS
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION REDEMPTION REDEMPTION REDEMPTION
AT THE END AT THE END
OF EACH OF EACH
PERIOD PERIOD
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year/1/ $ 79 $ 655 $ 155 $ 255 $ 155 $ 109 $ 53
--------------------------------------------------------------------------------
3 Years 252 787 487 487 487 389 173
--------------------------------------------------------------------------------
5 Years 441 1,042 842 842 842 691 304
--------------------------------------------------------------------------------
10 Years 987 1,641 1,641 1,843 1,843 1,548 686
--------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 year expenses would be as follows:
<TABLE>
<S> <C>
Class A $ 82
Class B (with
redemption) $658
Class B (no
redemption) $158
Class C (with
redemption) $258
Class C (no
redemption) $158
Service Class $132
Class I $ 56
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 Years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
4
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
U.S. Treasury Securities
Money Market Fund
What is the Goal of the U.S. Treasury Securities Money Market Fund?
The Fund seeks current income with liquidity and stability of principal.
What Are The U.S. Treasury Securities Money Market Fund's Main Investment
Strategies?
The Fund invests exclusively in short-term U. S. Treasury obligations including
repurchase agreements collateralized by such Treasury obligations and when-
issued securities, U. S. Treasury bills, notes and other securities issued or
backed by the U. S. government. The Fund will comply with SEC rules applicable
to all money market funds including Rule 2a-7 under the Investment Company Act
of 1940. For more information about the U. S. Treasury Securities Money Market
Fund's investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are the Main Risks of Investing in the U.S. Treasury Securities Money
Market Fund?
The main risks of investing in the U. S. Treasury Securities Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
MAIN RISKS
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
5
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
U.S. Treasury Securities Money Market Fund
How Has the U.S. Treasury Securities Money Market Fund Performed?
By showing the variability of the U. S. Treasury Securities Money Market Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the U.S.
Treasury Securities Money Market Fund is not necessarily an indication of how
the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 7.55%
1991 5.51%
1992 3.32%
1993 2.81%
1994 3.85%
1995 5.62%
1996 5.08%
1997 5.14%
1998 5.03%
1999 4.58%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.21%.
--------------------------------------------------------------------------------
Best Quarter: 1.88% 2Q 1990 Worst Quarter: .69% 2Q 1993
--------------------------------------------------------------------------------
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS
DATE OF
CLASS
<S> <C> <C> <C> <C>
Class A 2/18/92 4.32% 4.83% 4.57%
Class B 11/21/96 3.54% 4.05% 3.79%
Class C 2/18/98 3.54% 4.04% 3.79%
Service Class 4/16/99 4.00% 4.52% 4.26%
Class I 8/1/85 4.58% 5.09% 4.84%
</TABLE>
/1/For periods prior to the commencement of operations of Class A on 2/18/92,
Class A performance is based on Class I performance from 1/1/87 to 2/17/92.
For periods prior to the commencement of operations of Class B on 11/21/96,
Class B performance is based on Class A from 1/1/87 to 11/20/96. For periods
prior to the commencement of operations of Class C on 2/18/98, Class C
performance is based on Class B from 1/1/87 to 2/17/98. For periods prior to
the commencement of operations of Service Class on 4/16/99, Service Class
performance is based on Class A from 1/1/87 to 4/15/99. All prior class
performance has been adjusted to reflect the differences in expenses and
sales charges between classes.
To obtain current yield information, call toll-free 1-800-480-4111 or visit
www.onegroup.com.
------
6
<PAGE>
Examples
U.S. Treasury Securities Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from SERVICE
your investment)/1/ CLASS A CLASS B CLASS C CLASS CLASS I
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge
(Load) Imposed on
Purchases NONE NONE NONE NONE NONE
------------------------------------------------------------------
(AS A PERCENTAGE OF
OFFERING PRICE)
------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) NONE 5.00% 1.00% NONE NONE
------------------------------------------------------------------
(as a percentage of
original purchase price
of redemption proceeds,
as applicable)
------------------------------------------------------------------
Redemption Fee NONE NONE NONE NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
------------------------------------------------------------------
(expenses that are
deducted from Fund SERVICE
assets)/2/ CLASS A CLASS B CLASS C CLASS CLASS I
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .35% .35% .35% .35% .35%
------------------------------------------------------------------
Distribution [and/or
Service] (12b-1) Fees .25% 1.00% 1.00% .75% NONE
------------------------------------------------------------------
Other Expenses .20% .20% .20% .20% .20%
------------------------------------------------------------------
Total Annual Fund
Operating Expenses .80% 1.55% 1.55% 1.30% .55%
------------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/3/ (.03%) (.03%) (.03%) (.23%) (.03%)
------------------------------------------------------------------
Net Expenses .77% 1.52% 1.52% 1.07% .52%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .77% for Class A shares, 1.52% for Class B
shares, 1.52% for Class C shares, 1.07% for Service Class shares and .52% for
Class I shares for the period beginning November 1, 2000, and ending on
October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B/2/ CLASS B/2/ CLASS C CLASS C SERVICE CLASS I
CLASS
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION REDEMPTION REDEMPTION AT REDEMPTION
AT THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year/1/ $79 $ 655 $ 155 $ 255 $ 155 $ 109 $ 53
--------------------------------------------------------------------------------------
3 Years 252 787 487 487 487 389 173
--------------------------------------------------------------------------------------
5 Years 441 1,042 842 842 842 691 304
--------------------------------------------------------------------------------------
10 Years 987 1,641 1,641 1,843 1,843 1,548 686
--------------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 year expenses would be as follows:
<TABLE>
<S> <C>
Class A $ 82
Class B (with
redemption) $658
Class B (no
redemption) $158
Class C (with
redemption) $258
Class C (no
redemption) $158
Service Class $132
Class I $ 56
</TABLE>
/2/Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 Years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
------
7
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Treasury Prime Money Market Fund
What is the goal of the Treasury Prime Money Market Fund?
The Fund seeks high current income with liquidity and stability of principal.
What are the Treasury Prime Money Market Fund's main investment strategies?
The Fund invests in U.S. Treasury bills, notes and bonds. The Fund does not
engage in repurchase transactions. The Fund will comply with SEC rules
applicable to all money market funds, including Rule 2a-7 under the Investment
Company Act of 1940. For more information about the Treasury Prime Money Market
Fund's investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are the main risks of investing in the Treasury Prime Money Market Fund?
The main risks of investing in the Treasury Prime Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
MAIN RISKS
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other governmental agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
How has the Treasury Prime Money Market Fund performed?
The Treasury Prime Money Market Fund will be available for investment in March
2001.
------
8
<PAGE>
------------------
FUND SUMMARY
Treasury Prime Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------
(fees paid directly from your SERVICE
investment)/1/ CLASS A CLASS C CLASS CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases NONE NONE NONE NONE
-----------------------------------------------------------------
(as a percentage of offering
price)
-----------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) NONE 1.00% NONE NONE
-----------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
-----------------------------------------------------------------
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
(expenses that are deducted from
Fund assets)
-----------------------------------------------------------------
Investment Advisory Fees .35% .35% .35% .35%
-----------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% .75% NONE
-----------------------------------------------------------------
Other Expenses/2/ .20% .20% .20% .20%
-----------------------------------------------------------------
Total Annual Fund Operating
Expenses .80% 1.55% 1.30% .55%
-----------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/3/ (.03%) (.03%) (.23%) (.03%)
-----------------------------------------------------------------
Net Expenses .77% 1.52% 1.07% .52%
-----------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information is estimated based on amounts for the current fiscal
year.
/3/Banc One Investment Advisors Corporation and the Administrator have agreed
to waive fees and/or reimburse expenses to limit total annual fund operating
expenses to .77% for Class A shares, 1.52% for Class C shares, 1.07% for
Service Class shares and .52% for Class I shares, for the period beginning
November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or continued to hold them
at the end of the periods shown. The examples also assume that your investment
has a 5% return each year and that the Fund's operating expenses remain the
same. Your actual costs may be higher or lower than those shown below. There is
no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS C SERVICE CLASS I
CLASS
ASSUMING ASSUMING NO
REDEMPTION REDEMPTION
AT THE END OF
EACH PERIOD
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year/1/ $ 79 $ 155 $ 255 $ 109 $ 53
------------------------------------------------------------
3 Years $252 $ 487 $ 487 $ 389 $173
------------------------------------------------------------
5 Years $441 $ 842 $ 842 $ 691 $304
------------------------------------------------------------
10 Years $987 $1,843 $1,843 $1,548 $686
------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 year expenses would be as follows:
<TABLE>
<S> <C>
Class A $ 82
Class C (with
redemption) $258
Class C (no
redemption) $158
Service Class $132
Class I $ 56
</TABLE>
------
9
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
U.S. Government Securities Money Market Fund
What is the goal of the U. S. Government Securities Money Market Fund?
The Fund seeks high current income consistent with liquidity and stability of
principal.
What are the U. S. Government Securities Money Market Fund's main investment
strategies?
The Fund invests in short-term securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities and repurchase agreements
relating to such securities. The Fund will comply with SEC rules applicable to
all money market funds, including Rule 2a-7 under the Investment Company Act of
1940. For more information about the U. S. Government Securities Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are the main risks of investing in the U. S. Government Securities Money
Market Fund?
The main risks of investing in the U.S. Government Securities Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
MAIN RISKS
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other governmental agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
How has the U.S. Government Securities Money Market Fund performed?
The U.S. Government Securities Money Market Fund will be available for
investment in March 2001.
------
10
<PAGE>
------------------
U.S. Government Securities Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------
(fees paid directly from your SERVICE
investment)/1/ CLASS A CLASS C CLASS CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases NONE NONE NONE NONE
-----------------------------------------------------------------
(as a percentage of offering
price)
-----------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) NONE 1.00% NONE NONE
-----------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
-----------------------------------------------------------------
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
(expenses that are deducted from
Fund assets)
-----------------------------------------------------------------
Investment Advisory Fees .35% .35% .35% .35%
-----------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% .75% NONE
-----------------------------------------------------------------
Other Expenses/2/ .20% .20% .20% .20%
-----------------------------------------------------------------
Total Annual Fund Operating
Expenses .80% 1.55% 1.30% .55%
-----------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/3/ (.03%) (.03%) (.23%) (.03%)
-----------------------------------------------------------------
Net Expenses .77% 1.52% 1.07% .52%
-----------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information is based on amounts for the current fiscal year.
/3/Banc One Investment Advisors Corporation and the Administrator have agreed
to waive fees and/or reimburse expenses to limit total annual fund operating
expenses to .77% for Class A shares, 1.52% for Class C shares, 1.07% for
Service Class shares and .52% for Class I shares, for the period beginning
November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or continued to hold them
at the end of the periods shown. The examples also assume that your investment
has a 5% return each year and that the Fund's operating expenses remain the
same. Your actual costs may be higher or lower than those shown below. There is
no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS C SERVICE CLASS I
CLASS
ASSUMING ASSUMING NO
REDEMPTION REDEMPTION
AT THE END OF
EACH PERIOD
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year/1/ $ 79 $ 155 $ 255 $ 109 $ 53
------------------------------------------------------------
3 Years $252 $ 487 $ 487 $ 389 $173
------------------------------------------------------------
5 Years $441 $ 842 $ 842 $ 691 $304
------------------------------------------------------------
10 Years $987 $1,843 $1,843 $1,548 $686
------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 year expenses would be as follows:
<TABLE>
<S> <C>
Class A $ 82
Class C (with
redemption) $258
Class C (no
redemption) $158
Service Class $132
Class I $ 56
</TABLE>
------
11
<PAGE>
ONE GROUP(R)
[GRAPHIC]
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Municipal Money Market Fund
----------------
What is the Goal of the Municipal Money Market Fund?
The Fund seeks as high a level of current interest income exempt from federal
income tax as is consistent with liquidity and stability of principal.
What are the Municipal Money Market Fund's Main Investment Strategies?
The Fund invests in high-quality, short-term money market instruments. These
instruments include short-term municipal securities, which provide tax-exempt
income. The Fund will comply with SEC rules applicable to all money market
funds, including Rule 2a-7 under the Investment Company Act of 1940. For more
information about the Municipal Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any Portion of My Investment Be Taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income.
What are the Main risks of Investing in The Municipal Money Market Fund?
The main risks of investing in the Municipal Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
MAIN RISKS
Credit Risk. Because the Fund only invests in high-quality obligations and
limits its average maturity to 90 days or less, credit risk is minimized.
Nonetheless, if an issuer fails to pay interest or principal, the value of your
investment in the Fund could decline. Because the Fund invests in securities
that are backed by "credit enhancements" such as letters of credit, the value
of your investment in the Fund also could decrease if the value of the
securities in the portfolio decreases in response to the declining credit
quality of a credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
12
<PAGE>
------------------
FUND SUMMARY
Municipal Money Market Fund
How Has the Municipal Money Market Fund Performed?
By showing the variability of the Municipal Money Market Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the Municipal Money
Market Fund is not necessarily an indication of how the Fund will perform in
the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 5.77%
1991 4.37%
1992 2.49%
1993 2.10%
1994 2.54%
1995 3.60%
1996 3.13%
1997 3.31%
1998 3.10%
1999 2.92%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 2.78%.
--------------------------------------------------------------------------------
Best Quarter: 1.45% 2Q1990 Worst Quarter: .49% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF SINCE 6/4/87
CLASS
<S> <C> <C> <C> <C> <C>
Class A 2/18/92 2.66% 2.96% 3.08% 3.48%
Service Class 4/16/99 2.36% 2.66% 2.77% 3.17%
Class I 6/4/87 2.92% 3.21% 3.33% 3.73%
</TABLE>
/1/For periods prior to the commencement of operations of Class A on 2/18/92,
Class A performance is based on Class I performance from 6/4/87 to 2/17/92.
For periods prior to the commencement of operations of Service Class on
4/16/99. Service Class performance is based on Class A from 6/4/87 to
4/15/99. All prior class performance has been adjusted to reflect the
differences in expenses and sales charges between classes.
To obtain current yield information, call toll-free 1-800-480-4111 or visit
www.onegroup.com.
------
13
<PAGE>
ONE GROUP(R)
------------------
Municipal Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------
(fees paid directly from your SERVICE
investment)/1/ CLASS A CLASS C CLASS CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases NONE NONE NONE NONE
-----------------------------------------------------------------
(as a percentage of offering
price)
-----------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) NONE 1.00% NONE NONE
-----------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
-----------------------------------------------------------------
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------
(expenses that are deducted from SERVICE
Fund assets)/2/ CLASS A CLASS C CLASS CLASS I
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .35% .35% .35% .35%
-----------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% .75% NONE
-----------------------------------------------------------------
Other Expenses .19% .19% .19% .19%
-----------------------------------------------------------------
Total Annual Fund Operating
Expenses .79% 1.54% 1.29% .54%
-----------------------------------------------------------------
Fee Waiver and/or Expense
Reimbursement/3/ (.07%) (.07%) (.27%) (.07%)
-----------------------------------------------------------------
Net Expenses .72% 1.47% 1.02% .47%
-----------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .72% for Class A shares, 1.47% for Class C
shares, 1.02% for Service Class shares and .47% for Class I shares for the
period beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS C SERVICE CLASS I
CLASS
ASSUMING ASSUMING NO
REDEMPTION REDEMPTION
AT THE END OF
EACH PERIOD
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year/1/ $ 74 $ 250 $ 150 $ 104 $ 48
------------------------------------------------------------
3 Years 245 480 480 382 166
------------------------------------------------------------
5 Years 432 833 833 682 295
------------------------------------------------------------
10 Years 971 1,829 1,829 1,533 670
------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 year expenses would be as follows:
<TABLE>
<S> <C>
Class A $ 81
Class C (with
redemption) $257
Class C (no
redemption) $157
Service Class $131
Class I $ 55
</TABLE>
------
14
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Michigan Municipal Money Market Fund
What is the Goal of the Michigan Municipal Money Market Fund?
The Fund seeks as high a level of current interest income exempt from federal
income tax and Michigan personal income tax as is consistent with capital
preservation and stability of principal.
What are the Michigan Municipal Money Market Fund's Main Investment Strategies?
The Fund invests in high-quality, short-term money market instruments. These
include short-term municipal securities issued in Michigan, which provide tax-
exempt income. The Fund may also invest in municipal securities issued by other
states. The Fund will comply with SEC rules applicable to all money market
funds, including Rule 2a-7 under the Investment Company Act of 1940. For more
information about the Michigan Municipal Money Market Fund's investment
strategies, please read "More About the Funds" and "Principal Investment
Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will any Portion of My Investment Be Taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income.
What are the Main Risks of Investing in the Michigan Municipal Money Market
Fund?
The main risks of investing in the Michigan Municipal Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
------
15
<PAGE>
ONE GROUP(R)
------------------
----------------
Michigan Municipal Money
Market Fund
MAIN RISKS
Large Positions/Geographic Concentration. As a single state money market fund,
this Fund is allowed by SEC rules to invest a large portion of its assets in
one issuer. Because of these rules and the relatively small number of issuers
of Michigan municipal securities, the Fund's performance is affected to a
greater extent by the success of one or a few issuers than is the performance
of a more diversified fund. Moreover, because the Fund will concentrate in
Michigan issuances, certain factors particular to Michigan, including economic
conditions, constitutional amendments, legislative and executive measures, and
voter initiatives in Michigan, may have a disproportionately negative impact on
the Fund's investments.
Credit Risk. Because the Fund only invests in high-quality obligations and
limits its average maturity to 90 days or less, credit risk is minimized.
Nonetheless, if an issuer fails to pay interest or principal, the value of your
investment in the Fund could decline. Because the Fund invests in securities
that are backed by "credit enhancements" such as letters of credit, the value
of your investment in the Fund also could decrease if the value of the
securities in the portfolio decreases in response to the declining credit
quality of a credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
16
<PAGE>
------------------
FUND SUMMARY
Michigan Municipal Money
Market Fund
How has the Michigan Municipal Money Market Fund Performed?
By showing the variability of the Michigan Municipal Money Market Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the
Michigan Municipal Money Market Fund is not necessarily an indication of how
the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/,/2/ -- Class A Shares
--------------------------------------------------------------------------------
[GRAPH]
1992 2.40%
1993 1.83%
1994 2.30%
1995 3.32%
1996 2.93%
1997 3.00%
1998 2.76%
1999 2.61%
/1/ For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 2.55%.
/2/ Performance data includes the performance of the Pegasus Michigan Municipal
Money Market Fund for the period before it was consolidated with the One
Group Michigan Municipal Money Market Fund on March 22, 1999.
--------------------------------------------------------------------------------
Best Quarter: .87% 2Q 1995 Worst Quarter: .43% 1Q 1993
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated. Average annual total returns for more than
one year tend to smooth out variations in a Fund's total return and are not the
same as actual year- by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF SINCE 1/31/91
CLASS
<S> <C> <C> <C> <C>
Class A 1/31/91 2.61% 2.92% 2.77%
Class I 3/30/96 2.87% 3.09% 2.86%
</TABLE>
/1/ Performance data includes the performance of the Pegasus Michigan Municipal
Money Market Fund for the period before it was consolidated with the One
Group Michigan Municipal Money Market Fund on March 22, 1999. For periods
prior to the commencement of operations of Class I, on March 30, 1996, the
performance of Class I shares is based on Class A share performance without
adjustments.
To obtain current yield information, call toll-free 1-800-480-4111 or visit
www.onegroup.com.
------
17
<PAGE>
ONE GROUP(R)
------------------
Michigan Municipal
Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------
(fees paid directly from your SERVICE
investment)/1/ CLASS A CLASS C CLASS CLASS I
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases NONE NONE NONE NONE
---------------------------------------------------------------
(as a percentage of offering
price)
---------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) NONE 1.00% NONE NONE
---------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
---------------------------------------------------------------
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------
(expenses that are deducted SERVICE
from Fund assets)/2/ CLASS A CLASS C CLASS CLASS I
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .35% .35% .35% .35%
---------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% .75% NONE
---------------------------------------------------------------
Other Expenses .20% .20% .20% .20%
---------------------------------------------------------------
Total Annual Fund Operating
Expenses .80% 1.55% 1.30% .55%
---------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/3/ (.06%) (.06%) (.26%) (.06%)
---------------------------------------------------------------
Net Expenses .74% 1.49% 1.04% .49%
---------------------------------------------------------------
</TABLE>
/1/ If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/ Expense information has been restated to reflect current fees.
/3/ Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .74% for Class A shares, 1.49% for Class
C shares, 1.04% for Service Class Shares and .49% for Class I shares for
the period beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS C SERVICE CLASS I
CLASS
ASSUMING ASSUMING NO
REDEMPTION REDEMPTION
AT THE END OF
EACH PERIOD
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year/1/ $ 76 $ 252 $ 152 $ 106 $ 50
------------------------------------------------------------
3 Years 249 484 484 386 170
------------------------------------------------------------
5 Years 438 839 839 688 301
------------------------------------------------------------
10 Years 984 1,840 1,840 1,545 684
------------------------------------------------------------
</TABLE>
/1/ Without contractual fee waivers, 1 year expenses would be as follows:
<TABLE>
<S> <C>
Class A $ 82
Class C (with
redemption) $258
Class C (no
redemption) $158
Service Class $132
Class I $ 56
</TABLE>
------
18
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Ohio Municipal
Money Market Fund
What is the Goal of the Ohio Municipal Money Market Fund?
The Fund seeks as high a level of current interest income exempt from federal
income tax and Ohio personal income tax as is consistent with capital
preservation and stability of principal.
What are the Ohio Municipal Money Market Fund's Main Investment Strategies?
The Fund invests in high-quality, short-term money market instruments. These
include short-term municipal securities issued in Ohio, which provide tax-
exempt income. The Fund may also invest in municipal securities issued by other
states. The Fund will comply with SEC rules applicable to all money market
funds, including Rule 2a-7 under the Investment Company Act of 1940. For more
information about the Ohio Municipal Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
Will Any Portion of My Investment be Taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income.
What are the Main Risks of Investing in the Ohio Municipal Money Market Fund?
The main risks of investing in the Ohio Municipal Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
------
19
<PAGE>
ONE GROUP(R)
------------------
MAIN RISKS
----------------
Ohio Municipal Money Market Fund
MAIN RISKS
Large Positions/Geographically Concentrated. As a single state money market
fund, this Fund is allowed by SEC rules to invest a large portion of its assets
in one issuer. Because of these rules and the relatively small number of
issuers of Ohio municipal securities, the Fund's performance is affected to a
greater extent by the success of one or a few issuers than is the performance
of a more diversified fund. Moreover, because the Fund will concentrate in Ohio
issuances, certain factors particular to Ohio, including economic conditions,
constitutional amendments, legislative and executive measures and voter
initiatives in Ohio, may have a disproportionately negative impact on the
Fund's investments.
Credit Risk. Because the Fund only invests in high-quality obligations and
limits its average maturity to 90 days or less, credit risk is minimized.
Nonetheless, if an issuer fails to pay interest or principal, the value of your
investment in the Fund could decline. Because the Fund invests in securities
that are backed by "credit enhancements" such as letters of credit, the value
of your investment in the Fund also could decrease if the value of the
securities in the portfolio decreases in response to the declining credit
quality of a credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
20
<PAGE>
------------------
FUND SUMMARY
Ohio Municipal Money Market Fund
How has The Ohio Municipal Money Market Fund Performed?
By showing the variability of the Ohio Municipal Money Market Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the Ohio
Municipal Money Market Fund is not necessarily an indication of how the Fund
will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class A Shares
--------------------------------------------------------------------------------
[GRAPH]
1994 2.35%
1995 3.30%
1996 2.88%
1997 3.08%
1998 2.88%
1999 2.63%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 2.53%.
--------------------------------------------------------------------------------
Best Quarter: .86% 2Q 1995 Worst Quarter: .46% 1Q 1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF SINCE 1/26/93
CLASS
<S> <C> <C> <C> <C>
Class A 1/26/93 2.63% 2.95% 2.75%
Class I 6/9/93 2.88% 3.21% 2.96%
</TABLE>
/1/Prior to commencement of operations of Class I on June 9, 1993, the
performance of Class I shares is based on Class A performance without
adjustments.
To obtain current yield information, call toll-free 1-800-480-4111 or visit
www.onegroup.com.
------
21
<PAGE>
ONE GROUP(R)
------------------
Ohio Municipal
Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------
(fees paid directly from your SERVICE
investment)/1/ CLASS A CLASS C CLASS CLASS I
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases NONE NONE NONE NONE
---------------------------------------------------------------
(as a percentage of offering
price)
---------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) NONE 1.00% NONE NONE
---------------------------------------------------------------
(as a percentage of original
purchase price of redemption
proceeds, as applicable)
---------------------------------------------------------------
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------
(expenses that are deducted SERVICE
from Fund assets)/2/ CLASS A CLASS C CLASS CLASS I
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .30% .30% .30% .30%
---------------------------------------------------------------
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% .75% NONE
---------------------------------------------------------------
Other Expenses .23% .23% .23% .23%
---------------------------------------------------------------
Total Annual Fund Operating
Expenses .78% 1.53% 1.28% .53%
---------------------------------------------------------------
Fee Waiver [and/or Expense
Reimbursement]/3/ (.07%) (.07%) (.27%) (.07%)
---------------------------------------------------------------
Net Expenses .71% 1.46% 1.01% .46%
---------------------------------------------------------------
</TABLE>
/1/ If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/ Expense information has been restated to reflect current fees.
/3/ Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .71% for Class A shares, 1.46% for Class
C shares, 1.01% for Service Class Shares and .46% for Class I shares for
the period beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS C SERVICE CLASS I
CLASS
ASSUMING ASSUMING NO
REDEMPTION REDEMPTION
AT THE END OF
EACH PERIOD
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year/1/ $ 73 $ 249 $ 149 $ 103 $ 47
------------------------------------------------------------
3 Years 242 477 477 379 163
------------------------------------------------------------
5 Years 426 828 828 676 289
------------------------------------------------------------
10 Years 960 1,818 1,818 1,522 658
------------------------------------------------------------
</TABLE>
/1/ Without contractual fee waivers, 1 year expenses would be as follows:
<TABLE>
<S> <C>
Class A $ 80
Class C (with
redemption) $256
Class C (no
redemption) $156
Service Class $130
Class I $ 54
</TABLE>
------
22
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
More About the Funds
Each of the seven funds described in this prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation ("Banc
One Investment Advisors"). For more information about One Group and Banc One
Investment Advisors, please read "Management of One Group Mutual Funds" and the
Statement of Additional Information.
--------------------------------------------------------------------------------
Principal Investment Strategies
The seven mutual funds described in this prospectus are designed to produce
high current income consistent with liquidity or capital preservation and
stability of principal. The principal investment strategies that are used to
meet each Fund's investment objective are described in "Fund Summaries:
Investments, Risk & Performance" in the front of this prospectus. They are also
described below.
FUNDAMENTAL POLICIES
A Fund's investment strategy may
involve "fundamental policies." A
policy is fundamental if it cannot
be changed without the consent of
a majority of the outstanding
shares of the Fund.
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund may also use strategies that are not
described below, but which are described in the Statement of Additional
Information.
--
ONE GROUP PRIME MONEY MARKET FUND.
. The Fund invests only in U.S. denominated securities.
. The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
. The Fund invests exclusively in money market instruments. These include:
1. corporate notes;
2. commercial paper;
3. funding agreements;
4. certificates of deposit; and
5. bank obligations.
------
23
<PAGE>
. The Fund will invest at least 25% of its total assets in securities issued
by companies in the financial services industry, although the Fund may
invest less than 25% of its total assets in that industry if warranted due
to adverse economic conditions and if investing less than that amount would
be in the best interests of shareholders. The financial services industry
includes banks, broker-dealers, finance companies and other issuers of
asset-backed securities.
. The Fund may lend its securities.
--
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average of all the current maturities (that
is, the term of the securities) of the individual securities in a fund
calculated so as to count most heavily those securities with the highest dollar
value. Average weighted maturity is important to investors as an indication of
a fund's sensitivity to changes in interest rates. The longer the average
weighted maturity, the more fluctuation in share price you can expect.
ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND.
. The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
--
ONE GROUP TREASURY PRIME MONEY MARKET FUND.
. The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that are issued or guaranteed by
the U. S. Treasury.
. The Fund does not invest in securities subject to repurchase agreements.
--
ONE GROUP U. S. GOVERNMENT SECURITIES MONEY MARKET FUND.
. The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that are issued or guaranteed by
the U. S. government or its agencies or instrumentalities, some of which may
be subject to repurchase agreements.
--
ONE GROUP MUNICIPAL MONEY MARKET FUND.
. The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
. As a matter of fundamental policy, the Fund will invest at least 80% of its
total assets in municipal securities.
. The Fund will purchase municipal securities only if the issuer receives
assurances from its legal counsel that the interest payable on the
securities is exempt from federal personal income tax.
------
24
<PAGE>
. The Fund may invest as much as 100% of its assets in municipal securities
that produce income that is subject to the federal alternative minimum tax.
If you are subject to the federal alternative minimum tax, please read the
section of this prospectus entitled "Tax Treatment of Shareholders" before
you invest.
. The Fund also may invest up to 20% of its total assets in other types of
securities, such as taxable money market instruments, including repurchase
agreements. For a list of all the securities in which the Fund may invest,
please read "Investment Practices" in Appendix A.
--
ONE GROUP MICHIGAN MUNICIPAL MONEY MARKET FUND.
. The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
. The Fund invests at least 80% of its total assets in Michigan municipal
securities.
. The Fund will purchase municipal securities only if the issuer receives
assurances from its legal counsel that the interest payable on the
securities is exempt from federal personal income tax and Michigan personal
income tax.
. The Fund also may invest up to 20% of its total assets in non-Michigan
municipal securities, i.e., municipal securities issued by states,
territories and possessions of the United States, including the District of
Columbia, other than Michigan as well as their political subdivision,
agencies, instrumentalities and authorities that produce interest exempt
from federal income tax.
. The Fund has the ability, for temporary defensive purposes to invest as much
as 100% of its assets in non-Michigan municipal securities that produce
income that is subject to the federal alternative minimum tax, please read
the section of this prospectus entitled, "Tax Treatment of Shareholders"
before you invest.
. The Fund also may invest up to 20% of its total assets in other types of
securities, such as taxable money market instruments, including repurchase
agreements.
--
ONE GROUP OHIO MUNICIPAL MONEY MARKET FUND.
. The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
. The Fund will invest at least 80% of its total assets in Ohio municipal
securities.
. The Fund will purchase municipal securities only if the issuer receives
assurances from its legal counsel that the interest payable on the
securities is exempt from federal personal income tax and Ohio personal
income tax.
. The Fund also may invest up to 20% of its total assets in non-Ohio municipal
securities, i.e., municipal securities issued by states, territories and
possessions of the United States, including the District of Columbia, other
than Ohio, as well as their political subdivisions, agencies,
instrumentalities and authorities that produce interest exempt from federal
income tax.
. The Fund has the ability, for temporary defensive purposes, to invest as
much as 100% of its assets in non-Ohio municipal securities that produce
income that is subject to the federal alternative minimum tax. (If you are
subject to the federal
------
25
<PAGE>
alternative minimum tax, please read the section of this prospectus entitled
"Tax Treatment of Shareholders" before you invest.)
. The Fund also may invest up to 20% of its total assets in other types of
securities, such as taxable money market instruments, including repurchase
agreements.
--------------------------------------------------------------------------------
Investment Risks
The main risks associated with investing in the Money Market Funds are
described in "Fund Summaries: Investments, Risk & Performance" in the front of
this prospectus. Additional risks are described below.
--
NET ASSET VALUE. There is no assurance that the Funds will meet their
investment objectives or be able to maintain a net asset value of $1.00 per
share on a continuous basis.
--
DIVERSIFICATION. The Ohio Municipal Money Market Fund and the Michigan
Municipal Money Market Fund may be less diversified than money market funds
that are not single state funds. This is because a single state fund may invest
a significantly greater portion of its assets in the securities of a single
issuer than can a "diversified" fund. In addition, each Fund's investments are
concentrated geographically. These concentrations increase the risk of loss to
each Fund if the issuer of a security fails to make interest or principal
payments or if the market value of a security declines. Investment in each Fund
may entail more risks than an investment in another type of money market fund.
--
THE OHIO ECONOMY. The Ohio Municipal Money Market Fund's investments are
concentrated in Ohio. While Ohio's economy has become increasingly diversified,
it continues to rely to a significant degree on durable goods manufacturing,
such as automobiles, tires, steel and household appliances. These industries
tend to be cyclical. Agriculture also is an important part of the Ohio economy,
and the state has several programs that provide financial assistance to
farmers. Although obligations issued by the state and its political
subdivisions are payable from specific sources or taxes, future economic
difficulties and the impact on state and local government finances may
negatively affect the market value of the Ohio municipal securities held by the
Ohio Municipal Money Market Fund.
--
THE MICHIGAN ECONOMY. The Michigan Municipal Money Market Fund's investments
are concentrated in Michigan. The Michigan economy is heavily dependent on the
automobile industry, a highly cyclical industry. This affects the revenue
streams of the state and local governments because of its impact on tax
sources, particularly sales taxes, income taxes and Michigan single business
taxes. State and local revenues also are affected by statutory and
constitutional changes adopted in 1993 and 1994, which limit annual assessment
increases and transfer, in part, the financing of education costs from property
taxes to sales taxes.
--
FIXED INCOME SECURITIES. Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates.
If rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases.
The value of the securities in the Fund, and the value of your investment in
the Fund, will increase and decrease as the value of the Fund's investments
increase and decrease.
------
26
<PAGE>
--
DERIVATIVES. Funds other than the U.S. Treasury Securities Money Market Fund
invest in securities that may be considered to be derivatives. These securities
may be more volatile than other investments. Derivatives present, to varying
degrees, market, credit, leverage, liquidity and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and options) that derive
their value from the performance of underlying assets or securities.
For more information about risks associated with the types of investments that
the Money Market Funds purchase, please read the "Fund Summaries: Investments,
Risk, & Performance," Appendix A and the Statement of Additional Information.
--------------------------------------------------------------------------------
Investment Policies
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
--
FUNDAMENTAL POLICIES OF EACH FUND
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of $1.00
per share, although there is no guarantee that the Funds will be able to do
so.
2. Will not make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending.
--
FUNDAMENTAL POLICIES OF SPECIFIC FUNDS
The Prime Money Market Fund:
1. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries (except that the Fund may concentrate its investments
in securities issued by companies in the financial services industry). This
does not include obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities, domestic bank certificates of deposit
or bankers' acceptances, and repurchase agreements involving such
securities, municipal securities or governmental guarantees of municipal
securities. In addition, private activity bonds backed only by the revenues
and assets of a non-governmental user will not be deemed to be municipal
securities.
--
The Prime Money Market Fund, the Treasury Prime Money Market Fund, the U.S.
Government Securities Money Market Fund, the Municipal Money Market Fund and
the U.S. Treasury Securities Money Market Fund:
1. Will not, with respect to 75% of its assets, purchase an issuer's
securities if as a result more than 5% of a Fund's total assets would be
invested in the securities of that issuer or the Fund would own more than
10% of the outstanding voting securities of that issuer. This does not
include securities issued or guaranteed by the United States, its agencies
or instrumentalities and repurchase agreements involving these securities.
------
27
<PAGE>
--
The U.S. Treasury Securities Money Market Fund:
1. Will invest only in U.S. Treasury obligations and repurchase agreements
collateralized by such obligations.
--
The Ohio Municipal Money Market Fund and the Michigan Municipal Money Market
Fund:
1. Will not purchase an issuer's securities if as a result more than 25% of
its total assets would be invested in the securities of that issuer or the
Fund would own more than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or guaranteed by the United
States, its agencies or instrumentalities, securities of registered
investment companies and repurchase agreements involving these securities.
This restriction applies with respect to 50% of the Fund's total assets.
With respect to the remaining 50% of its total assets, the Fund will not
purchase an issuer's securities if as a result more than 5% of its total
assets would be invested in the securities of that issuer.
--
The Ohio Municipal Money Market Fund:
1. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries. This does not include municipal securities or
governmental guarantees of municipal securities. In addition, private
activity bonds backed only by the assets and revenues of a non-governmental
user will not be deemed to be Ohio municipal securities.
--
The Michigan Municipal Money Market Fund:
1. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries. This does not include municipal securities or
governmental guarantees of municipal securities.
--
The Municipal Money Market Fund:
1. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries. This does not include municipal securities or
governmental guarantees of municipal securities. In addition, private
activity bonds backed only by the revenues and assets of a non-governmental
user will not be deemed to be municipal securities.
Additional investment policies can be found in the Statement of Additional
Information.
--------------------------------------------------------------------------------
Portfolio Quality and Maturity
The quality and maturity of money market funds are subject to SEC rules.
Quality is generally restricted to the two highest short-term ratings or their
equivalent. Maturity is limited both as to total portfolio average and as to
each individual security. With respect to portfolio average, the rules limit
the Fund's average weighted maturity to 90 days. With respect to each
individual security, the remaining maturity is restricted to 397 days at
acquisition. Moreover, the SEC rules limit exposure to a single issuer to 5% of
a money market fund's assets (although there is no limit on government
securities).
------
28
<PAGE>
--------------------------------------------------------------------------------
Temporary Defensive Positions
To respond to unusual market conditions, the Ohio Municipal Money Market Fund,
the Michigan Municipal Money Market Fund and the Municipal Money Market Fund
may take temporary defensive positions by:
. investing all or most of their assets in cash equivalents (i.e., securities
that are not municipal securities), and
. holding uninvested cash pending investment.
These investments may result in a lower yield than lower-quality or longer-term
investments and may prevent the Funds from meeting their investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash equivalents are highly liquid, high-quality instruments with maturities of
three months or less on the date they are purchased. They include securities
issued by the U.S. government, its agencies and instrumentalities, repurchase
agreements (other than equity repurchase agreements), certificates of deposit,
bankers' acceptances, commercial paper (rated in one of the two highest rating
categories), variable rate master demand notes, money market mutual funds and
bank money market deposit accounts.
------
29
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
How to Do Business with One Group Mutual Funds
--------------------------------------------------------------------------------
Purchasing Fund Shares
Where can I buy shares?
You may purchase Fund shares:
. Directly from One Group through The One Group Services Company (the
"Distributor"), and
. From Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this way
will be held for you by the Shareholder Servicing Agent.
When can I buy shares?
. Purchases may be made on any business day. This includes any day that the
Funds are open for business. The Funds will be closed on weekends and days
on which the New York Stock Exchange ("NYSE") or the Federal Reserve are
closed, including the following holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans Day, Thanksgiving and Christmas Day.
. Purchase requests will be effective on the day received and you will be
eligible to receive dividends declared the same day, if such purchase orders
are received.
(i) before 12:00 noon, Eastern Time ("ET"), for the Municipal Money Market
Fund, the Ohio Municipal Money Market Fund and the Michigan Municipal
Money Market Fund;
(ii) before 2:00 p.m., ET, for the Treasury Prime Money Market Fund, and
(iii) before 4:00 p.m., ET, for the Prime Money Market Fund, the U.S.
Treasury Securities Money Market Fund and the U.S. Government
Securities Money Market Fund.
. In addition, the Funds' Custodian, State Street Bank and Trust Company, must
receive "federal funds" before the times listed above. If State Street Bank
and Trust Company does not receive federal funds by the cut-off time, the
purchase order will not be effective until the next business day on which
federal funds are timely received by State Street Bank and Trust Company.
. On occasion, the NYSE will close before 4 p.m. ET. When the NYSE closes
before the times listed above, purchase requests received after the NYSE
closes will be effective the following business day.
. If a Shareholder Servicing Agent holds your shares, it is the responsibility
of the Shareholder Servicing Agent to send your purchase or redemption order
to the
------
30
<PAGE>
Fund. Your Shareholder Servicing Agent may have an earlier cut-off time for
purchase and redemption requests.
. The Distributor can reject a purchase order if it does not think that it is
in the best interests of a Fund and/or its shareholders to accept the order.
. Shares are electronically recorded. Therefore, certificates will not be
issued.
What kind of shares can I buy?
One Group offers the following classes of shares:
. Class A, Class B and Class C shares are available to the general public.
. Class I shares are available to institutional investors, such as
corporations, pension and profit sharing plans, and foundations; and any
organization authorized to act in a fiduciary, advisory, custodial or agency
capacity. We will refer to these entities as "Intermediaries."
. Service Class shares are available to Intermediaries purchasing shares on
behalf of investors requiring additional administrative or accounting
services such as sweep processing.
. When deciding what class of shares to buy, you should consider the amount of
your investment, the length of time you intend to hold the shares, and the
sales charges and expenses applicable to each class of shares.
ONE GROUP FUND DIRECT IRA AND 403(B). One Group offers retirement plans. This
plan allows participants to defer taxes while their retirement savings grow.
Call 1-800-480-4111 for an Adoption Agreement.
How much do shares cost?
. Shares are sold at net asset value ("NAV") plus a sales charge, if any.
. NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class. The Funds use their best
efforts to maintain their NAV at $1.00, although there is no guarantee that
they will be able to do so.
. NAV is calculated each business day as of:
(i) 12:00 noon ET, for the Municipal Money Market Fund, Ohio Municipal
Money Market Fund and the Michigan Municipal Money Market Fund;
(ii) 2:00 p.m., ET, for the Treasury Prime Money Market Fund, and
(iii) 4:00 p.m., ET, for the Prime Money Market Fund, the U.S. Treasury
Securities Money Market Fund and the U.S. Government Securities Money
Market Fund.
On occasion, the NYSE will close before 4 p.m. ET. When the NYSE closes before
the times listed above, NAV will be calculated as of the time the NYSE closes.
How do I open an account?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
. The minimum initial investment for all classes except Class I shares is
$1,000 per Fund ($100 for employees of Bank One Corporation and its
affiliates). The minimum initial investment for an IRA and 403(b) is $250.
. The minimum initial investment for Class I shares is $200,000 per Fund.
. You are required to maintain a minimum account balance equal to the
minimum initial investment in each Fund.
------
31
<PAGE>
. Subsequent investments must be at least $25 per Fund.
. Class B shares may be purchased only in connection with exchanges from
Class B shares of another fund. This is because Class A shares are
offered with no sales charge and have lower expenses.
. These minimums may be waived.
3. Complete the Account Application Form. Be sure to sign up for all of the
account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
4. Send the completed application and a personal check (unless you choose to
pay by wire or bank transfer) to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "One Group Mutual
Funds for the Benefit of (your name)."
If you choose to pay by wire, please call 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual or company and endorsed to
One Group are considered third party checks.
All checks must be payable to one of the following:
. One Group Mutual Funds, or
. the specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. If you redeem shares purchased by check, One Group will delay forwarding
your redemption proceeds until payment has been collected from your bank.
One Group generally receives payment within seven (7) business days of
purchase.
7. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
8. If you have any questions, contact your Shareholder Servicing Agent or call
1-800-480-4111.
Can I purchase shares over the telephone?
Yes. Simply select this option on your Account Application Form and then:
. Contact your Shareholder Servicing Agent or call 1-800-480-4111 to relay
your purchase instructions.
------
32
<PAGE>
. Authorize a bank transfer or initiate a wire transfer to the following wire
address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167 FBO ONE GROUP FUND
(EX: ONE GROUP PRIME MONEY MARKET FUND -- A)
YOUR ACCOUNT NUMBER (EX: 123456789) YOUR ACCOUNT REGISTRATION
(EX: JOHN SMITH & MARY SMITH, JTWROS)
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. You may revoke your right to make purchases over the telephone by sending a
letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
Can I automatically invest on a systematic basis?
Yes. You may purchase additional Class A, Class B and Class C shares by making
automatic monthly investments from your bank account. To establish a Systematic
Investment Plan:
. Select the "Systematic Investment Plan" option on the Account Application
Form.
. Provide the necessary information about the bank account from which your
investments will be made.
. Shares purchased under a Systematic Investment Plan may not be redeemed for
five (5) business days.
. One Group currently does not charge for this service, but may impose a
charge in the future. However, your bank may impose a charge for debiting
your bank account.
. You may revoke your right to make systematic investments by calling 1-800-
480-4111 or by sending a letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
May I write checks on my account?
Class A shareholders may write checks for $250 or more.
. Checks may be payable to any person and your account will continue to earn
dividends until the check clears.
. Checks are free, but your bank or the payee may charge you for stop payment
orders, insufficient funds, or other valid reasons.
. You can not use this option to close your account because of the difficulty
of determining the exact value of your account.
. You must wait ten (10) calendar days before you can write a check against
shares purchased by a check.
------
33
<PAGE>
----------------
To select this option:
. Select the "Check Writing" option on the Account Application Form.
. Complete, sign and return a signature card and other forms sent to you by
State Street Bank and Trust Company. You will receive a supply of checks
that will be drawn on State Street Bank and Trust Company.
Conversion Feature
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
. After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares.
. You will not be assessed any sales charges or fees for conversion of shares,
nor will you be subject to any federal income tax.
. If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together.
--------------------------------------------------------------------------------
Sales Charges
The Distributor compensates Shareholder Servicing Agents who sell shares of One
Group Mutual Funds. Compensation comes from sales charges, 12b-1 fees and
payments by the Distributor and the Funds' investment advisor from their own
resources. The tables below show the charges for each class of shares and the
percentage of your investment that is paid as a commission to a Shareholder
Servicing Agent. Class A shares do not assess a sales charge.
Class B Shares
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
--------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A % OF
SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
-----------------------------------------
1-2 4.00%
-----------------------------------------
2-3 3.00%
-----------------------------------------
3-4 3.00%
-----------------------------------------
4-5 2.00%
-----------------------------------------
5-6 1.00%
-----------------------------------------
more than 6 NONE
-----------------------------------------
</TABLE>
The Distributor pays a commission of 4.00% of the original purchase price to
Shareholder Servicing Agents who sell Class B shares.
Class C Shares
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
--------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A % OF
SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 1.00%
-----------------------------------------
after first year NONE
-----------------------------------------
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from the Distributor.
------
34
<PAGE>
How the CDSC is Calculated
. The Fund assumes that all purchases made in a given month were made on the
first day of the month.
. The CDSC is based on the net amount redeemed.
. A CDSC is not assessed on shares acquired through reinvestment of dividends
or capital gains distributions.
. To keep your CDSC as low as possible, the Fund first will redeem the shares
you have held for the longest time and thus have the lowest CDSC.
. If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of One Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including the
period of time you have held those shares) will be applied to One Group
shares you receive in the reorganization.
12B-1 Fees
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 fees. 12b-1 fees are paid by
One Group Mutual Funds to the Distributor as compensation for its services and
expenses. The Distributor in turn pays all or part of the 12b-1 fee to
Shareholder Servicing Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .25% of the average daily net assets of
the Fund.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the average daily
net assets of the Fund. This will cause expenses for Class B and Class C
shares to be higher and dividends to be lower than for Class A shares.
3. Service Class shares pay a 12b-1 fee of .75% of the average daily net
assets of the Fund, which is currently being waived to .55% for each Fund.
4. There are no 12b-1 fees for Class I shares.
12b-1 fees, together with the CDSC, help the Distributor sell Class B and Class
C shares without an "up-front" sales charge by defraying the costs of advancing
brokerage commissions and other expenses paid to Shareholder Servicing Agents.
. The Distributor may use up to .25% of the fees for shareholder servicing and
up to .75% for distribution. During the last fiscal year, the Distributor
received 12b-1 fees totaling .25% and 1.00% of the average daily net assets
of Class A and Class B shares, respectively.
. The Distributor may pay 12b-1 fees to its affiliates and to Banc One
Investment Advisors and its affiliates (or any sub-advisor) for brokerage
and other agency transactions.
Because 12b-1 fees are paid out of Fund assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
------
35
<PAGE>
--------------------------------------------------------------------------------
Sales Charge Reductions and Waivers
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw, on an annual basis, no more than 10% of the value of your
account. Shares received from dividend and capital gains reinvestment are
included in calculating amount eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver. For information on the Systematic Withdrawal Plan, please see "Can I
Redeem on a Systematic Basis?"
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the Distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability.
3. That represent a minimum required distribution from your One Group IRA
Account or other One Group qualifying retirement plan, but only if you are
at least age 70 1/2. Only your One Group assets are considered when
calculating that portion of your minimum required distribution that
qualifies for the waiver.
4. Exchanged in connection with plans of reorganization of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class B shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the exchange.
Please read "Do I Pay A Sales Charge on an Exchange?"
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
Waiver of the Class C Sales Charge
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver. For information on the Systematic Withdrawal Plan, please see "Can I
Redeem on a Systematic Basis?"
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability.
------
36
<PAGE>
3. That represent a minimum required distribution from your One Group IRA
Account or other One Group qualifying retirement plan, but only if you are
at least age 70 1/2. Only your One Group assets are considered when
calculating that portion of your minimum required distribution that
qualifies for the waiver.
4. Exchanged in connection with plans of reorganization of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the exchange.
Please read "Do I Pay A Sales Charge on an Exchange?"
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
Waiver Qualifications
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, call 1-800-480-4111 or contact
your Shareholder Servicing Agent. The waivers described above will not continue
indefinitely and may be discontinued at any time without notice.
--------------------------------------------------------------------------------
Exchanging Fund Shares
What are my exchange privileges?
You may make the following exchanges:
. Class I shares of a Fund may be exchanged for Class A shares of that Fund or
for Class A or Class I shares of another One Group Fund.
. Class A shares of a Fund may be exchanged for Class I shares of that Fund or
for Class A or Class I shares of another One Group Fund, but only if you are
eligible to purchase those shares.
. Class B shares of a Fund may be exchanged for Class B shares of another One
Group Fund.
. Class C shares of a Fund may be exchanged for Class C shares of another One
Group Fund.
. Service Class shares do not have exchange privileges.
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in the
Systematic Exchange Privilege, please select it on your Account Application. To
learn more about it, please call 1-800-480-4111.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days
written notice.
When are exchanges processed?
Exchanges are processed the same business day they are received, provided:
. State Street Bank and Trust Company receives the request by:
(i) 12:00 noon ET, for the Municipal Money Market Fund, the Ohio Municipal
Money Market Fund and the Michigan Municipal Money Market Fund.
------
37
<PAGE>
(ii) 4:00 p.m., ET for the Prime Money Market Fund, the U.S. Treasury
Securities Money Market Fund, the Treasury Prime Money Market Fund and
the U.S. Government Securities Money Market Fund.
. You have provided One Group with all of the information necessary to process
the exchange.
. You have received a current prospectus of the Fund or Funds in which you wish
to invest.
. You have contacted your Shareholder Servicing Agent, if necessary.
Do I pay a sales charge on an exchange?
Generally, you will not pay a sales charge on an exchange. However:
. You will pay a sales charge if you own Class I shares of a Fund and you want
to exchange those shares for Class A shares, unless you qualify for a sales
charge waiver (see above).
. You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them for
shares of a Fund that does, in which case you would pay the sales charge
applicable to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that Fund's
sales charge and all other sales charges you have already paid.
. If you exchange Class B or Class C shares of a Fund, you will not pay a sales
charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you
exchanged or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class B or Class C shares is
carried over to your new shares.
Are exchanges taxable?
Generally:
. An exchange between classes of shares of the same Fund is not taxable for
federal income tax purposes.
. An exchange between Funds is considered a sale and generally results in a
capital gain or loss for federal income tax purposes.
. You should talk to your tax advisor before making an exchange.
Are there limits on exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
. To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity.
. Exchange activity is excessive if it exceeds two substantive exchange
redemptions within 30 days of each other.
. Excessive exchange activity will result in revocation of your exchange
privilege.
------
38
<PAGE>
. In addition, One Group reserves the right to reject any exchange request
(even those that are not excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or otherwise adversely
affect other shareholders.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to exchanges, your account
value falls below the minimum required balance. For information on minimum
required balances, please read, "How Do I Open An Account?"
--------------------------------------------------------------------------------
Redeeming Fund Shares
When can I redeem shares?
You may redeem all or some of your shares on any day that the Funds are open
for business.
. Redemption requests will be effective that day if received before:
(i) 12:00 noon ET, for the Municipal Money Market Fund, the Ohio Municipal
Money Market Fund and the Michigan Municipal Money Market Fund.
(ii) 2:00 p.m. ET, for the Treasury Prime Money Market Fund.
(iii) 4:00 p.m. ET, for the Prime Money Market Fund, the U.S. Treasury
Securities Money Market Fund, and the U.S. Government Securities Money
Market Fund.
On occasion, the NYSE will close before 4:00 p.m. ET. When the NYSE closes
before the times listed above, redemption requests received after the NYSE
closes will be effective the following business day.
How do I redeem shares?
. You may use any of the following methods to redeem your shares:
1. You may send a written redemption request to your Shareholder Servicing
Agent, if applicable, or to State Street Bank and Trust Company at the
following address:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
2. You may use the One Group website at www.onegroup.com, or
3. You may redeem over the telephone. Please see "Can I Redeem By Telephone?"
for more information.
. All requests for redemptions from IRA accounts must be in writing.
. You may request redemption forms by calling 1-800-480-4111 or visiting
www.onegroup.com.
. One Group may require that the signature on your redemption request be
guaranteed by a participant in the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less; and
------
39
<PAGE>
2. the redemption is payable to the shareholder of record; and
3. the redemption check is mailed to the shareholder at the record address or
the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
. On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. a designated commercial bank, or
2. your Shareholder Servicing Agent.
. One Group may charge you a wire redemption fee. The current charge is $7.00.
. Your redemption proceeds will be paid within seven days after receipt of the
redemption request. However, the Funds will attempt to honor requests for
same day payment if the request is received before the times listed in "When
Can I Redeem Shares?" If redemption requests are received after these times,
the Funds will attempt to wire payment the next business day.
. The Funds also will attempt to honor requests for payment in two business
days, if the redemption request is received after the time listed above.
What will my shares be worth?
. If you own Class A, Service Class or Class I shares and the Fund receives
your redemption request before the times listed in "When Can I Redeem
Shares?", you will receive that day's NAV.
. If you own Class B or Class C shares and the Fund receives your redemption
request before the times listed in "When Can I Redeem Shares?", you will
receive that day's NAV, minus the amount of any applicable CDSC.
Can I redeem by telephone?
Yes, if you selected this option on your Account Application Form.
. Contact your Shareholder Servicing Agent or call 1-800-480-4111 to relay your
redemption request.
. Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
. State Street Bank and Trust Company may charge you a wire redemption fee. The
current charge is $7.00.
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. Redemptions from your IRA account may not be made by telephone.
Can I redeem on a systematic basis?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each. This $10,000
minimum does not apply to minimum required distributions from your One Group
IRA or other qualifying retirement plan.
. Select the "Systematic Withdrawal Plan" option on the Account Application
Form.
. Specify the amount you wish to receive and the frequency of the payments.
. You may designate a person other than yourself as the payee.
. There is no charge for this service.
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40
<PAGE>
If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A shares while
participating in a Systematic Withdrawal Plan. This is because Class A
shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated payee may
receive systematic payments. The applicable Class B or Class C sales
charge is waived provided your withdrawals do not exceed 10% of your
account value annually, measured from the date you begin participating in
the Plan. Shares received from dividend and capital gains reinvestment are
included in calculating the 10%. Withdrawals in excess of 10% will subject
the entire annual withdrawal to the applicable sales load.
3. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from an IRA or
other qualifying retirement plan. Only One Group assets are considered
when calculating your minimum required distribution.
4. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
Additional Information Regarding Redemptions
. Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more, the Fund reserves the right to pay part or all of
your redemption proceeds in readily marketable securities instead of cash. If
payment is made in securities, the Fund will value the securities selected in
the same manner in which it computes its NAV. This process minimizes the
effect of large redemptions on the Fund and its remaining shareholders.
. If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to redemptions, your account
value falls below the minimum required balance. The above provision does not
apply to accounts participating in the Systematic Withdrawal Plan. For
information on minimum required balances, please read "How Do I Open An
Account?"
No CDSC will be charged on such redemptions.
. One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
. You generally will recognize a gain or loss on a redemption for federal
income tax purposes. You should talk to your tax advisor before making a
redemption.
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41
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
Shareholder Information
--------------------------------------------------------------------------------
Voting Rights
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each
Fund, and each class of shares within each Fund, vote separately on matters
relating solely to that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal voting rights on matters
that affect all shareholders equally.
--------------------------------------------------------------------------------
Dividend Policies
DIVIDENDS. The Funds generally declare dividends on each business day.
Dividends are distributed on the first business day of each month. Capital
gains, if any, for all Funds are distributed at least annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B, Class C and Service Class
shares have higher distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payments in cash. The price of the shares
is the NAV determined immediately following the dividend record date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street. You also may change the way you receive
dividends and distributions by calling 1-800-480-4111.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES. Class B shares received as dividends
and capital gains distributions will be accounted for separately. Each time any
Class B shares (other than those in the sub-account) convert to Class A shares,
a percentage of the Class B shares in the sub-account will also convert to
Class A shares. (See "Conversion Feature.")
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42
<PAGE>
--------------------------------------------------------------------------------
Tax Treatment of Shareholders
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange or redemption of Fund
shares may produce either a taxable gain or a loss. You are responsible for any
tax liabilities generated by your transactions.
Taxation of Distributions--Prime Money Market Fund and U.S. Treasury Securities
Money Market Fund.
Each Fund will distribute substantially all of its net investment income.
Dividends you receive from a Fund, whether reinvested or received in cash, will
be taxable to you. Dividends from a Fund's net investment income (generally,
all of the Fund's net investment income) will be taxable as ordinary income.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
Taxation of Dividends--Ohio Municipal Money Market Fund, Michigan Municipal
Money Market Fund and Municipal Money Market Fund.
Each Fund will distribute substantially all of its net investment income. These
Funds may pay "exempt-interest dividends" if at least 50% of the value of Fund
assets at the end of each quarter of the Fund's taxable year consists of
obligations the interest on which is excludable from gross income. Exempt-
interest dividends are generally excludable from an investor's gross income for
regular federal income tax purposes. However, the receipt of exempt-interest
dividends may cause recipients of Social Security or Railroad Retirement
benefits to be taxed on a portion of such benefits. In addition, the receipt of
exempt-interest dividends may result in liability for federal alternative
minimum tax and for state (including state alternative minimum tax) and local
taxes, both for individuals and corporate shareholders. Corporate shareholders
will be required to take the interest on municipal securities into account in
determining their alternative minimum taxable income.
Ohio Taxation of Dividends--Ohio Municipal Money Market Fund.
Dividends received from the Ohio Municipal Money Market Fund that result from
interest on Ohio municipal securities are exempt from the Ohio personal income
tax. Some Ohio statutes provide that interest on and gain from the sale of Ohio
municipal securities is exempt from all taxation in Ohio. Dividends that are
attributable to interest on or gain from the sale of certain obligations issued
under such statutes should be exempt from Ohio personal income tax. Ohio
municipalities may not impose income taxes on dividends on any intangible
property (including such property of the Fund) unless the intangible income was
not exempt from municipal income taxation before April 2, 1986, and the tax was
approved in an election held on November 8, 1988. Corporate shareholders will
be required to include the interest on Ohio municipal securities in their
alternative minimum taxable income. In addition, corporate shareholders must
include the Fund shares in the corporation's tax base for purposes of the Ohio
franchise tax net worth computation, but not for the net income tax
computation. Information in this paragraph is based on current statutes and
regulations as well as current policies of the Ohio Department of Taxation, all
of which may change.
Michigan Taxation of Dividends--Michigan Municipal Money Market Fund.
Dividends paid by the Michigan Municipal Money Market Fund that are derived
from interest attributable to tax-exempt Michigan Municipal Obligations will be
exempt from Michigan income tax and Michigan single business tax. Conversely,
to the extent that the Fund's dividends are derived from interest on
obligations other than Michigan Municipal Obligations or certain U.S.
government obligations (or are derived from short-term or long-term gains),
such dividends may be subject to Michigan income tax and Michigan single
business tax, even though the dividends may be exempt for federal income tax
purposes.
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43
<PAGE>
Except as noted above with respect to Michigan income taxation, distributions
of net income may be taxable to investors as dividend income under other state
or local laws even though a substantial portion of such distributions may be
derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such income taxes.
Taxation of Retirement Plans
Distributions by the Funds to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for tax-
exempt treatment or by an individual who has received shares as a distribution
from a retirement plan, the distributions will be taxable to the plan or
individual as described in "Tax Treatment of Shareholders." If you are
considering purchasing shares of any money market funds, particularly the
Municipal, Michigan Municipal or Ohio Municipal Money Market Funds, with
qualified retirement plan assets, you should consult your tax advisor for a
more complete explanation of the federal, state, local and (if applicable)
foreign tax consequences of making such an investment.
Tax Information
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature. No
attempt has been made to present a complete explanation of the federal, state,
local or foreign tax treatment of the Funds or their shareholders.
--------------------------------------------------------------------------------
Shareholder Statements and Reports
One Group or your Shareholder Servicing Agent will send you transaction
confirmation statements and quarterly account statements. Please review these
statements carefully. One Group will correct errors if notified within one year
of the date printed on the transaction confirmation or account statement. Your
Shareholder Servicing Agent may have a different cut-off time.
To reduce expenses and conserve natural resources, One Group will deliver a
single copy of prospectuses and financial reports to individual investors who
share a residential address, provided they have the same last name or One Group
reasonably believes they are members of the same family. If you would like to
receive separate mailings, please call 1-800-480-4111 and One Group will begin
individual delivery within 30 days. If you would like to receive these
documents by e-mail, please visit www.onegroup.com and sign up for electronic
delivery.
If you are the record owner of your One Group shares (that is, you did not use
a Shareholder Servicing Agent to buy your shares), you may access your account
statements at www.onegroup.com.
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
If you have any questions or need additional information, please write One
Group Mutual Funds at 1111 Polaris Parkway, Columbus, OH 43271-1235, call 1-
800-480-4111 or visit www.onegroup.com.
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<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
Management of One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor to
the Trust since its inception. In addition, Banc One Investment Advisors serves
as investment advisor to other mutual funds and individual corporate,
charitable and retirement accounts. As of June 30, 2000, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $131 billion in assets.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rate:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Prime Money Market Fund .32%
----------------------------------------------------------------------
One Group(R) U.S. Treasury Securities Money
Market Fund .32%
----------------------------------------------------------------------
One Group(R) Municipal Money Market Fund .27%
----------------------------------------------------------------------
One Group(R) Michigan Municipal Money Market
Fund .27%
----------------------------------------------------------------------
One Group(R) Ohio Municipal Money Market
Fund .26%
----------------------------------------------------------------------
</TABLE>
The Treasury Prime Money Market Fund and the U.S. Government Securities Money
Market Fund will be available for investment in March 2001. Under the
Investment Advisory Agreement with the Fund, Banc One Investment Advisors
Corporation is entitled to a fee, which is calculated daily and paid monthly,
of .35% of the average daily net assets of each Fund.
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45
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Prime Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
CLASS A SHARES 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.051 0.046 0.050 0.048 0.051
------------------------------------------------------------------------------
Distributions:
Net investment income (0.051) (0.046) (0.050) (0.048) (0.051)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------
Total Return 5.25% 4.72% 5.13% 4.94% 5.22%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $3,505,068 $3,171,028 $605,291 $332,646 $315,374
Ratio of expenses to
average net assets 0.77% 0.75% 0.76% 0.73% 0.69%
Ratio of net investment
income to average net
assets 5.13% 4.47% 5.01% 4.83% 5.09%
Ratio of expenses to
average net assets* 0.80% 0.79% 0.83% 0.91% 0.90%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
<TABLE>
<CAPTION>
NOVEMBER 12,
YEAR ENDED JUNE 30, 1996 TO
----------------------- JUNE 30,
CLASS B SHARES 2000 1999 1998 1997 (A)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $1.000 $1.000 $1.000
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.044 0.039 0.043 0.026
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.044) (0.039) (0.043) (0.026)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $1.000 $1.000 $1.000
-------------------------------------------------------------------------------
Total Return 4.47% 3.94% 4.35% 2.63%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $16,564 $9,854 $1,912 $ 618
Ratio of expenses to average net assets 1.52% 1.50% 1.51% 1.51%(C)
Ratio of net investment income to
average net assets 4.42% 3.80% 4.25% 4.16%(C)
Ratio of expenses to average net assets* 1.55% 1.54% 1.57% 1.59%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized.
------
46
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Prime Money Market Fund
<TABLE>
<CAPTION>
MAY 31, 2000
TO JUNE 30,
CLASS C SHARES 2000(A)
------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000
------------------------------------------------------------------
Investment Activities:
Net investment income 0.004
------------------------------------------------------------------
Distributions:
Net Investment income (0.004)
------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000
------------------------------------------------------------------
Total Return 0.43%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 848
Ratio of expenses to average net assets 1.52%(C)
Ratio of net investment income to average net assets 5.11%(C)
Ratio of expenses to average net assets* 1.55%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized.
<TABLE>
<CAPTION>
APRIL 16,
YEAR ENDED 1999 TO
JUNE 30, JUNE 30,
SERVICE CLASS SHARES 2000 1999(A)
---------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000
---------------------------------------------------------------------------
Investment Activities:
Net investment income 0.048 0.008
---------------------------------------------------------------------------
Distributions:
Net Investment income (0.048) (0.008)
---------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000 $1.000
---------------------------------------------------------------------------
Total Return 4.94% 0.84%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $6,293 $ 73
Ratio of expenses to average net assets 1.07% 1.05%(C)
Ratio of net investment income to average net assets 5.03% 4.02%(C)
Ratio of expenses to average net assets* 1.30% 1.28%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
CLASS I SHARES 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.054 0.049 0.053 0.051 0.054
------------------------------------------------------------------------------------
Distributions:
Net investment income (0.054) (0.049) (0.053) (0.051) (0.054)
------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------
Total Return 5.51% 4.98% 5.39% 5.20% 5.49%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $6,224,509 $5,398,206 $2,616,698 $2,563,768 $2,186,562
Ratio of expenses to
average net assets 0.52% 0.50% 0.51% 0.48% 0.44%
Ratio of net investment
income to average net
assets 5.39% 4.79% 5.26% 5.06% 5.34%
Ratio of expenses to
average net assets* 0.55% 0.54% 0.58% 0.56% 0.55%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
------
47
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
U.S. Treasury Securities Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------
CLASS A SHARES 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.048 0.043 0.048 0.047 0.050
---------------------------------------------------------------------------------
Distributions:
Net investment income (0.048) (0.043) (0.048) (0.047)(A) (0.050)
---------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------
Total Return 4.86% 4.37% 4.92% 4.81% 5.08%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,846,153 $2,073,442 $861,350 $530,164 $110,864
Ratio of expenses to
average net assets 0.76% 0.76% 0.77% 0.72% 0.67%
Ratio of net investment
income to average net
assets 4.74% 4.21% 4.82% 4.71% 4.92%
Ratio of expenses to
average net assets* 0.79% 0.79% 0.86% 0.93% 0.91%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Includes $.000002 short term gain.
<TABLE>
<CAPTION>
NOVEMBER 21,
YEAR ENDED JUNE 30, 1996 TO
---------------------- JUNE 30,
CLASS B SHARES 2000 1999 1998 1997(A)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.040 0.035 0.041 0.024
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.040) (0.035) (0.041) (0.024)(B)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000
-------------------------------------------------------------------------------
Total Return 4.08% 3.60% 4.14% 2.44%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,057 $1,012 $ 181 $ 49
Ratio of expenses to average net assets 1.51% 1.51% 1.52% 1.48%(D)
Ratio of net investment income to
average net assets 3.97% 3.43% 4.06% 3.97%(D)
Ratio of expenses to average net assets* 1.54% 1.54% 1.60% 1.59%(D)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Includes $.000002 short
term capital gain. (C) Not annualized. (D) Annualized.
------
48
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
U.S. Treasury Securities Money Market Fund
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 18,
JUNE 30, 1998 TO
-------------- JUNE 30,
CLASS C SHARES 2000 1999 1998(A)
---------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000
---------------------------------------------------------------------------
Investment Activities:
Net investment income 0.040 0.035 0.015
---------------------------------------------------------------------------
Distributions:
Net investment income (0.040) (0.035) (0.015)
---------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000
---------------------------------------------------------------------------
Total Return 4.08% 3.59% 1.47%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 526 $ 684 $ 1
Ratio of expenses to average net assets 1.51% 1.51% 1.57%(C)
Ratio of net investment income to average net
assets 3.96% 3.35% 4.01%(C)
Ratio of expenses to average net assets* 1.54% 1.54% 1.57%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized.
<TABLE>
<CAPTION>
APRIL 16,
YEAR ENDED 1999 TO
JUNE 30, JUNE 30,
SERVICE CLASS SHARES 2000 1999(A)
---------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000
---------------------------------------------------------------------------
Investment Activities:
Net investment income 0.045 0.008
---------------------------------------------------------------------------
Distributions:
Net investment income (0.045) (0.008)
---------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000 $1.000
---------------------------------------------------------------------------
Total Return 4.54% 0.77%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 83 $ 5
Ratio of expenses to average net assets 1.07% 1.06%(C)
Ratio of net investment income to average net assets 4.44% 3.71%(C)
Ratio of expenses to average net assets* 1.30% 1.27%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------
CLASS I SHARES 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.050 0.045 0.051 0.050 0.052
---------------------------------------------------------------------------------------
Distributions:
Net investment income (0.050) (0.045) (0.051) (0.050)(A) (0.052)
---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------
Total Return 5.12% 4.63% 5.19% 5.07% 5.34%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $4,785,390 $5,599,894 $3,025,608 $2,243,376 $1,844,590
Ratio of expenses to
average net assets 0.51% 0.51% 0.52% 0.46% 0.42%
Ratio of net investment
income to average net
assets 4.98% 4.52% 5.07% 4.95% 5.17%
Ratio of expenses to
average net assets* 0.54% 0.54% 0.60% 0.57% 0.56%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Includes $.000002 short term capital gain.
------
49
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Treasury Prime Money Market Fund
U. S. Government Securities Money Market Fund
This section normally would include Financial Highlights for the Funds. Because
the Funds had not begun operations as of June 30, 2000, there are no Financial
Highlights for the Funds.
------
50
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Municipal Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------
CLASS A SHARES 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.031 0.026 0.030 0.029 0.030
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.031) (0.026) (0.030) (0.029) (0.030)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Total Return 3.12% 2.63% 3.01% 2.97% 3.08%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $438,468 $428,448 $104,809 $48,185 $50,720
Ratio of expenses to average
net assets 0.71% 0.70% 0.70% 0.68% 0.66%
Ratio of net investment income
to average net assets 3.06% 2.59% 2.97% 2.91% 3.04%
Ratio of expenses to average
net assets* 0.79% 0.80% 0.81% 0.90% 0.94%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
<TABLE>
<CAPTION>
APRIL 16,
YEAR ENDED 1999 TO
JUNE 30, JUNE 30,
SERVICE CLASS SHARES 2000 1999(A)
----------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.028 0.005
----------------------------------------------------------------------------
Distributions:
Net investment income (0.028) (0.005)
----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
----------------------------------------------------------------------------
Total Return 2.81% 0.50%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 442 $ 36
Ratio of expenses to average net assets 1.01% 1.00%(C)
Ratio of net investment income to average net assets 3.01% 2.45%(C)
Ratio of expenses to average net assets* 1.29% 1.29%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized.
------
51
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Municipal Money Market Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------
CLASS I SHARES 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Investment activities:
net investment income 0.033 0.028 0.032 0.031 0.033
-------------------------------------------------------------------------------
Distributions:
net investment income (0.033) (0.028) (0.032) (0.031) (0.033)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Total Return 3.38% 2.88% 3.27% 3.19% 3.34%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000) $969,070 $1,077,205 $498,127 $467,420 $459,807
Ratio of expenses to
average net assets 0.46% 0.46% 0.45% 0.43% 0.41%
Ratio of net investment
income to average net
assets 3.31% 2.84% 3.22% 3.16% 3.29%
Ratio of expenses to
average net assets* 0.54% 0.56% 0.56% 0.55% 0.59%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
------
52
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Michigan Municipal Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED YEAR ENDED DECEMBER 31,
JUNE 30, JUNE 30, -----------------------------------
CLASS A SHARES 2000 1999(A) 1998 1997 1996 1995
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.030 0.012 0.027 0.030 0.029 0.033
-------------------------------------------------------------------------------------
Distributions:
Net investment income (0.030) (0.012) (0.027) (0.030) (0.029) (0.033)
-------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------
Total Return 3.06% 1.21%(B) 2.76% 3.00% 2.93% 3.32%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $76,294 $69,101 $64,283 $29,202 $72,089 $122,057
Ratio of expenses to
average net assets 0.72% 0.75%(C) 0.75% 0.75% 0.74% 0.69%
Ratio of net investment
income to average net
assets 3.03% 2.42%(C) 2.72% 2.95% 2.87% 3.30%
Ratio of expenses to
average net assets* 0.81% 0.84%(C) 0.78% 0.79% 0.77% 0.76%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Michigan
Municipal Money Market Fund became the Michigan Municipal Money Market Fund.
The Financial Highlights for the periods prior to March 22, 1999 represent
the Pegasus Michigan Municipal Money Market Fund. (B) Not annualized. (C)
Annualized.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED MARCH 30,
YEAR ENDED ENDED DECEMBER 31, 1996 TO
JUNE 30, JUNE 30, ----------------- DECEMBER 31,
CLASS I SHARES 2000 1999(A) 1998 1997 1996 (B)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.033 0.013 0.030 0.032 0.023
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.033) (0.013) (0.030) (0.032) (0.023)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------
Total Return 3.32% 1.34%(C) 3.02% 3.26% 3.03%(D)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $111,900 $91,211 $110,833 $74,888 $49,521
Ratio of expenses to
average net assets 0.47% 0.49%(D) 0.50% 0.50% 0.59%(D)
Ratio of net investment
income to average net
assets 3.33% 2.65%(D) 2.97% 3.20% 3.02%(D)
Ratio of expenses
average net assets* 0.56% 0.57%(D) 0.53% 0.54% 0.62%(D)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Michigan
Municipal Money Market Fund became the Michigan Municipal Money Market Fund.
The Financial Highlights for the periods prior to March 22, 1999 represent
the Pegasus Michigan Municipal Money Market Fund. (B) Period from
commencement of operations. (C) Not annualized. (D) Annualized.
------
53
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Ohio Municipal Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS A SHARES 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.030 0.026 0.030 0.029 0.030
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.030) (0.026) (0.030) (0.029) (0.029)
In excess of net investment
income - - - - (0.001)
Total Distributions (0.030) (0.026) (0.030) (0.029) (0.030)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Total Return 3.06% 2.62% 3.06% 2.96% 3.08%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $29,842 $37,180 $39,100 $30,479 $41,132
Ratio of expenses to average net
assets 0.70% 0.67% 0.65% 0.65% 0.66%
Ratio of net investment income to
average net assets 3.00% 2.60% 2.98% 2.90% 2.94%
Ratio of expenses to average net
assets* 0.77% 0.80% 0.78% 0.88% 1.06%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS I SHARES 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.033 0.028 0.033 0.032 0.033
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.033) (0.028) (0.033) (0.032) (0.032)
In excess of net investment
income - - - - (0.001)
Total Distributions (0.033) (0.028) (0.033) (0.032) (0.033)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Total Return 3.32% 2.88% 3.31% 3.22% 3.34%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $62,084 $55,745 $77,224 $56,442 $55,915
Ratio of expenses to average net
assets 0.45% 0.42% 0.40% 0.40% 0.41%
Ratio of net investment income to
average net assets 3.26% 2.85% 3.27% 3.17% 3.19%
Ratio of expenses to average net
assets* 0.52% 0.55% 0.53% 0.53% 0.71%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
------
54
<PAGE>
ONE GROUP(R)
------------------
[GRAPHIC]
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Funds, as well
as the risks inherent in their use. Fixed income securities are primarily
influenced by market, credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
<TABLE>
-----------------------------------------------------
<CAPTION>
FUND NAME FUND CODE
-----------------------------------------------------
<S> <C>
One Group(R) Prime Money Market Fund 1
---------------------------------------------------
One Group(R) U.S. Treasury Securities
Money Market Fund 2
---------------------------------------------------
One Group(R) Treasury Prime Money
Market Fund 3
---------------------------------------------------
One Group(R) U.S. Government Securities
Money Market Fund 4
---------------------------------------------------
One Group(R) Municipal Money Market
Fund 5
---------------------------------------------------
One Group(R) Michigan Municipal Money
Market Fund 6
---------------------------------------------------
One Group(R) Ohio Municipal Money
Market Fund 7
</TABLE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS and 1-7 Market
CUBES. The U.S. Treasury Securities Money Market Fund does
not buy STRIPS and CUBES.
-------------------------------------------------------------------------------
Treasury Receipts: TRs, TIGRS and CATS. 1, 3-7 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by 1, 4-7 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae and Freddie Mac.
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a stated 1, 5-7 Market
maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in 1, 5-7 Liquidity
exchange for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
</TABLE>
------
55
<PAGE>
<TABLE>
<CAPTION>
Risk
Instrument Fund Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements: The purchase of a security and the 1, 2, 4-7 Credit
simultaneous commitment to return the security to the Market
seller at an agreed upon price on an agreed upon date. Liquidity
This is treated as a loan.
-------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a security and 1, 2, 5 Market
the simultaneous commitment to buy the security back at Leverage
an agreed upon price on an agreed upon date. This is
treated as a borrowing by a Fund.
-------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% of the 1, 3, 4 Credit
Fund's total assets. In return, the Fund will receive Market
cash, other securities and/or letters of credit as Leverage
collateral.
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase 1-7 Market
or contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other money 1, 4-7 Market
market mutual funds, including One Group money market
funds and shares of other money market funds for which
Banc One Investment Advisors or its affiliates serve as
investment advisor or administrator. Banc One Investment
Advisors will waive certain fees when investing in funds
for which it serves as investment advisor.
-------------------------------------------------------------------------------
Extendable Commercial Notes: Variable rate notes which 1, 5-7 Market
normally mature within a short period of time (e.g., one Credit
month) but which may be extended by the issuer for a Liquidity
maximum maturity of thirteen months.
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time drafts 1, 5-7 Credit
drawn on and accepted by a commercial bank. Maturities Liquidity
are generally six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1, 5-7 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few days to Market
nine months.
-------------------------------------------------------------------------------
Foreign Securities: Commercial paper of foreign issuers 1, 5-7 Market
and obligations of foreign banks, overseas branches of Political
U.S. banks and supranational entities. Liquidity
Foreign
Investment
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered under 1, 5-7 Liquidity
the Securities Act of 1933, such as privately placed Market
commercial paper and Rule 144A securities.
-------------------------------------------------------------------------------
</TABLE>
------
56
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Variable and Floating Rate Instruments: Obligations with 1, 4-7 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations secured by real 1, 4-7 Prepayment
estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Estate Credit
Mortgage Investment Conduits ("REMICs"). Regulatory
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to puts and 1, 5-7 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state or 1, 5-7 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as General Tax
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Regulatory
Notes, Revenue Anticipation Notes, other short-term tax-
exempt obligations, municipal leases, obligations of
municipal housing authorities and single family revenue
bonds.
-------------------------------------------------------------------------------
Short-Term Funding Agreements: Agreements issued by banks 1 Market
and highly rated insurance companies such as Guaranteed Credit
Investment Contracts ("GICs") and Bank Investment Contracts Liquidity
("BICs").
-------------------------------------------------------------------------------
Participation Interests: Interests in municipal securities, 1, 5-7 Credit
including municipal leases, from financial institutions such Tax
as commercial and investment banks, savings and loan Market
associations and insurance companies. These interests may
take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect
ownership that allows the Funds to treat the income from the
investment as exempt from federal income tax.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company 1, 5-7 Prepayment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Regulatory
-------------------------------------------------------------------------------
</TABLE>
------
57
<PAGE>
Investment Risks
--------------------------------------------------------------------------------
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price and liquidity of a security can be adversely affected
prior to actual default as its credit status deteriorates and the
probability of default rises.
. Leverage Risk. The risk associated with securities or practices (such as
borrowing) that multiply small index or market movements into large changes
in value.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to
take advantage of it are tied up in less advantageous investments.
. Management Risk. The risk that a strategy used by a fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. For fixed
income securities, market risk is largely, but not exclusively, influenced
by changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.
Finally, key information about a security or market may be inaccurate or
unavailable. This is particularly relevant to investments in foreign
securities.
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
. Foreign Investment Risk. Risks associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S.
dollar denominated debt, thereby increasing credit risk.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other
------
58
<PAGE>
obligations are pre-paid, a Fund may have to reinvest in securities with a
lower yield. Further, with early repayment, a Fund may fail to recoup any
additional amounts (i.e., premiums) paid for securities with higher interest
rates, resulting in an unexpected capital loss.
. Tax Risk. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which could cause
adverse tax consequences. Also, the risk that the tax treatment of municipal
or other securities could be changed by Congress thereby affecting the value
of outstanding securities.
. Regulatory Risk. The risk associated with federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
------
59
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Funds, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
How Can I Get More Information? You can get a free copy of the semi-
annual/annual reports or the SAI, request other information or discuss your
questions about the Fund by calling 1 800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
OR VISITING
WWW.ONEGROUP.COM
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information also
may be obtained, after paying a copying charge, by electronic request at the
following e-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
(Investment Company Act File No. 811-4236)
TOG-F-123 [LOGO OF ONE GROUP]
<PAGE>
[LOGO OF ONE GROUP MUTUAL FUNDS]
Cash Management Money Market Funds
PROSPECTUS
November 1, 2000
One Group(R) Cash Management Money Market Fund
One Group(R) Treasury Prime Cash Management Money
Market Fund
One Group(R) U.S. Government Securities Cash Management
Money Market Fund
One Group(R) Treasury Cash Management Money Market Fund
One Group(R) Municipal Cash Management Money Market
Fund
------
The Funds, with the
exception of the One
Group Municipal Cash
Management Money Market
Fund, have discontinued
public sale of shares to
new investors, but
shareholders who have
open Fund accounts may
make additional
investments. If a Fund
account is closed,
however, additional
investments in the Fund
may not be possible.
The Securities and
Exchange Commission has
not approved or
disapproved the shares of
any of the Funds as an
investment or determined
whether this Prospectus
is accurate or complete.
Anyone who tells you
otherwise is committing a
crime.
<PAGE>
Table of
CONTENTS
<TABLE>
<CAPTION>
Fund Summaries: Investments, Risk & Performance
<S> <C>
One Group Cash Management Money Market Fund 2
-----
One Group Treasury Prime Cash Management Money Market Fund 6
-----
One Group U.S. Government Securities Cash Management Money
Market Fund 9
-----
One Group Treasury Cash Management Money Market Fund 12
-----
One Group Municipal Cash Management Money Market Fund 15
-----
</TABLE>
<TABLE>
<CAPTION>
More About One Group Mutual Funds
<S> <C>
Principal Investment Strategies 19
-----
Investment Risks 19
-----
Investment Policies 20
-----
Portfolio Quality 20
-----
</TABLE>
<TABLE>
<CAPTION>
How to Do Business with One Group Mutual Funds
<S> <C>
Purchasing Fund Shares 21
-----
Distribution and Servicing Expenses 23
-----
Exchanging Fund Shares 24
-----
Redeeming Fund Shares 25
-----
</TABLE>
<TABLE>
<CAPTION>
Shareholder Information
<S> <C>
Voting Rights 28
-----
Dividend Policies 28
-----
Tax Treatment of Shareholders 28
-----
Shareholder Statements and Records 29
-----
</TABLE>
<TABLE>
<CAPTION>
Management of One Group Mutual Funds
<S> <C>
The Advisor 30
-----
Advisory Fees 30
</TABLE>
<TABLE>
<S> <C>
Financial Highlights 31
------
Appendix A: Investment Practices 36
------
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Cash Management
Money Market Fund
What is the goal of the Cash Management Money Market Fund?
The Fund seeks high current income with liquidity and stability of principal.
What are the Cash Management Money Market Fund's Main Investment Strategies?
The Fund invests in short-term, high-quality money market obligations,
including securities that are issued or guaranteed by the U.S. government or
its agencies and instrumentalities, certificates of deposit, variable and
floating rate instruments, mortgage-backed securities, puts, municipal
securities and other short-term obligations. Some of these securities are
subject to repurchase agreements. The Fund will concentrate in the financial
services sector, including asset-backed commercial paper programs. This means
that at least 25% of the Fund's total assets will be invested in the financial
services industry. The Fund will comply with SEC rules applicable to all money
market funds, including Rule 2a-7 under the Investment Company Act of 1940. For
more information about the Cash Management Money Market Fund's investment
strategies, please read "More About the Funds" and "Principal Investment
Strategies."
What are the main risks of Investing in the Cash Management Money Market Fund?
The main risks of investing in the Cash Management Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
------
2
<PAGE>
------------------
----------------
Cash Management
Money Market Fund
MAIN RISKS
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Derivatives. The Fund invests in securities that are considered to be
derivatives. The value of derivative securities (like certain types of
mortgage-related securities) is dependent upon the performance of underlying
assets or securities. If the underlying assets do not perform as expected, the
value of the derivative security and your investment in the Fund declines.
Generally, derivatives are more volatile and are riskier in terms of both
liquidity and value than traditional investments.
Concentration. The Cash Management Money Market Fund will invest a significant
portion of its assets in the securities of companies in the financial services
industry. This increases the Fund's risk of loss if the financial services
industry experiences economic or other difficulties that either increase the
industry's default rate or lowers the value of securities issued by the
industry. These developments include changes in interest rates, earlier than
expected repayments by borrowers, an inability to achieve the same yield on the
reinvestment of prepaid obligations and federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on a loan.
Net Asset Value and Credit Risk. There is no assurance that the Fund will meet
its investment objective of maintaining a net asset value of $1.00 per share on
a continuous basis. Credit risk is very low because the Fund only invests in
high-quality obligations and limits its average maturity to 90 days.
Nonetheless, if an issuer fails to pay interest or to repay principal, the
value of your investment in the Fund could decline. Because the Fund invests in
securities that are backed by "credit enhancements" such as letters of credit,
the value of your investment in the Fund could also decrease if the value of
the securities in the portfolio decreases in response to declining credit
quality of a credit enhancement provider.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
3
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Cash Management
Money Market Fund
How has the Cash Management Money Market Fund Performed?
By showing the variability of the Cash Management Money Market Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the Cash
Management Money Market Fund is not necessarily an indication of how the Fund
will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/,/2/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1993 3.27
1994 4.06
1995 5.72
1996 5.23
1997 5.41
1998 5.36
1999 5.04
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.59%.
/2/Performance data includes performance of the Pegasus Cash Management Fund
for the period before it was consolidated with the One Group Cash Management
Money Market Fund on March 29, 1999.
--------------------------------------------------------------------------------
Best Quarter: 1.41% 1Q1995 Worst Quarter: 0.79% 4Q1993
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF CLASS SINCE 7/30/92
<S> <C> <C> <C> <C>
Class A 1/17/95 4.77% 5.09% 4.52%
Class I 7/30/92 5.04% 5.35% 4.77%
</TABLE>
/1/Performance data includes performance of the Pegasus Cash Management Fund
for the period before it was consolidated with the One Group Cash Management
Money Market Fund on March 29, 1999. For periods prior to the commencement
of operations of Class A on January 17, 1995, the performance of Class A
shares is based on Class I share performance adjusted to reflect the
differences in expenses and sales charges.
To obtain current yield information, call toll-free 1-877-691-1118 or visit
www.onegroup.com.
------
4
<PAGE>
------------------
Cash Management Money
Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your investment)/1/ CLASS A CLASS I
------------------------------------------------------------------
<S> <C> <C>
Maximum Deferred Sales Charge (Load) NONE NONE
------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
------------------------------------------------------------------
Redemption Fee NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from Fund assets)/2/ CLASS A CLASS I
------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .20% .20%
------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% NONE
------------------------------------------------------------------
Other Expenses .19% .19%
------------------------------------------------------------------
Total Annual Fund Operating Expenses .64% .39%
------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.04%) (.04%)
------------------------------------------------------------------
Net Expenses .60% .35%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .60% for Class A shares and .35% for Class
I shares for the period beginning November 1, 2000, and ending on October 31,
2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you held all of your shares for the period. The examples also
assume that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Your actual costs may be higher or lower
than those shown below. There is no sales charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
CLASS A CLASS I
--------------------------
<S> <C> <C>
1 Year/1/ $ 61 $ 36
--------------------------
3 Years 201 121
--------------------------
5 Years 353 215
--------------------------
10 Years 795 489
--------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $65
Class I $40
</TABLE>
------
5
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Treasury Prime Cash
Management Money
Market Fund
What is the goal of the Treasury Prime Cash Management Money Market Fund?
The Fund seeks high current income with liquidity and stability of principal.
What are the Treasury Prime Cash Management Money Market Fund's Main Investment
Strategies?
The Fund invests in U.S. Treasury bills, notes, bonds and other U.S.
obligations issued or guaranteed by the U.S. Treasury. The Fund does not invest
in repurchase agreements. The Fund will comply with SEC rules applicable to all
money market funds, including Rule 2a-7 under the Investment Company Act of
1940. For more information about the Treasury Prime Cash Management Money
Market Fund's investment strategies, please read "More About the Funds" and
"Principal Investment Strategies."
What are the main risks of investing in the Treasury Prime Cash Management
Money Market Fund?
The main risks of investing in the Treasury Prime Cash Management Money Market
Fund and the circumstances likely to adversely affect your investment are
described below. Before you invest, please read "More About the Funds" and
"Investment Risks."
MAIN RISKS
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
6
<PAGE>
------------------
FUND SUMMARY
Treasury Prime Cash Management
Money Market Fund
How has the Treasury Prime Cash Management Money Market Fund Performed?
By showing the variability of the Treasury Prime Cash Management Money Market
Fund's performance from year to year, the chart and table below help show the
risk of investing in the Fund. Please remember that the past performance of the
Treasury Prime Cash Management Money Market Fund is not necessarily an
indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/,/2/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
4.86% 1996
4.90% 1997
4.76% 1998
4.46% 1999
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.16%.
/2/Performance data includes the performance of the Pegasus Treasury Prime Cash
Management Fund for the period before it was consolidated with the One Group
Treasury Prime Cash Management Money Market Fund on March 29, 1999.
--------------------------------------------------------------------------------
Best Quarter: 1.24% 3Q1997 Worst Quarter: 1.04% 4Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 3/22/95
<S> <C> <C> <C>
Class A 3/22/95 4.20% 4.57%
Class I 3/22/95 4.46% 4.83%
</TABLE>
/1/Performance data includes the performance of the Pegasus Treasury Prime Cash
Management Fund for the period before it was consolidated with the One Group
Treasury Prime Cash Management Money Market Fund on March 29, 1999.
To obtain current yield information, call toll-free 1-877-691-1118 or visit
www.onegroup.com.
------
7
<PAGE>
ONE GROUP(R)
------------------
Treasury Prime Cash Management
Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your investment)/1/ CLASS A CLASS I
------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
------------------------------------------------------------------
(as a percentage of offering price)
------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) NONE NONE
------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
------------------------------------------------------------------
Redemption Fee NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from Fund assets)/2/ CLASS A CLASS I
------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .20% .20%
------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% NONE
------------------------------------------------------------------
Other Expenses .19% .19%
------------------------------------------------------------------
Total Annual Fund Operating Expenses .64% .39%
------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.04%) (.04%)
------------------------------------------------------------------
Net Expenses .60% .35%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .60% for Class A shares and .35% for Class
I shares for the period beginning November 1, 2000, and ending on October 31,
2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you held all of your shares for the period. The examples also
assume that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Your actual costs may be higher or lower
than those shown below. There is no sales charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
CLASS A CLASS I
--------------------------
<S> <C> <C>
1 Year/1/ $ 61 $ 36
--------------------------
3 Years 201 121
--------------------------
5 Years 353 215
--------------------------
10 Years 795 489
--------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $65
Class I $40
</TABLE>
------
8
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
U.S. Government
Securities Cash
Management Money
Market Fund
What is the goal of the U.S. Government Securities Cash Management Money Market
Fund?
The Fund seeks high current income with liquidity and stability of principal.
What are the U.S. Government Securities Cash Management Money Market Fund's
Main Investment Strategies?
The Fund invests in short-term securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities; and repurchase agreements
relating to such securities. The Fund will comply with SEC rules applicable to
all money market funds, including Rule 2a-7 under the Investment Company Act of
1940. For more information about the U.S. Government Securities Cash Management
Money Market Fund's investment strategies, please read "More About the Funds"
and "Principal Investment Strategies."
What are the main risks of investing in the U.S. Government Securities Cash
Management Money Market Fund?
The main risks of investing in the U.S. Government Securities Cash Management
Money Market Fund and the circumstances likely to adversely affect your
investment are described below. Before you invest, please read "More About the
Funds" and "Investment Risks."
MAIN RISKS
----------------
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
9
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
U.S. Government Securities Cash
Management Money Market Fund
How has the U.S. Government Securities Cash Management Money Market Fund
Performed?
By showing the variability of the U.S. Government Securities Cash Management
Money Market Fund's performance from year to year, the chart and table below
help show the risk of investing in the Fund. Please remember that the past
performance of the U.S. Government Securities Cash Management Money Market Fund
is not necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/,/2/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
3.04% 1993
3.97% 1994
5.65% 1995
5.15% 1996
5.34% 1997
5.26% 1998
4.88% 1999
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.48%.
/2/Performance data includes the performance of the Pegasus U.S. Government
Securities Cash Management Fund for the period before it was consolidated
with the One Group U.S. Government Securities Cash Management Money Market
Fund on March 29, 1999.
--------------------------------------------------------------------------------
Best Quarter: 1.40% 1Q1995 Worst Quarter: 0.72% 4Q1993
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF CLASS SINCE 6/2/92
<S> <C> <C> <C> <C>
Class A 1/17/95 4.62% 4.99% 4.38%
Class I 6/2/92 4.88% 5.25% 4.64%
</TABLE>
1 Performance data includes the performance of the Pegasus U.S. Government
Securities Cash Management Fund for the period before it was consolidated
with the One Group U.S. Government Securities Cash Management Money Market
Fund on March 29, 1999. For periods prior to the commencement of operations
of Class A on January 17, 1995, the performance of Class A shares is based on
Class I share performance adjusted to reflect the differences in expenses and
sales charges.
To obtain current yield information, call toll-free 1-877-691-1118 or visit
www.onegroup.com.
------
10
<PAGE>
------------------
U.S. Government Securities Cash
Management Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your investment)/1/ CLASS A CLASS I
------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
------------------------------------------------------------------
(as a percentage of offering price)
------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) NONE NONE
------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
------------------------------------------------------------------
Redemption Fee NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE
------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------
(expenses that are deducted from Fund
assets)/2/ CLASS A CLASS I
-----------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .20% .20%
-----------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% NONE
-----------------------------------------------------------
Other Expenses .18% .18%
-----------------------------------------------------------
Total Annual Fund Operating Expenses .63% .38%
-----------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.03%) (.03%)
-----------------------------------------------------------
Net Expenses .60% .35%
-----------------------------------------------------------
</TABLE>
/1/ If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/ Expense information has been restated to reflect current fees.
/3/ Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .60% for Class A shares and .35% for
Class I shares for the period beginning November 1, 2000, and ending on
October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you held all of your shares for the period. The examples also
assume that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Your actual costs may be higher or lower
than those shown below. There is no sales charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
CLASS A CLASS I
--------------------------
<S> <C> <C>
1 Year/1/ $ 61 $ 36
--------------------------
3 Years 199 119
--------------------------
5 Years 348 210
--------------------------
10 Years 783 477
--------------------------
</TABLE>
/1/ Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $64
Class I $39
</TABLE>
------
11
<PAGE>
ONE GROUP(R)
------------------
----------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Treasury Cash
Management Money
Market Fund
What is the goal of the Treasury Cash Management Money Market Fund?
The Fund seeks high current income with liquidity and stability of principal.
What are the Treasury Cash Management Money Market Fund's Main Investment
Strategies?
The Fund invests exclusively in U. S. Treasury bills, notes, bonds and other U.
S. obligations issued or guaranteed by the U. S. Treasury, some of which are
subject to repurchase agreements. The Fund will comply with SEC rules
applicable to all money market funds, including Rule 2a-7 under the Investment
Company Act of 1940. For more information about the Treasury Cash Management
Money Market Fund's investment strategies, please read "More About the Funds"
and "Principal Investment Strategies."
What are the main risks of Investing in the Treasury Cash Management Money
Market Fund?
The main risks of investing in the Treasury Cash Management Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
MAIN RISKS
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
12
<PAGE>
FUND SUMMARY
Treasury Cash Management Money
Market Fund
------------------
How has the Treasury Cash Management Money Market Fund Performed?
By showing the variability of the Treasury Cash Management Money Market Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the
Treasury Cash Management Money Market Fund is not necessarily an indication of
how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/,/2/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
5.20% 1998
4.69% 1999
/1/ For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.38%.
/2/ Performance data includes performance of the Pegasus Treasury Cash
Management Fund for the period before it was consolidated with the One
Group Treasury Cash Management Money Market Fund on March 29, 1999.
--------------------------------------------------------------------------------
Best Quarter: 1.32% 3Q1998 Worst Quarter: 1.10% 1Q1999
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 9/12/97
<S> <C> <C> <C>
Class A 9/12/97 4.43% 4.75%
Class I 9/12/97 4.69% 5.01%
</TABLE>
/1/ Performance data includes performance of the Pegasus Treasury Cash
Management Fund for the period before it was consolidated with the One
Group Treasury Cash Management Money Market Fund on March 29, 1999.
To obtain current yield information, call toll-free 1-877-691-1118 or visit
www.onegroup.com.
------
13
<PAGE>
ONE GROUP(R)
------------------
Treasury Cash Management Money
Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your investment)/1/ CLASS A CLASS I
------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
------------------------------------------------------------------
(as a percentage of offering price)
------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) NONE NONE
------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
------------------------------------------------------------------
Redemption Fee NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE
------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------
(expenses that are deducted from Fund
assets)/2/ CLASS A CLASS I
-----------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .20% .20%
-----------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% NONE
-----------------------------------------------------------
Other Expenses .22% .22%
-----------------------------------------------------------
Total Annual Fund Operating Expenses .67% .42%
-----------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.07%) (.07%)
-----------------------------------------------------------
Net Expenses .60% .35%
-----------------------------------------------------------
</TABLE>
/1/ If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, a $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
/2/ Expense information has been restated to reflect current fees.
/3/ Banc One Investment Advisors Corporation and The One Group Services Company
have contractually agreed to waive fees and/or reimburse expenses to limit
total annual fund operating expenses to .60% for Class A shares and .35%
for Class I shares for the period beginning November 1, 2000, and ending on
October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you held all of your shares for the period. The examples also
assume that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Your actual costs may be higher or lower
than those shown below. There is no sales charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
CLASS A CLASS I
--------------------------
<S> <C> <C>
1 Year/1/ $ 61 $ 36
--------------------------
3 Years 207 128
--------------------------
5 Years 366 228
--------------------------
10 Years 828 523
--------------------------
</TABLE>
/1/ Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $68
Class I $43
</TABLE>
------
14
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Municipal Cash
Management Money
Market Fund
What is the goal of the Municipal Cash Management Money Market Fund?
The Fund seeks high current income exempt from federal income tax with
liquidity and stability of principal.
What are the Municipal Cash Management Money Market Fund's Main Investment
Strategies?
As a matter of fundamental policy, the Fund will invest at least 80% of its
total assets in short-term, high-quality municipal securities. These are
securities issued by or on behalf of the states, territories and possessions of
the United States, including the District of Columbia, and their political
subdivisions, agencies, instrumentalities and authorities. These municipal
securities produce interest that, in the opinion of bond counsel for the
issuer, is exempt from federal income tax. However, the Fund may invest as much
as 100% of its assets in municipal securities that produce income that is
subject to the federal alternative minimum tax. If you are subject to the
federal alternative minimum tax, please read the section of this prospectus
entitled "Tax Treatment of Shareholders" before you invest. The Fund also may
invest up to 20% of its total assets in other types of securities, such as
taxable money market instruments, including repurchase agreements. The Fund
will comply with SEC rules applicable to all money market funds, including Rule
2a-7 under the Investment Company Act of 1940. For more information about the
Municipal Cash Management Money Market Fund's investment strategies, please
read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Municipal Cash Management
Money Market Fund?
The main risks of investing in the Municipal Cash Management Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
------
15
<PAGE>
ONE GROUP(R)
------------------
----------------
Municipal Cash Management
Money Market Fund
MAIN RISKS
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value and Credit Risk. There is no assurance that the Fund will meet
its investment objective of maintaining a net asset value of $1.00 per share on
a continuous basis. Credit risk is very low because the Fund only invests in
high- quality obligations and limits its average maturity to 90 days.
Nonetheless, if an issuer fails to pay interest or to repay principal, the
value of your investment in the Fund could decline. Because the Fund invests in
securities that are backed by "credit enhancements" such as letters of credit,
the value of your investment in the Fund could also decrease if the value of
the securities in the portfolio decreases in response to declining credit
quality of a credit enhancement provider.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
16
<PAGE>
------------------
FUND SUMMARY
Municipal Cash Management Money
Market Fund
How has the Municipal Cash Management Money Market Fund Performed?
By showing the variability of the Municipal Cash Management Money Market Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the
Municipal Cash Management Money Market Fund is not necessarily an indication of
how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/,/2/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
3.20% 1998
3.00% 1999
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 2.84%.
/2/Performance data includes the performance of the Pegasus Municipal Cash
Management Fund for the period before it was consolidated with the One Group
Municipal Cash Management Money Market Fund on March 29, 1999.
--------------------------------------------------------------------------------
Best Quarter: 0.85% 4Q1999 Worst Quarter: 0.65% 1Q1999
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 8/18/97
<S> <C> <C> <C>
Class A 8/18/97 2.74% 2.90%
Class I 8/18/97 3.00% 3.16%
</TABLE>
1 Performance data includes the performance of the Pegasus Municipal Cash
Management Fund for the period before it was consolidated with the One Group
Municipal Cash Management Money Market Fund on March 29, 1999.
To obtain current yield information, call toll-free 1-877-691-1118 or visit
www.onegroup.com.
------
17
<PAGE>
ONE GROUP(R)
------------------
Municipal Cash Management
Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your investment)/1/ CLASS A CLASS I
------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
------------------------------------------------------------------
(as a percentage of offering price)
------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) NONE NONE
------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
------------------------------------------------------------------
Redemption Fee NONE NONE
------------------------------------------------------------------
Exchange Fee NONE NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from Fund assets)/2/ CLASS A CLASS I
------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .20% .20%
------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% NONE
------------------------------------------------------------------
Other Expenses .19% .19%
------------------------------------------------------------------
Total Annual Fund Operating Expenses .64% .39%
------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.04%) (.04%)
------------------------------------------------------------------
Net Expenses .60% .35%
------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .60% for Class A shares and .35% for Class
I shares for the period beginning November 1, 2000, and ending on October 31,
2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you held all of your shares for the period. The examples also
assume that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Your actual costs may be higher or lower
than those shown below. There is no sales charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
CLASS A CLASS I
--------------------------
<S> <C> <C>
1 Year/1/ $ 61 $ 36
--------------------------
3 Years 201 121
--------------------------
5 Years 353 215
--------------------------
10 Years 795 489
--------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<S> <C>
Class A $65
Class I $40
</TABLE>
------
18
<PAGE>
ONE GROUP(R)
------------------
More About One Group
Mutual Funds
Each of the five funds described in this prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of One Group Mutual Funds" and the Statement of Additional
Information.
--------------------------------------------------------------------------------
Principal Investment Strategies
This prospectus describes five mutual funds that are designed to seek high
current income with liquidity and stability of principal. The principal
investment strategies that are used to meet each Fund's investment objective
are described in "Fund Summaries: Investment, Risk & Performance."
FUNDAMENTAL POLICIES
Each Fund's investment strategy
may involve "fundamental
policies." A policy is fundamental
if it cannot be changed without
the consent of a majority of the
outstanding shares of the Fund.
There can be no assurance that the Funds will achieve their investment
objective. Please note that each Fund also may use strategies that are not
described in the Fund Summaries, but which are described in the Statement of
Additional Information.
--------------------------------------------------------------------------------
Investment Risks
The risks associated with investing in all five of the Cash Management Money
Market Funds are described in the Fund Summaries in the front of this
prospectus. Risks associated with certain cash management funds are described
further below.
DERIVATIVES. The Cash Management Money Market Fund, the U.S. Government
Securities Cash Management Money Market Fund and the Municipal Cash Management
Money Market Fund invest in securities that may be considered to be
derivatives. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity
and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or
contracts (like certain types of
mortgage-related securities) that
derive their value from the
performance of underlying assets
or securities.
------
19
<PAGE>
For more information about risks associated with the types of investments that
the Cash Management Money Market Funds purchase, please read the Fund
Summaries, Appendix A and the Statement of Additional Information.
--------------------------------------------------------------------------------
Investment Policies
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of $1.00
per share, although there is no guarantee that the Funds will be able to do
so.
2. Will not purchase the securities of an issuer if as a result more than 5% of
its total assets would be invested in the securities of that issuer or the
Fund would own more than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or guaranteed by the United
States, its agencies or instrumentalities, and repurchase agreements
involving these securities. This restriction applies with respect to 75% of
a Fund's total assets. The Funds may invest the remaining 25% of their total
assets without regard to this restriction as permitted by applicable law.
3. Will not purchase securities while borrowings (including reverse repurchase
agreements) exceed 5% of the respective Fund's net assets.
4. Will not borrow money or issue senior securities, except that the Funds may
borrow from banks for temporary purposes in amounts not exceeding 10% of
their total assets at the time of the borrowing.
5. Will not mortgage, pledge or hypothecate any assets, except in connection
with borrowing specified in 4 above and in amounts not in excess of the
lesser of the dollar amount borrowed or 10% of the value of the respective
Fund's total assets at the time of its borrowing.
Additional investment policies can be found in the Statement of Additional
Information.
--------------------------------------------------------------------------------
Portfolio Quality
Securities will be purchased by the Funds only if: i) the securities satisfy
Securities and Exchange Commission regulations intended to restrict these Funds
to short-term, high-quality investments; and ii) they present minimal credit
risk under guidelines adopted by the One Group Board of Trustees. For more
information about ratings, please see "Description of Ratings" in the Statement
of Additional Information.
------
20
<PAGE>
ONE GROUP(R)
------------------
How to Do Business with
One Group Mutual Funds
--------------------------------------------------------------------------------
Purchasing Fund Shares
Where Can I Buy Shares?
You may purchase Fund shares:
. Directly from One Group through The One Group Services Company (the
"Distributor"), and
. From Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or 401(k)
plan sponsors or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
When Can I Buy Shares?
. Purchases may be made on any business day. This includes any day that the
Funds are open for business. The Funds will be closed on weekends, and days
on which the New York Stock Exchange ("NYSE") or the Federal Reserve are
closed, including the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans Day, Thanksgiving, and Christmas Day.
. Purchase requests received before 12:00 p.m. Eastern Time ("ET") for the
Municipal Cash Management Money Market Fund, 2:00 p.m. ET for the Treasury
Prime Cash Management Money Market Fund, and 3:00 p.m. ET for the Cash
Management Money Market Fund, the Treasury Cash Management Money Market Fund
and the U.S. Government Securities Cash Management Money Market Fund will be
effective that day. On occasion, the NYSE will close before 4:00 p.m. ET.
When the NYSE closes before the times listed above, purchase requests
received after the NYSE closes will be effective the following business day.
. Purchase orders may be cancelled if the Fund's Custodian, State Street Bank
and Trust Company, does not receive "federal funds" by each Fund's cut-off
time.
. If a Shareholder Servicing Agent holds your shares, it is the responsibility
of the Shareholder Servicing Agent to send your purchase or redemption order
to the Fund. Your Shareholder Servicing Agent may have an earlier cut-off
time for purchase and redemption requests.
. The Distributor can reject a purchase order if it does not think that it is
in the best interests of a Fund and/or its shareholders to accept the order.
. Shares are electronically recorded. Therefore, certificates will not be
issued.
------
21
<PAGE>
What Kind Of Shares Can I Buy?
One Group offers the following classes of shares:
. Class A shares are available to the general public.
. Class I shares are available to institutional investors, such as
corporations, pension and profit sharing plans, and foundations; and any
organization authorized to act in a fiduciary, advisory, custodial or agency
capacity. We will refer to these entities as "Intermediaries."
How Much Do Shares Cost?
. Shares are sold at net asset value ("NAV"), which, under normal
circumstances, will equal $1.00.
. NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
. A Fund's NAV changes every day. NAV is calculated each business day as of
12:00 p.m. ET for the Municipal Cash Management Money Market Fund, 2:00 p.m.
ET for the Treasury Prime Cash Management Money Market and 3:00 p.m. ET for
the Cash Management Money Market Fund, Treasury Cash Management Money Market
Fund and U.S. Government Securities Cash Management Money Market Fund. On
occasion, the NYSE will close before 4:00 p.m. ET. When the NYSE closes
before the times listed above, NAV will be calculated as of the time the NYSE
closes.
How Do I Open An Account?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
. The minimum initial investment is $1,000,000. You are required to maintain
a minimum account balance of $1,000,000.
. Subsequent investments must be at least $5,000.
. These minimums may be waived.
3. Complete the Account Application Form. Be sure to sign up for all of the
account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
4. Send the completed application to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
------
22
<PAGE>
And authorize a bank transfer or initiate a wire to:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP CASH MANAGEMENT MONEY MARKET FUND)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: ABC CORPORATION)
5. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
6. If you have any questions, contact your Shareholder Servicing Agent or call
1-877-691-1118.
Can I Purchase Shares Over The Telephone?
Yes. Simply select this option on your Account Application Form and then:
. Contact your Shareholder Servicing Agent or call 1-877-691-1118 to relay your
purchase instructions.
. Authorize a bank transfer or initiate a wire to:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP CASH MANAGEMENT MONEY MARKET FUND)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: ABC CORPORATION)
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. You may revoke your right to make purchases over the telephone by sending a
letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
--------------------------------------------------------------------------------
Distribution and Servicing Expenses
The Distributor compensates Shareholder Servicing Agents who sell shares of One
Group. Compensation comes from 12b-1 fees and payments by the Distributor and
the Funds' investment advisor from their own resources.
------
23
<PAGE>
----------------
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 fees. 12b-1 fees are paid by
One Group to the Distributor as compensation for its services and expenses. The
Distributor in turn pays all or part of the 12b-1 fee to Shareholder Servicing
Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .25% of its average daily net assets.
2. There are no 12b-1 fees for Class I shares.
. 12b-1 fees help the Distributor sell Class A shares without an "up-front"
sales charge by defraying the costs of advancing brokerage commissions and
other expenses paid to Shareholder Servicing Agents. The Distributor may
use up to .25% of the fees for shareholder servicing.
. The Distributor may pay 12b-1 fees to its affiliates and to Banc One
Investment Advisors and its affiliates (or any sub-advisor).
Because 12b-1 fees are paid out of Fund assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
--------------------------------------------------------------------------------
Exchanging Fund Shares
What Are My Exchange Privileges?
You may exchange your shares for shares of any other Fund described in this
prospectus. You may also exchange your shares for shares of any institutional
money market fund that One Group may offer.
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in the
Systematic Exchange Privilege, please select it on your Account Application. To
learn more about it, please call 1-877-691-1118.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days
written notice.
When Are Exchanges Processed?
Exchanges are processed the same business day they are received, provided:
. State Street Bank and Trust Company receives the request by 12:00 p.m. ET.
. You have provided One Group with all of the information necessary to process
the exchange.
. You have received a current prospectus of the Fund or Funds in which you wish
to invest.
. You have contacted your Shareholder Servicing Agent, if necessary.
------
24
<PAGE>
Are Exchanges Taxable?
Generally:
. An exchange between classes of shares of the same Fund is not taxable for
federal income tax purposes.
. An exchange between Funds is considered a sale and generally results in a
capital gain or loss for federal income tax purposes.
. You should talk to your tax advisor before making an exchange.
Are There Limits On Exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
. To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity. Exchange activity is excessive if it exceeds two
substantive exchange redemptions within 30 days of each other.
. Excessive exchange activity will result in revocation of your exchange
privilege.
. In addition, One Group reserves the right to reject any exchange request
(even those that are not excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or otherwise adversely
affect other shareholders.
. Also, your shares may be automatically redeemed if, due to exchanges, you no
longer meet the Fund's minimum balance requirements. For information on the
minimum required balance, please read, "How Do I Open An Account?"
--------------------------------------------------------------------------------
Redeeming Fund Shares
When Can I Redeem Shares?
You may redeem all or some of your shares on any day that the Funds are open
for business.
. Redemption requests will be effective that day if received before:
. 12:00 p.m. ET for the Municipal Cash Management Money Market Fund;
. 2:00 p.m. ET for the Treasury Prime Cash Management Money Market Fund;
. 3:00 p.m. ET for the Cash Management Money Market Fund, Treasury Cash
Management Money Market Fund and U. S. Government Securities Cash
Management Money Market Fund;
On occasion, the NYSE will close before 4:00 p.m. ET. When the NYSE closes
before the times listed above, redemption requests received after the NYSE
closes will be effective the following business day.
. All required documentation in the proper form must accompany a redemption
request. One Group may refuse to honor incomplete redemption requests.
------
25
<PAGE>
How Do I Redeem Shares?
. You may use any of the following methods to redeem your shares:
1. You may send a written redemption request to your Shareholder Servicing
Agent, if applicable, or to State Street Bank and Trust Company at the
following address:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
2. You may use the One Group website at www.onegroup.com; or
3. You may redeem over the telephone. Please see "Can I Redeem By Telephone?"
for more information.
. You may request redemption forms by calling 1-877-691-1118 or visiting
www.onegroup.com.
. One Group may require that the signature on your redemption request be
guaranteed by a participant in the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is payable to the shareholder of record; and
2. the redemption check is mailed to the shareholder at the record address or
the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
. On the Account Application Form, you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
. One Group may charge you a wire redemption fee. The current charge is $7.00.
. Your redemption proceeds will be paid within seven days after receipt of the
redemption request. However, the Funds will attempt to honor requests for
same day payment on redemptions, if the request is received before the time
listed in "When Can I Redeem Shares?" If the request is received after the
time listed in "When Can I Redeem Shares?", the Funds will attempt to wire
payment the next business day.
What Will My Shares Be Worth?
. The NAV of shares of the Funds is expected to remain constant at $1.00 per
share, although there is no assurance that this will always be the case.
. You will receive the NAV calculated after your redemption request is
received. Please read "How Much Do Shares Cost?"
------
26
<PAGE>
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
----------------
Can I Redeem By Telephone?
Yes, if you selected this option on your Account Application Form.
. Contact your Shareholder Servicing Agent or call 1-877-691-1118 to relay your
redemption request.
. Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
. State Street Bank and Trust Company may charge you a wire redemption fee. The
current charge is $7.00.
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
. All redemptions will be for cash. However, if you redeem shares worth
$500,000 or more, the Fund reserves the right to pay part or all of your
redemption proceeds in readily marketable securities instead of cash. If
payment is made in securities, the Fund will value the securities selected in
the same manner in which it computes its NAV. This process minimizes the
effect of large redemptions on the Fund and its remaining shareholders.
. Your shares may be automatically redeemed if, due to redemptions, you no
longer meet a Fund's minimum balance requirements. For information on the
minimum required balances, please read, "How Do I Open An Account?"
. If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank. One
Group generally receives payment within seven (7) business days of purchase.
. One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
------
27
<PAGE>
ONE GROUP(R)
------------------
Shareholder Information
--------------------------------------------------------------------------------
Voting Rights
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each
Fund, and each class of shares within each Fund, votes separately on matters
relating solely to that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal voting rights on matters
that affect all shareholders equally.
--------------------------------------------------------------------------------
Dividend Policies
DIVIDENDS. The Funds generally declare dividends on each business day.
Dividends are distributed on the first business day of month. Capital gains, if
any, for all Funds are distributed at least annually.
The Funds pay dividends and distributions on a per-share basis.
Dividends payable on Class I shares will be more than those payable on Class A
shares. This is because Class A shares have higher distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payments in cash. The price of the shares
is the NAV determined immediately following the dividend record date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you may write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street. You also may call 1-877-691-1118 to make this
change.
--------------------------------------------------------------------------------
Tax Treatment of Shareholders
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange or redemption of Fund
shares may produce either a taxable gain or a loss. You are responsible for any
tax liabilities generated by your transactions.
Taxation of Distributions
ALL FUNDS OTHER THAN ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET
FUND. Each Fund will distribute substantially all of its net investment income.
Dividends you receive from a Fund, whether reinvested or received in cash, will
be taxable to you. Dividends from a Fund's net investment income (generally all
of the Fund's net investment income), if any, will be taxable as ordinary
income.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
------
28
<PAGE>
Taxation of Distributions
ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND. The Fund will distribute
substantially all of its net investment income. Distributions you receive from
the Fund, whether reinvested or received in cash, will be taxable to you except
as discussed below. The Fund expects to pay much or all of its dividends in the
form of "exempt-interest dividends." It will be able to do so if at least 50%
of the value of the Fund's assets at the end of each quarter of the Fund's
taxable year consists of obligations the interest on which is excludable from
gross income. Exempt-interest dividends are generally excludable from an
investor's gross income for regular federal income tax purposes. However, the
receipt of exempt-interest dividends may result in liability for federal
alternative minimum tax and for state (including state alternative minimum tax)
and local taxes, both for individual and corporate shareholders. Corporate
shareholders will be required to take the interest on municipal securities into
account in determining their alternative minimum taxable income. Dividends from
a Fund's net investment income that do not qualify as "exempt-interest
dividends" will be taxable as ordinary income.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous year.
Tax Information
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information, see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the federal, state,
local or foreign tax treatment of the Funds or their shareholders.
One Group or your Shareholder Servicing Agent will send you transaction
confirmation statements and quarterly account statements. Please review these
statements carefully. One Group will correct errors if notified within one year
of the date printed on the transaction confirmation or account statement. Your
Shareholder Servicing Agent may have a different cut-off time.
SHAREHOLDER STATEMENTS AND RECORDS
To reduce expenses and conserve natural resources, One Group will deliver a
single copy of prospectuses and financial reports to individual investors who
share a residential address, provided they have the same last name or One Group
reasonably believes they are members of the same family. If you would like to
receive separate mailings, please call 1-877-691-1118 and One Group will begin
individual delivery within 30 days. If you would like to receive these
documents by e-mail, please visit www.onegroup.com and sign up for electronic
delivery.
If you are the record owner of your One Group shares (that is, you did not use
a Shareholder Servicing Agent to buy your shares), you may access your account
statements at www.onegroup.com.
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
If you have any questions or need additional information, please write One
Group Mutual Funds at 1111 Polaris Parkway, Columbus, OH 43271-1235, call 1-
877-691-1118 or visit www.onegroup.com.
------
29
<PAGE>
ONE GROUP(R)
------------------
Management of
One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor to
the Trust since its inception. In addition, Banc One Investment Advisors serves
as investment advisor to other mutual funds and individual corporate,
charitable and retirement accounts. As of June 30, 2000, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $131 billion in assets.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Cash Management Money Market
Fund .17%
----------------------------------------------------------------------
One Group(R) Treasury Prime Cash Management
Money Market Fund .16%
----------------------------------------------------------------------
One Group(R) U.S. Government Securities Cash
Management Money Market Fund .18%
----------------------------------------------------------------------
One Group(R) Treasury Cash Management Money
Market Fund .16%
----------------------------------------------------------------------
One Group(R) Municipal Cash Management Money
Market Fund .17%
----------------------------------------------------------------------
</TABLE>
------
30
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Cash Management
Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information
for the Fund has been audited by PricewaterhouseCoopers LLP and other
independent accountants. PricewaterhouseCoopers' report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR SIX MONTHS JULY 1,
ENDED ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, JUNE 30, -------------------------------- DECEMBER 31,
CLASS A SHARES 2000 1999(A) 1998 1997 1996 1995(B)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.053 0.022 0.050 0.050 0.048 0.026
Net realized gains
(losses) from
investments - (C) - - (C) - - (C) - (C)
------------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.053 0.022 0.050 0.050 0.048 0.026
------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.053) (0.022) (0.050) (0.050) (0.048) (0.026)
------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.39% 2.22%(D) 5.10% 5.15% 4.98% 2.68%(D)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,593,945 $1,259,860 $1,521,827 $992,763 $232,249 $121,750
Ratio of expenses to
average net assets 0.60% 0.60%(E) 0.60% 0.60% 0.60% 0.60%(E)
Ratio of net investment
income to average net
assets 5.27% 4.45%(E) 5.04% 5.11% 4.94% 5.25%(E)
Ratio of expenses to
average net assets* 0.64% 0.65%(E) 0.64% 0.63% 0.67% 0.69%(E)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of the One Group Mutual Funds, the Pegasus
Cash Management Fund became the Cash Management Money Market Fund. The
Financial Highlights for the periods prior to March 29, 1999, represent the
Pegasus Cash Management Fund. (B) Effective July 1, 1995, the Fund changed
its fiscal year end from June 30 to December 31. (C) Amount is less than
.001. (D) Not annualized. (E) Annualized.
<TABLE>
<CAPTION>
YEAR SIX MONTHS JULY 1,
ENDED ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, JUNE 30, -------------------------------- DECEMBER 31,
CLASS I SHARES 2000 1999(A) 1998 1997 1996 1995(B)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.055 0.023 0.052 0.053 0.051 0.028
Net realized gains
(losses) from
investments - (C) - - (C) - - (C) - (C)
---------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.055 0.023 0.052 0.053 0.051 0.028
---------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.055) (0.023) (0.052) (0.053) (0.051) (0.028)
---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------------
TOTAL RETURN 5.65% 2.35%(D) 5.36% 5.41% 5.23% 2.80%(D)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $815,933 $947,776 $1,076,045 $705,270 $885,946 $389,127
Ratio of expenses to
average net assets 0.35% 0.34%(E) 0.35% 0.35% 0.35% 0.35%(E)
Ratio of net investment
income to average net
assets 5.47% 4.69%(E) 5.21% 5.36% 5.19% 5.51%(E)
Ratio of expenses to
average net assets* 0.39% 0.40%(E) 0.39% 0.38% 0.42% 0.43%(E)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of the One Group Mutual Funds, the Pegasus
Cash Management Fund became the Cash Management Money Market Fund. The
Financial Highlights for the periods prior to March 29, 1999, represent the
Pegasus Cash Management Fund. (B) Effective July 1, 1995, the Fund changed
its fiscal year end from June 30 to December 31. (C) Amount is less than
.001. (D) Not annualized. (E) Annualized.
------
31
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Treasury Prime Cash Management
Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information
for the Fund has been audited by PricewaterhouseCoopers LLP and other
independent accountants. PricewaterhouseCoopers' report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR SIX MONTHS MARCH 22,
ENDED ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, JUNE 30, ---------------------------- DECEMBER 31,
CLASS A SHARES 2000 1999(A) 1998 1997 1996 1995(B)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.046 0.020 0.044 0.045 0.045 0.038
---------------------------------------------------------------------------------------------
Net realized gains
(losses) from
investments - (C) - (C) - - - -
---------------------------------------------------------------------------------------------
Total from Investment
Activities 0.046 0.020 0.044 0.045 0.045 0.038
---------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.046) (0.020) (0.044) (0.045) (0.045) (0.038)
---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------
TOTAL RETURN 4.75% 2.00%(D) 4.50% 4.64% 4.60% 3.86%(D)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $586,950 $474,180 $469,443 $233,590 $215,040 $130,559
Ratio of expenses to
average net assets 0.60% 0.60%(E) 0.60% 0.60% 0.60% 0.60%(E)
Ratio of net investment
income to average net
assets 4.66% 3.99%(E) 4.35% 4.54% 4.59% 4.72%(E)
Ratio of expenses to
average net assets* 0.65% 0.67%(E) 0.65% 0.65% 0.71% 0.74%(E)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of the One Group Mutual Funds, the Pegasus
Treasury Prime Cash Management Fund became the Treasury Prime Cash Management
Money Market Fund. The Financial Highlights for the periods prior to March
29, 1999, represent the Pegasus Treasury Prime Cash Management Fund. (B)
Period from commencement of operations. (C) Amount is less than .001. (D) Not
annualized. (E) Annualized.
<TABLE>
<CAPTION>
YEAR SIX MONTHS MARCH 22,
ENDED ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, JUNE 30, -------------------------- DECEMBER 31,
CLASS I SHARES 2000 1999(A) 1998 1997 1996 1995(B)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.049 0.021 0.047 0.048 0.047 0.040
Net realized gains
(losses) from
investments - (C) - (C) - - - (C) -
--------------------------------------------------------------------------------------------
Total from Investment
Activities 0.049 0.021 0.047 0.048 0.047 0.040
--------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.049) (0.021) (0.047) (0.048) (0.047) (0.040)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------
TOTAL RETURN 5.01% 2.12%(D) 4.76% 4.90% 4.86% 4.06%(D)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $111,912 $125,645 $189,630 $90,813 $70,120 $14,008
Ratio of expenses to
average net assets 0.35% 0.35%(E) 0.35% 0.35% 0.35% 0.35%(E)
Ratio of net investment
income to average net
assets 4.89% 4.24%(E) 4.55% 4.79% 4.84% 5.16%(E)
Ratio of expenses to
average net assets* 0.40% 0.42%(E) 0.40% 0.40% 0.46% 1.23%(E)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of the One Group Mutual Funds, the Pegasus
Treasury Prime Cash Management Fund became the Treasury Prime Cash Management
Money Market Fund. The Financial Highlights for the periods prior to March
29, 1999, represent the Pegasus Treasury Prime Cash Management Fund. (B)
Period from commencement of operations. (C) Amount is less than .001. (D) Not
annualized. (E) Annualized.
------
32
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
U.S. Government Securities Cash
Management Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information
for the Fund has been audited by PricewaterhouseCoopers LLP and other
independent accountants. PricewaterhouseCoopers' report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
SIX MONTHS JUNE 1,
YEAR ENDED ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, JUNE 30, ------------------------------ DECEMBER 31,
CLASS A SHARES 2000 1999(A) 1998 1997 1996 1995(B)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.051 0.021 0.049 0.050 0.048 0.031
Net realized gains
(losses) from
investments - (C) - (C) - - (C) - (C) - (C)
--------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.051 0.021 0.049 0.050 0.048 0.031
--------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.051) (0.021) (0.049) (0.050) (0.048) (0.031)
--------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------------
TOTAL RETURN 5.21% 2.16%(D) 5.00% 5.08% 4.89% 3.09%(D)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,208,091 $767,457 $559,770 $357,663 $207,046 $56,000
Ratio of expenses to
average net assets 0.60% 0.60%(E) 0.60% 0.60% 0.60% 0.60%(E)
Ratio of net investment
income to average net
assets 5.15% 4.31%(E) 4.87% 5.02% 4.84% 5.17%(E)
Ratio of expenses to
average net assets* 0.64% 0.63%(E) 0.62% 0.61% 0.68% 0.69%(E)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of the One Group Mutual Funds, the Pegasus
U.S. Government Securities Cash Management Fund became the U.S. Government
Securities Cash Management Money Market Fund. The Financial Highlights for
the periods prior to March 29, 1999, represent the Pegasus U.S. Government
Securities Cash Management Fund. (B) Effective June 1, 1995, the Fund changed
its fiscal year end from May 31 to December 31. (C) Amount is less than .001.
(D) Not annualized. (E) Annualized.
<TABLE>
<CAPTION>
SIX MONTHS JUNE 1,
YEAR ENDED ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, JUNE 30, -------------------------------- DECEMBER 31,
CLASS I SHARES 2000 1999(A) 1998 1997 1996 1995(B)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.053 0.023 0.051 0.052 0.050 0.032
Net realized gains
(losses) from
investments - (C) - (C) - - (C) - (C) - (C)
----------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.053 0.023 0.051 0.052 0.050 0.032
----------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.053) (0.023) (0.051) (0.052) (0.050) (0.032)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
TOTAL RETURN 5.47% 2.28%(D) 5.26% 5.34% 5.15% 3.24%(D)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $788,464 $856,449 $1,017,830 $534,364 $369,163 $489,395
Ratio of expenses to
average net assets 0.35% 0.35%(E) 0.35% 0.35% 0.35% 0.35%(E)
Ratio of net investment
income to average net
assets 5.33% 4.56%(E) 5.11% 5.27% 5.09% 5.46%(E)
Ratio of expenses to
average net assets* 0.39% 0.38%(E) 0.37% 0.36% 0.43% 0.42%(E)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of the One Group Mutual Funds, the Pegasus
U.S. Government Securities Cash Management Fund became the U.S. Government
Securities Cash Management Money Market Fund. The Financial Highlights for
the periods prior to March 29, 1999, represent the Pegasus U.S. Government
Securities Cash Management Fund. (B) Effective June 1, 1995, the fund changed
its fiscal year end from May 31 to December 31. (C) Amount is less than .001.
(D) Not annualized. (E) Annualized.
------
33
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Treasury Cash Management
Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information
for the Fund has been audited by PricewaterhouseCoopers LLP and other
independent accountants. PricewaterhouseCoopers' report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
SIX MONTHS SEPTEMBER 12,
YEAR ENDED ENDED YEAR ENDED 1997 TO
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
CLASS A SHARES 2000 1999(A) 1998 1997(B)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
-----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.049 0.021 0.048 0.015
Net realized and
unrealized gains
(losses) from
investments - (C) - - -
-----------------------------------------------------------------------------
Total from Investment
Activities 0.049 0.021 0.048 0.015
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.049) (0.021) (0.048) (0.015)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
-----------------------------------------------------------------------------
TOTAL RETURN 5.00% 2.10%(D) 4.94% 5.04%(E)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $223,888 $130,989 $331,015 $205,722
Ratio of expenses to
average net assets 0.60% 0.60%(E) 0.60% 0.60%(E)
Ratio of net investment
income to average net
assets 4.92% 4.19%(E) 4.82% 5.03%(E)
Ratio of expenses to
average net assets* 0.65% 0.68%(E) 0.65% 0.66%(E)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of the One Group Mutual Funds, the Pegasus
Treasury Cash Management Fund became the Treasury Cash Management Money
Market Fund. The Financial Highlights for the periods prior to March 29,
1999, represent the Pegasus Treasury Cash Management Fund. (B) Period from
commencement of operations. (C) Amount is less than .001. (D) Not annualized.
(E) Annualized.
<TABLE>
<CAPTION>
SIX MONTHS SEPTEMBER 12,
YEAR ENDED ENDED YEAR ENDED 1997 TO
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
CLASS I SHARES 2000 1999(A) 1998 1997(B)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $1.000
-----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.051 0.022 0.051 0.016
Net realized and
unrealized gains
(losses) from
investments - (C) - - -
-----------------------------------------------------------------------------
Total from Investment
Activities 0.051 0.022 0.051 0.016
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.051) (0.022) (0.051) (0.016)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $1.000
-----------------------------------------------------------------------------
TOTAL RETURN 5.26% 2.22%(D) 5.20% 5.29%(E)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $198,616 $191,181 $32,196 $ 850
Ratio of expenses to
average net assets 0.35% 0.35%(E) 0.35% 0.35%(E)
Ratio of net investment
income to average net
assets 5.13% 4.44%(E) 4.97% 5.28%(E)
Ratio of expenses to
average net assets* 0.40% 0.43%(E) 0.40% 0.41%(E)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of the One Group Mutual Funds, the Pegasus
Treasury Cash Management Fund became the Treasury Cash Management Money
Market Fund. The Financial Highlights for the periods prior to March 29,
1999, represent the Pegasus Treasury Cash Management Fund. (B) Period from
commencement of operations. (C) Amount is less than .001. (D) Not annualized.
(E) Annualized.
------
34
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Municipal Cash Management
Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information
for the Fund has been audited by PricewaterhouseCoopers LLP and other
independent accountants. PricewaterhouseCoopers' report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
SIX MONTHS AUGUST 18,
YEAR ENDED ENDED YEAR ENDED 1997 TO
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
CLASS A SHARES 2000 1999(a) 1998 1997(b)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.031 0.013 0.029 0.012
Net realized gains (losses)
from investments - - (C) - -
--------------------------------------------------------------------------------
Total from Investment
Activities 0.031 0.013 0.029 0.012
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.031) (0.013) (0.029) (0.012)
--------------------------------------------------------------------------------
Net asset value, end of
period $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------
Total Return 3.19% 1.27%(D) 2.95% 3.14%(E)
Ratios/supplementary data:
Net assets at end of period
(000) $11,881 $16,299 $61,243 $56,534
Ratio of expenses to average
net assets 0.60% 0.60%(E) 0.60% 0.60%(E)
Ratio of net investment
income to average net
assets 3.12% 2.52%(E) 2.90% 3.12%(E)
Ratio of expenses to average
net assets* 0.64% 0.66%(E) 0.64% 0.66%(E)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of the One Group Mutual Funds, the Pegasus
Municipal Cash Management Fund became the Municipal Cash Management Money
Market Fund. The Financial Highlights for the periods prior to March 29,
1999, represent the Pegasus Municipal Cash Management Fund. (B) Period from
commencement of operations. (C) Amount is less than .001. (D) Not annualized.
(E) Annualized.
<TABLE>
<CAPTION>
SIX MONTHS AUGUST 18,
YEAR ENDED ENDED YEAR ENDED 1997 TO
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
CLASS I SHARES 2000 1999(A) 1998 1997(B)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.034 0.014 0.032 0.013
Net realized gains (losses)
from investments - - (C) - -
-------------------------------------------------------------------------------
Total from Investment
Activities 0.034 0.014 0.032 0.013
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.034) (0.014) (0.032) (0.013)
-------------------------------------------------------------------------------
Net asset value, end of
period $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Total Return 3.45% 1.39%(E) 3.20% 3.39%(E)
Ratios/supplementary data:
Net assets at end of period
(000) $397,248 $476,802 $588,602 $201,705
Ratio of expenses to
average net assets 0.35% 0.35%(E) 0.35% 0.35%(E)
Ratio of net investment
income to average net
assets 3.37% 2.77%(E) 3.12% 3.37%(E)
Ratio of expenses to
average net assets* 0.39% 0.41%(E) 0.39% 0.41%(E)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of the One Group Mutual Funds, the Pegasus
Municipal Cash Management Fund became the Municipal Cash Management Money
Market Fund. The Financial Highlights for the periods prior to March 29,
1999, represent the Pegasus Municipal Cash Management Fund. (B) Period from
commencement of operations. (C) Amount is less than .001. (D) Not annualized.
(E) Annualized.
------
35
<PAGE>
ONE GROUP(R)
------------------
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Funds, as well
as the risks inherent in their use. Fixed income securities are primarily
influenced by market, credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
<TABLE>
--------------------------------------------
<CAPTION>
FUND NAME FUND CODE
------------------------------------------
<S> <C>
One Group(R) Cash Management
Money Market Fund 1
------------------------------------------
One Group(R) Treasury Prime
Cash Management
Money Market Fund 2
------------------------------------------
One Group(R) U.S. Government
Securities Cash
Management Money Market Fund 3
------------------------------------------
One Group(R) Treasury Cash
Management
Money Market Fund 4
------------------------------------------
One Group(R) Municipal Cash
Management
Money Market Fund 5
</TABLE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes and bonds. 1-5 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by 1, 3, 5 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security and the 1, 3-5 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase or 1-5 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other money market 1, 3, 5 Market
mutual funds, including One Group money market funds and
shares of other money market mutual funds for which Banc One
Investment Advisors or its affiliates serves as investment
advisor or administrator. Banc One Investment Advisors will
waive certain fees when investing in funds for which it
serves as investment advisor.
-------------------------------------------------------------------------------
</TABLE>
------
36
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Extendable Commercial Notes: Variable rate notes with a 1 Market
maximum stated maturity of thirteen months which, on a Credit
designated day each month, may be extended by the purchaser Liquidity
for an additional thirteen months. The note's maturity
cannot be extended beyond the tenth anniversary of its
issuance.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations with 1, 3, 5 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations secured by 1, 3, 5 Prepayment
real estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a 1, 5 Market
stated maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in 1, 5 Liquidity
exchange for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time drafts 1, 5 Credit
drawn on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1, 5 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to puts and 1, 5 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state or 1, 5 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as General Tax
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Regulatory
Notes, Revenue Anticipation Notes, other short-term tax-
exempt obligations, municipal leases, obligations of
municipal housing authorities and single family revenue
bonds.
-------------------------------------------------------------------------------
</TABLE>
------
37
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Funding Agreements: Agreements issued by banks and 1 Market
highly rated insurance companies such as Guaranteed Investment Credit
Contracts ("GICs") and Bank Investment Contracts ("BICs"). Liquidity
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered under the 1, 5 Liquidity
Securities Act of 1933, such as privately placed commercial Credit
paper and Rule 144A securities. Market
-------------------------------------------------------------------------------
Foreign Securities: U.S. dollar-denominated commercial paper 1 Market
of foreign issuers and obligations of foreign banks, overseas Political
branches of U.S. banks and supranational entities. Liquidity
Foreign
-------------------------------------------------------------------------------
Participation Interests: Interests in municipal securities, 1, 5 Credit
including municipal leases, from financial institutions such Tax
as commercial and investment banks, savings and loan Market
associations and insurance companies.These interests may take
the form of participations, beneficial interests in a trust,
partnership interests or any form of indirect ownership that
allows the Funds to treat the income from the investments as
exempt from federal income tax.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company 1, 5 Prepayment
receivables, home equity loans, truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivables or other assets. Regulatory
-------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities in the Funds may fluctuate, as will the value of your
investment in the Funds. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price and liquidity of a security can be adversely affected
prior to actual default as its credit status deteriorates and the probability
of default rises.
. Foreign Investment Risk. Risks associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk.
------
38
<PAGE>
. Leverage Risk. The risk associated with securities or practices that multiply
small index or market movements into large changes in value. Leverage is
often associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities instead
or forego an investment opportunity, any of which could have a negative
effect on fund management or performance. This includes the risk of missing
out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
. Management Risk. The risk that a strategy used by a fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. There also is the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. Finally, key information about a security or market
may be inaccurate or unavailable.
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes and governmental collapse and war.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early repayment, a Fund may
fail to recover additional amounts (i.e., premiums) paid for securities with
higher interest rates, resulting in an unexpected capital loss.
. Regulatory Risk. The risk associated with federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
. Tax Risk. The risk that the issuer of the securities will fail to comply with
certain requirements of the Internal Revenue Code, which could cause adverse
tax consequences. Also, the risk that the tax treatment of municipal or other
securities would be changed by Congress thereby affecting the value of
outstanding securities.
------
39
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Funds, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
How can I get more information? You can get a free copy of the semi-annual/
annual reports or the SAI, request other information or discuss your questions
about the Fund by calling 1-877-691-1118, or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
OR VISITING
WWW.ONEGROUP.COM
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information also
may be obtained, after paying a copying charge, by electronic request at the
following e-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
(Investment Company Act File No. 811-4236)
TOG-F-126
[LOGO OF ONE GROUP MUTUAL FUNDS]
<PAGE>
Institutional Money Market Funds
PROSPECTUS
November 1, 2000
[LOGO OF ONE GROUP]
One Group(R) Institutional Prime Money Market Fund
One Group(R) Treasury Only Money Market Fund
One Group(R) Government Money Market Fund
------
The Securities and Ex-
change Commission has not
approved or disapproved
the shares of any of the
Funds as an investment or
determined whether this
prospectus is accurate or
complete. Anyone who
tells you otherwise is
committing a crime.
<PAGE>
Table of
CONTENTS
<TABLE>
<CAPTION>
Fund Summaries: Investments, Risk &
Performance
<S> <C>
One Group Institutional Prime Money Market
Fund 2
---
One Group Treasury Only Money Market Fund 6
---
One Group Government Money Market Fund 9
---
</TABLE>
<TABLE>
<CAPTION>
More About The Funds
<S> <C>
Principal Investment Strategies 12
---
Investment Risks 13
---
Investment Policies 14
---
Portfolio Quality and Maturity 15
---
</TABLE>
<TABLE>
<CAPTION>
How to Do Business
with One Group Mutual
Funds
<S> <C>
Purchasing Fund Shares 16
---
Exchanging Fund Shares 19
---
Redeeming Fund Shares 20
---
</TABLE>
<TABLE>
<CAPTION>
Shareholder Information
<S> <C>
Voting Rights 22
---
Dividend Policies 22
---
Tax Treatment of
Shareholders 22
---
Shareholder Statements
and Reports 23
---
</TABLE>
<TABLE>
<CAPTION>
Management of
One Group
Mutual Funds
<S> <C>
The Advisor 24
---
Advisory Fees 24
---
</TABLE>
<TABLE>
<CAPTION>
Financial
Highlights 25
<S> <C>
---
<CAPTION>
Appendix
A:
Investment
Practices 28
<S> <C>
---
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Institutional Prime
Money Market Fund
What is the goal of the Institutional Prime Money Market Fund?
The Fund seeks current income with liquidity and stability of principal.
What are the Institutional Prime Money Market Fund's Main Investment
Strategies?
The Fund invests exclusively in high-quality, short-term money market
instruments. These instruments include corporate notes, commercial paper,
funding agreements, certificates of deposit and bank obligations. The Fund will
comply with Securities and Exchange Commission ("SEC") rules applicable to all
money market funds, including Rule 2a-7 under the Investment Company Act of
1940. The Fund will concentrate its investments in the financial services
industry, including asset-backed commercial paper programs. For more
information about the Institutional Prime Money Market Fund's investment
strategies, please read "More About The Funds" and "Principal Investment
Strategies."
What are the main risks of investing in the Institutional Prime Money Market
Fund?
The main risks of investing in the Institutional Prime Money Market Fund and
the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
------
2
<PAGE>
Institutional Prime
Money Market Fund
MAIN RISKS
----------
Credit Risk. Because the Fund only invests in high-quality obligations and
limits its average maturity to 90 days or less, credit risk is minimized.
Nonetheless, if an issuer fails to pay interest or principal, the value of your
investment in the Fund could decline. Because the Fund invests in securities
that are backed by "credit enhancements" such as letters of credit, the value
of your investment in the Fund also could decrease if the value of the
securities in the portfolio decreases in response to the declining credit
quality of a credit enhancement provider.
Concentration. The Fund will invest a significant portion of its assets in the
securities of companies in the financial services industry. Because of the
Fund's greater exposure to that industry, economic, political and regulatory
developments affecting the financial services industry will have a
disproportionate impact on the Fund. These developments include changes in
interest rates, earlier than expected repayments by borrowers, an inability to
achieve the same yield on the reinvestment of prepaid obligations and federal
and state laws which may restrict the remedies that a lender has when a
borrower defaults on a loan.
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
3
<PAGE>
ONE GROUP(R)
------------------
FM MENU
FUND SUMMARY
Institutional Prime
Money Market Fund
How has the Institutional Prime Money Market Fund Performed?
This section normally would include a bar chart and average annual total return
table. The Institutional Prime Money Market Fund began operations on April 19,
1999, and did not have a full calendar year of investment returns as of the
date of this prospectus. However, to obtain the Fund's current yield
information, please call toll-free 1-877-691-1118 or visit www.onegroup.com.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
<S> <C> <C>
(fees paid directly from your investment)/1/ CLASS I CLASS S
-------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
-------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
-------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
Redemption Fee NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE
-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------
<S> <C> <C>
(expenses that are deducted from Fund assets)/2/ CLASS I CLASS S
---------------------------------------------------------------------
Investment Advisory Fees .10% .10%
---------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE NONE
---------------------------------------------------------------------
Other Expenses .08% .33%
---------------------------------------------------------------------
Total Annual Fund Operating Expenses .18% .43%/3/
---------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/4/ (.02%) (.08%)
---------------------------------------------------------------------
Net Expenses .16% .35%
---------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent.
/2/Expense information has been restated to reflect current fees.
/3/Class S shareholders pay a shareholder servicing fee of up to .25% of the
average daily net assets of such shares. The services provided may include
providing reports and other information related to the maintenance of
shareholder accounts.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .16% for Class I shares and .35% for Class
S shares for the period beginning November 1, 2000, and ending on October
31, 2001.
------
4
<PAGE>
------------------
Institutional Prime
Money Market Fund
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or continued to hold them
at the end of the periods shown. The examples also assume that your investment
has a 5% return each year and that the Fund's operating expenses remain the
same. Your actual costs may be higher or lower than those shown below. There is
no sales charge (load) on reinvested dividends.
CLASS I CLASS S
----------------------------------------------------------------------------
1 Year/1/ $16 $36
----------------------------------------------------------------------------
3 Years 56 130
----------------------------------------------------------------------------
5 Years 99 233
----------------------------------------------------------------------------
10 Years 228 534
----------------------------------------------------------------------------
/1/Without contractual fee waivers, 1 Year expenses for Class I shares would be
$18 and Class S shares would be $44.
------
5
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Treasury Only
Money Market Fund
What is the goal of the Treasury Only Money Market Fund?
The Fund seeks high current income with liquidity and stability of principal
with the added assurance of a Fund that does not purchase securities that are
subject to repurchase agreements.
What are the Main Investment Strategies of the Treasury Only Money Market Fund?
The Fund invests exclusively in short-term U.S. Treasury bills, notes and
bonds. The Fund will comply with SEC rules applicable to all money market
funds, including Rule 2a-7 under the Investment Company Act of 1940. For more
information about the Treasury Only Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Treasury Only Money Market Fund?
The main risks of investing in the Treasury Only Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
MAIN RISKS
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
6
<PAGE>
------------------
-----------------
Treasury Only Money Market Fund
How has the Treasury Only Money Market Fund Performed?
By showing the variability of the Treasury Only Money Market Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the Treasury Only Money
Market Fund is not necessarily an indication of how the Fund will perform in
the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1994 4.02%
1995 5.67%
1996 5.20%
1997 5.28%
1998 5.08%
1999 4.66%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.35%.
--------------------------------------------------------------------------------
Best Quarter: 1.43% 2Q 1995 Worst Quarter: .77% 1Q 1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF SINCE 4/16/93
CLASS
<S> <C> <C> <C> <C>
Class I 4/16/93 4.66% 5.18% 4.78%
Class S 4/10/00 4.40% 4.92% 4.52%
</TABLE>
/1/For periods prior to the commencement of operations of Class S on April 10,
2000, the performance of Class S shares is based on Class I share
performance adjusted to reflect the differences in expenses.
To obtain current yield information, call toll-free 1-877-691-1118 or visit
www.onegroup.com.
------
7
<PAGE>
Treasury Only Money Market Fund
-----------------
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
<S> <C> <C>
(fees paid directly from your investment)/1/ CLASS I CLASS S
-------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
-------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
-------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
Redemption Fee NONE NONE
-------------------------------------------------------------------
Exchange Fee NONE NONE
-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
<S> <C> <C>
(expenses that are deducted from Fund assets)/2/ CLASS I CLASS S
--------------------------------------------------------------------
Investment Advisory Fees .08% .08%
--------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE NONE
--------------------------------------------------------------------
Other Expenses .08% .33%/3/
--------------------------------------------------------------------
Total Annual Fund Operating Expenses .16% .41%
--------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/4/ NONE (.06%)
--------------------------------------------------------------------
Net Expenses .16% .35%
--------------------------------------------------------------------
</TABLE>
/1/ If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent.
/2/ Expense information has been restated to reflect current fees.
/3/ Class S shareholders pay a shareholder servicing fee of up to .25% of the
average daily net assets of such shares. The services provided may include
providing reports and other information related to the maintenance of
shareholder accounts.
/4/ Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .16% for Class I shares and .35% for Class
S shares for the period beginning November 1, 2000, and ending on October
31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or continued to hold them
at the end of the periods shown. The examples also assume that your investment
has a 5% return each year and that the Fund's operating expenses remain the
same. Your actual costs may be higher or lower than those shown below. There is
no sales charge (load) on reinvested dividends.
CLASS I CLASS S
----------------------------------------------------------------------------
1 Year/1/ $16 $36
----------------------------------------------------------------------------
3 Years 52 126
----------------------------------------------------------------------------
5 Years 90 224
----------------------------------------------------------------------------
10 Years 205 512
----------------------------------------------------------------------------
/1/Without contractual fee waivers, 1 Year expenses for Class S shares would be
$42.
------
8
<PAGE>
ONE GROUP(R)
------------------
-----------------
MAIN RISKS
----------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Government Money
Market Fund
What is the goal of the Government Money Market Fund?
The Fund seeks high current income with liquidity and stability of principal.
What are the Main Investment Strategies of the Government Money Market Fund?
The Fund invests exclusively in high-quality, short-term securities that are
issued or guaranteed by the U.S. government or by U.S. government agencies and
instrumentalities. Some of the securities purchased by the Fund may be subject
to repurchase agreements. The Fund will comply with SEC rules applicable to all
money market funds, including Rule 2a-7 under the Investment Company Act of
1940. For more information about the Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Government Money Market Fund?
The main risks of investing in the Government Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
MAIN RISKS
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
9
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Government Money Market Fund
How has the Government Money Market Fund Performed?
By showing the variability of the Government Money Market Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the Government Money
Market Fund is not necessarily an indication of how the Fund will perform in
the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1994 4.24%
1995 5.87%
1996 5.42%
1997 5.56%
1998 5.47%
1999 5.12%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.65%.
--------------------------------------------------------------------------------
Best Quarter: 1.47% 2Q 1995 Worst Quarter: .81% 1Q 1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF SINCE 6/14/93
CLASS
<S> <C> <C> <C> <C>
Class I.................... 6/14/93 5.12% 5.49% 5.11%
Class S.................... 4/10/00 4.85% 5.22% 4.84%
</TABLE>
/1/For periods prior to the commencement of operations of Class S on April 10,
2000, the performance of Class S shares is based on Class I share performance
adjusted to reflect the differences in expenses.
To obtain current yield information, call toll-free 1-877-691-1118 or visit
www.onegroup.com.
------
10
<PAGE>
------------------
Government Money Market Fund
<TABLE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------------------
(fees paid directly from your investment)/1/ CLASS I CLASS S
-------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
-------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
-------------------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
Redemption Fee NONE NONE
-------------------------------------------------------------------------------
Exchange Fee NONE NONE
-------------------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------
(expenses that are deducted from Fund assets)/2/ CLASS I CLASS S
-------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .08% .08%
-------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE NONE
-------------------------------------------------------------------------------
Other Expenses .08% .33%/3/
-------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .16% .41%
-------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/4/ NONE (.06%)
-------------------------------------------------------------------------------
Net Expenses .16% .35%
-------------------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent.
/2/Expense information has been restated to reflect current fees.
/3/Class S shareholders pay a shareholder servicing fee of up to .25% of the
average daily net assets of such shares. The services provided may include
providing reports and other information related to the maintenance of
shareholder accounts.
/4/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .16% for Class I shares and .35% for Class
S shares for the period beginning November 1, 2000, and ending on October 31,
2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or continued to hold them
at the end of the periods shown. The examples also assume that your investment
has a 5% return each year and that the Fund's operating expenses remain the
same. Your actual costs may be higher or lower than those shown below. There is
no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS I CLASS S
--------------------------
<S> <C> <C>
1 Year/1/ $16 $36
--------------------------
3 Years 52 126
--------------------------
5 Years 90 224
--------------------------
10 Years 205 512
--------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Class S shares would be
$42.
------
11
<PAGE>
ONE GROUP(R)
------------------
More About the Funds
Each of the three Funds described in this prospectus is a series of One Group
Mutual Funds ("One Group") and is managed by Banc One Investment Advisors
Corporation ("Banc One Investment Advisors"). For more information about One
Group and Banc One Investment Advisors, please read "Management of the Funds"
and the Statement of Additional Information.
--------------------------------------------------------------------------------
Principal Investment Strategies
The three mutual funds described in this prospectus are designed to produce
high current income consistent with liquidity and stability of principal. The
principal investment strategies that are used to meet each Fund's investment
objective are described in "Fund Summaries: Investments, Risk & Performance" in
the front of this prospectus. They are also described below.
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund also may use strategies that are not
described below, but which are described in the Statement of Additional
Information.
ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND. The Fund invests only in U.S.
dollar denominated securities.
. The average maturity on a dollar-weighted basis of the securities held by the
Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
. The Fund invests exclusively in money market instruments. These include, but
are not limited to:
1. corporate notes;
2. commercial paper;
3. funding agreements;
4. certificates of deposit; and
5. bank obligations.
------
12
<PAGE>
. The Fund will invest at least 25% of its total assets in securities issued by
companies in the financial services industry, although the Fund may invest
less than 25% of its total assets in that industry if warranted due to
adverse economic conditions and if investing less than that amount would be
in the best interests of shareholders. The financial services industry
includes banks, broker-dealers, finance companies and other issuers of asset-
backed securities.
.The Fund may lend its securities.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the
average of all the current
maturities (that is, the term of
the securities) of the individual
securities in a fund calculated so
as to count most heavily those
securities with the highest dollar
value. Average weighted maturity is
important to investors as an
indication of a fund's sensitivity
to changes in interest rates. The
longer the average weighted
maturity, the more fluctuation in
yield you can expect.
--
ONE GROUP TREASURY ONLY MONEY MARKET FUND. The Fund invests only in U.S. dollar
denominated securities.
. The Fund invests exclusively in short-term U.S. Treasury bills, notes and
bonds.
. The average maturity on a dollar-weighted basis of the securities held by the
Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
. The Fund may lend its securities.
--
ONE GROUP GOVERNMENT MONEY MARKET FUND. The Fund invests only in U.S. dollar
denominated securities.
. The average maturity on a dollar-weighted basis of the securities held by the
Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
. In addition to fixed-rate government securities, the Fund also will invest in
government securities that are:
1. variable and floating rate instruments;
2. mortgage backed securities; and
3. other money market funds that have similar investment policies and
objectives.
These money market funds must only invest in securities with short-term
ratings equivalent to or higher than those in which the Fund invests.
. The Fund may lend its securities.
--------------------------------------------------------------------------------
Investment Risks
The main risks associated with investing in the Institutional Money Market
Funds are described in the "Fund Summaries: Investments, Risk & Performance" in
the front of this prospectus. Additional risks are described below.
--
NET ASSET VALUE. There is no assurance that the Funds will meet their
investment objectives or be able to maintain a net asset value of $1.00 per
share on a continuous basis.
--
FIXED INCOME SECURITIES. Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates.
If rates
------
13
<PAGE>
increase, the value of a Fund's investments generally declines. On the other
hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may
affect the value of your investment.
--
PREPAYMENT AND CALL RISK. As part of its investment strategy, the Institutional
Prime Money Market Fund invests in mortgage-backed and asset-backed securities
and the Government Money Market Fund may invest in mortgage-backed securities.
These securities are subject to prepayment and call risks. The issuers of these
securities may be able to repay principal early, especially when interest rates
fall. Changes in prepayment rates can affect the return on investment and yield
of mortgage-backed and asset-backed securities. When obligations are prepaid,
the Fund may have to reinvest in securities with lower yields. The Fund may
fail to recover additional amounts (i.e., premiums) paid for securities with
higher interest rates, resulting in an unexpected capital loss.
WHAT IS A DERIVATIVE?
Derivatives are securities or
contracts (like futures and
options) that derive their value
from the performance of underlying
assets or securities.
--
DERIVATIVES. The Institutional Prime Money Market Fund and the Government Money
Market Fund invest in securities that may be considered to be derivatives.
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity and management
risks.
For more information about risks associated with the types of investments that
the Institutional Money Market Funds purchase, please read "Fund Summaries:
Investments, Risk & Performance," Appendix A and the Statement of Additional
Information.
--------------------------------------------------------------------------------
Investment Policies
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of $1.00
per share, although there is no guarantee that the Funds will be able to do
so.
2. Will not purchase the securities of an issuer if as a result more than 5% of
its total assets would be invested in the securities of that issuer or the
Fund would own more than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or guaranteed by the United
States, its agencies or instrumentalities, and repurchase agreements
involving these securities. This restriction applies with respect to 75% of
a Fund's total assets. The Funds may invest the remaining 25% of their total
assets without regard to this restriction as permitted by applicable law.
------
14
<PAGE>
--
Policies Of Special Funds?
The Institutional Prime Money Market Fund:
1. Will not make loans, except that the Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending.
2. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries (except that the Fund may concentrate its investments in
securities issued by companies in the financial services industry). This
does not include obligations issued or guaranteed by the U.S. government or
its agencies or instrumentalities, domestic bank certificates of deposit or
banker's acceptances, and repurchase agreements involving such securities,
municipal securities or governmental guarantees of municipal securities. In
addition, private activity bonds backed only by the revenues and assets of a
non-governmental user will not be deemed to be municipal securities.
The Treasury Only and Government Money Market Funds:
1. Will not purchase securities while borrowings (including reverse repurchase
agreements) exceed 5% of the respective Fund's net assets.
2. Will not borrow money or issue senior securities, except that the Funds may
borrow from banks for temporary purposes in amounts not exceeding 10% of
their total assets at the time of the borrowing.
3. Will not mortgage, pledge or hypothecate any assets, except in connection
with borrowing specified in 2 above and in amounts not in excess of the
lesser of the dollar amount borrowed or 10% of the value of the respective
Fund's total assets at the time of its borrowing.
The Treasury Only Money Market Fund:
1. Will not purchase securities other than U.S. Treasury bills, notes and
bonds.
2. Will not invest in any securities subject to repurchase agreements.
The Government Money Market Fund:
1. Will not purchase securities other than those issued or guaranteed by the
U.S. government or its agencies or instrumentalities, some of which may be
subject to repurchase agreements.
Additional investment policies can be found in the Statement of Additional
Information.
--
ILLIQUID INVESTMENTS. Each Fund may invest up to 10% of its net assets in
illiquid investments. A security is illiquid if it cannot be sold at
approximately the value assessed by the Fund within seven (7) days. Banc One
Investment Advisors will follow guidelines adopted by the Board of Trustees of
One Group Mutual Funds in determining whether an investment is illiquid.
--------------------------------------------------------------------------------
Portfolio Quality And Maturity
The quality and maturity of money market funds are subject to SEC rules.
Quality is generally restricted to the two highest short-term ratings or their
equivalent. Maturity is limited both as to total portfolio average and as to
each individual security. With respect to portfolio average, the rules limit
the Fund's average weighted maturity to 90 days. With respect to each
individual security, remaining maturity is restricted to 397 days at
acquisition. Moreover, the SEC rules limit exposure to a single issuer to 5% of
a money market fund's assets (although there is no limit on government
securities).
------
15
<PAGE>
ONE GROUP(R)
------------------
How to Do Business with One Group Mutual Funds
--------------------------------------------------------------------------------
Purchasing Fund Shares
Where Can I Buy Shares?
You may purchase Fund shares:
. Directly from One Group through The One Group Services Company (the
"Distributor"), and
. From Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or 401(k)
plan sponsors or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
Who May Purchase Fund Shares?
Fund shares may be purchased by:
. Institutional investors and other accredited investors, including affiliates
of Bank One Corporation, that have opened accounts with the Fund's transfer
agent, State Street Bank and Trust Company, either directly or through a
Shareholder Servicing Agent.
. If you have questions about eligibility, please call 1-877-691-1118.
When Can I Buy Shares?
. Purchases may be made on any business day. This includes any day that the
Funds are open for business. The Funds will be closed on weekends and days on
which the New York Stock Exchange ("NYSE") or the Federal Reserve are closed,
including the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving, and Christmas Day.
. Purchase requests will be effective on the day received and you will be
eligible to receive dividends declared the same day, if such purchase orders
are received:
(i) before 3:00 p.m. ET for the Treasury Only Money Market Fund; and
(ii) before 5:00 p.m. ET for the Institutional Prime and Government Money
Market Funds.
. On occasion, the NYSE closes before 4:00 p.m. ET. When the NYSE closes early,
purchase requests received after the NYSE closes will be effective the
following business day.
. In addition, the Fund's custodian, State Street Bank and Trust Company, must
receive "federal funds" before each Fund's cut-off time. If State Street Bank
and Trust Company does not receive federal funds by the cut-off time, the
purchase order will not be effective until the next business day on which
federal funds are timely received by State Street Bank and Trust Company.
------
16
<PAGE>
. If a Shareholder Servicing Agent holds your shares, it is the responsibility
of the Shareholder Servicing Agent to send your purchase or redemption order
to the Fund. Your Shareholder Servicing Agent may have an earlier cut-off
time for purchase and redemption requests.
. The Distributor can reject a purchase order if it does not think that it is
in the best interests of a Fund and/or shareholders to accept the order.
. Shares are electronically recorded. Therefore, certificates will not be
issued.
What Kind of Shares Can I Buy?
One Group offers the following classes of shares:
. Class I shares are available to institutional investors, such as
corporations, pension and profit sharing plans, and foundations; and any
organization authorized to act in a fiduciary, advisory, custodial or agency
capacity. We refer to these entities as "Intermediaries."
. Class S shares are available to Intermediaries purchasing shares on behalf of
investors requiring additional services.
How Much Do Shares Cost?
. Shares are sold at net asset value ("NAV").
. NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets (minus expenses) by the number of outstanding
shares. The Funds use their best efforts to maintain their NAV at $1.00,
although there is no guarantee that they will be able to do so.
. NAV is calculated each business day as of 3:00 p.m. ET for the Treasury Only
and at 5:00 p.m. ET for the Institutional Prime Money Market Fund and the
Government Money Market Fund.
How Do I Open An Account?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
. The minimum initial investment is $1,000,000. You are required to maintain a
minimum account balance of $1,000,000.
. Subsequent investments must be at least $5,000.
. These minimums may be waived.
3. Complete the Account Application Form. Be sure to sign up for all of the
account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
4. Send the completed application to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
------
17
<PAGE>
. And authorize a wire to:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY AND SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: ABC CORPORATION)
5. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
6. If you have any questions, contact your Shareholder Servicing Agent or call
1-877-691-1118.
Can I Purchase Shares Over The Telephone?
Yes. Simply select this option on your Account Application Form and then:
. Contact your Shareholder Servicing Agent or call 1-877-691-1118 to relay your
purchase instructions.
. Authorize a bank transfer or initiate a wire transfer payable to "One Group
Mutual Funds" to State Street Bank and Trust Company to the following wire
address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY AND SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: ABC CORPORATION)
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
. You may revoke your right to make purchases over the telephone by sending a
letter to:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
------
18
<PAGE>
--------------------------------------------------------------------------------
Exchanging Fund Shares
What Are My Exchange Privileges?
You may exchange your shares for shares of any other Fund described in this
prospectus.
. One Group may change the terms and conditions of your exchange privileges
upon 60 days written notice.
. One Group Funds offers a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or
quarterly basis. This privilege is useful in Dollar Cost Averaging. To
participate in the Systematic Exchange Privilege, please select it on your
Account Application. To learn more about it, please call 1-877-691-1118.
. One Group does not charge a fee for this privilege.
When Are Exchanges Processed?
Exchanges are processed the same business day they are received, provided:
. State Street Bank and Trust Company receives the request by 3:00 p.m. ET.
. You have provided One Group with all of the information necessary to process
the exchange.
. You have received a current prospectus of the Fund or Funds in which you wish
to invest.
. You have contacted your Shareholder Servicing Agent, if necessary.
Are Exchanges Taxable?
Generally:
. An exchange between Funds is considered a sale and may result in a capital
gain or loss for federal income tax purposes.
. You should talk to your tax advisor before making an exchange.
Are There Limits On Exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
. To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity. Exchange activity is excessive if it exceeds two
substantive exchange redemptions within 30 days of each other.
. Excessive exchange activity will result in revocation of your exchange
privilege.
. In addition, One Group reserves the right to reject any exchange request
(even those that are not excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or otherwise adversely
affect other shareholders.
. Your shares may be automatically redeemed and your account closed if, due to
exchanges, you no longer meet the Fund's minimum balance requirement. For
information on the minimum required balance, please read, "How Do I Open An
Account?"
------
19
<PAGE>
--------------------------------------------------------------------------------
Redeeming Fund Shares
When Can I Redeem Shares?
You may redeem all or some of your shares on any day that the Funds are open
for business.
. Redemption requests received before 3:00 p.m. ET for the Treasury Only Money
Market Fund and 5:00 p.m. ET for the Institutional Prime and Government Money
Market Funds, will be effective that day.
. All required documentation (for example, a death certificate) in the proper
form must accompany a redemption request. One Group may refuse to honor
incomplete redemption requests.
How Do I Redeem Shares?
. You may use any of the following methods to redeem your shares:
1. You may send a written redemption request to your Shareholder Servicing
Agent, if applicable, or to State Street Bank and Trust Company at the
following address:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
2. You may use the One Group website at www.onegroup.com; or
3. You may redeem over the telephone. Please see "Can I Redeem By Telephone?"
for more information.
. You may request redemption forms by calling 1-877-691-1118 or visiting
www.onegroup.com.
. One Group may require that the signature on your redemption request be
guaranteed by a participant in the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is payable to the shareholder of record;
2. the redemption check is mailed to the shareholder at the record address; or
3. the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
. On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. A designated commercial bank; or
2. Your Shareholder Servicing Agent.
. Your redemption proceeds will be paid within seven days after receipt of the
redemption request. However, the Funds will attempt to honor requests for
same day payment if the request is received before 3:00 p.m. ET for the
Treasury Only Money Market Fund and 5:00 p.m. ET for the Institutional Prime
and Government Money Market Funds. If redemption requests are received after
those times, the Funds will attempt to wire payment the next business day.
What Will My Shares Be Worth?
. The NAV of shares of the Funds is expected to remain constant at $1.00 per
share, although there is no assurance that this will always be the case.
. You will receive the NAV calculated after your redemption request is
received. Please read "How Much Do Shares Cost?"
------
20
<PAGE>
----------------
Can I Redeem By Telephone?
Yes, if you selected this option on your Account Application Form.
. Contact your Shareholder Servicing Agent or call 1-877-691-1118 to relay your
redemption request.
. Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
. One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
--------------------------------------------
. Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more, the Fund reserves the right to pay part or all of
your redemption proceeds in readily marketable securities instead of cash. If
payment is made in securities, the Fund will value the securities selected in
the same manner in which it computes its NAV. This process minimizes the
effect of large redemptions on the Fund and its remaining shareholders.
. If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank. One
Group generally receives payment within seven (7) business days of purchase.
. Your shares may be automatically redeemed if, due to redemptions, you no
longer meet the Fund's minimum balance requirement. For information on the
minimum required balance, please read, "How Do I Open An Account?"
. One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted;
2. The NYSE is closed (other than weekend and holiday closings);
3. The SEC has permitted a suspension; or
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
. You generally will recognize a gain or loss on a redemption for federal
income tax purposes. You should talk to your tax adviser before making a
redemption.
------
21
<PAGE>
ONE GROUP(R)
------------------
Shareholder Information
--------------------------------------------------------------------------------
Voting Rights
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each
Fund, and each class of shares within each Fund, vote separately on matters
relating solely to that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal voting rights on matters
that affect all shareholders equally.
--------------------------------------------------------------------------------
Dividend Policies
DIVIDENDS. Dividends payable on Class I shares will be more than those payable
on Class S shares. This is because Class S shares have higher expenses.
The Funds generally declare dividends each business day. Dividends are
distributed on the first business day of the next month after they are
declared. Capital gains, if any, for all Funds are distributed at least
annually.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payments in cash. The price of the shares
is the NAV determined immediately following the dividend record date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street. You may change the way you receive
dividends and distributions by calling 1-877-691-1118.
--------------------------------------------------------------------------------
Tax Treatment of Shareholders
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange, or redemption of Fund
shares generally will produce either a taxable gain or a loss. You are
responsible for any tax liabilities generated by your transactions.
------
22
<PAGE>
Taxation of Distributions
Each Fund will distribute substantially all of its net investment income.
Dividends you receive from a Fund will be taxable to you, whether reinvested or
received in cash. Dividends from a Fund's net investment income (generally all
of the Fund's net investment income), if any, will be taxable as ordinary
income.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
Tax Information
The Form 1099 that is mailed to eligible taxpayers in January details dividends
and their federal tax category. Even though the Funds provide this information,
you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the federal, state,
local or foreign tax treatment of the Funds or their shareholders.
--------------------------------------------------------------------------------
Shareholder Statements And Reports
One Group or your Shareholder Servicing Agent will send you transaction
confirmation statements and quarterly account statements. Please review these
statements carefully. One Group will correct errors if notified within one year
of the date printed on the transaction confirmation or account statement. Your
Shareholder Servicing Agent may have a different cut-off time.
To reduce expenses and conserve natural resources, One Group will deliver a
single copy of prospectuses and financial reports to individual investors who
share a residential address, provided they have the same last name or One Group
reasonably believes they are members of the same family. If you would like to
receive separate mailings, please call 1-877-691-1118 and One Group will begin
individual delivery within 30 days. If you would like to receive these
documents by e-mail, please visit www.onegroup.com and sign up for electronic
delivery.
If you are the record owner of your One Group shares (that is, you did not use
a Shareholder Servicing Agent to buy your shares), you may access your account
statements at www.onegroup.com.
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
If you have any questions or need additional information, please write One
Group Mutual Funds at 1111 Polaris Parkway, Columbus, OH 43271-1235, call 1-
877-691-1118 or visit www.onegroup.com.
------
23
<PAGE>
ONE GROUP(R)
------------------
Management of
One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor to
One Group Mutual Funds since its inception. In addition, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual
corporate, charitable, and retirement accounts. As of June 30, 2000, Banc One
Investment Advisors, an indirect wholly-owned subsidiary of Bank One
Corporation, managed over $131 billion in assets.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each Fund. For the most recent fiscal year, the
Funds paid advisory fees at the following rates.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Institutional Prime Money
Market Fund .08%
----------------------------------------------------------------------
One Group(R) Treasury Only Money Market Fund .08%
----------------------------------------------------------------------
One Group(R) Government Money Market Fund .08%
----------------------------------------------------------------------
</TABLE>
------
24
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Institutional Prime Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
APRIL 19,
1999 TO
YEAR ENDED JUNE 30,
CLASS I JUNE 30, 2000 1999(A)
-------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.057 0.009
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.057) (0.009)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------------
Total Return 5.87% 0.94%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $5,209,033 $24,847
Ratio of expenses to average net assets 0.16% 0.18%(C)
Ratio of net investment income to average net assets 6.04% 4.73%(C)
Ratio of expenses to average net assets* 0.18% 0.33%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
<TABLE>
<CAPTION>
APRIL 10,
2000 TO
JUNE 30,
CLASS S 2000(A)
-----------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000
Investment Activities:
Net investment income 0.014
-----------------------------------------------------------------
Distributions:
Net investment income (0.014)
-----------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000
-----------------------------------------------------------------
Total Return 1.38%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $44,707
Ratio of expenses to average net assets 0.35%(C)
Ratio of net investment income to average net assets 6.29%(C)
Ratio of expenses to average net assets* 0.44%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
------
25
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Treasury Only Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.051 0.046 0.052 0.051 0.052
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.051) (0.046) (0.052) (0.051) (0.052)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------
Total Return 5.27% 4.69% 5.30% 5.24% 5.38%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $818,295 $947,205 $719,570 $480,860 $415,961
Ratio of expenses to average
net assets 0.16% 0.17% 0.15% 0.15% 0.17%
Ratio of net investment
income to average net
assets 5.13% 4.58% 5.18% 5.12% 5.23%
</TABLE>
<TABLE>
<CAPTION>
APRIL
10, 2000
TO JUNE
30,
CLASS S 2000(A)
-------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000
-------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.012
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.012)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000
-------------------------------------------------------------------------------
Total Return 1.24%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $122,569
Ratio of expenses to average net assets 0.35%(C)
Ratio of net investment income to average net assets 5.53%(C)
Ratio of expenses to average net assets* 0.41%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
------
26
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Government Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.055 0.050 0.055 0.053 0.055
----------------------------------------------------------------------------------
Distributions:
Net investment income (0.055) (0.050) (0.055) (0.053) (0.055)
----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------
Total Return 5.69% 5.13% 5.64% 5.43% 5.61%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $3,433,100 $3,482,581 $3,712,252 $1,083,438 $855,613
Ratio of expenses to
average net assets 0.16% 0.17% 0.15% 0.14% 0.18%
Ratio of net investment
income to average net
assets 5.54% 5.02% 5.48% 5.31% 5.46%
</TABLE>
<TABLE>
<CAPTION>
APRIL
10, 2000
TO JUNE
30,
CLASS S 2000(A)
-----------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000
-----------------------------------------------------------------
Investment Activities:
Net investment income 0.013
-----------------------------------------------------------------
Distributions:
Net investment income (0.013)
-----------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000
-----------------------------------------------------------------
Total Return 1.35%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $215,079
Ratio of expenses to average net assets 0.35%(C)
Ratio of net investment income to average net assets 5.97%(C)
Ratio of expenses to average net assets* 0.40%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
------
27
<PAGE>
ONE GROUP(R)
------------------
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Funds, as well
as the risks inherent in their use. Fixed income securities are primarily
influenced by market, credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete discussion, please see
the Statement of Additional Information. Following the table is a more complete
discussion of risk.
<TABLE>
--------------------------------------------
<CAPTION>
FUND NAME FUND CODE
------------------------------------------
<S> <C>
One Group(R) Institutional
Prime
Money Market Fund 1
------------------------------------------
One Group(R) Treasury Only
Money Market Fund 2
------------------------------------------
One Group(R) Government Money
Market Fund 3
</TABLE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes and bonds. 1-3 Market
-------------------------------------------------------------------------------
Treasury Receipts: TRs, TIGRS and CATS. 1-3 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by 1, 3 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae and Freddie Mac.
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a stated 1 Market
maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in 1 Liquidity
exchange for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security and the 1, 3 Credit
simultaneous commitment to return the security to the seller at Market
an agreed upon price on an agreed upon date. This is treated as Liquidity
a loan.
-------------------------------------------------------------------------------
</TABLE>
------
28
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Securities Lending: The lending of up to 33 1/3% of the Fund's 1-3 Credit
total assets. In return, the Fund will receive cash, other Market
securities and/or letters of credit. Leverage
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase or 1-3 Market
contract to purchase securities at a fixed price for delivery Leverage
at a future date. Liquidity
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other money market 1, 3 Market
mutual funds, including One Group money market funds and
shares of other money market mutual funds for which Banc One
Investment Advisors or its affiliates serve as investment
advisor or administrator. Banc One Investment Advisors will
waive certain fees when investing in funds for which it serves
as investment advisor.
-------------------------------------------------------------------------------
Extendable Commercial Notes: Variable rate notes which 1 Market
normally mature within a short period of time (e.g., one Credit
month) but which may be extended by the issuer for a maximum Liquidity
maturity of 13 months.
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time drafts drawn 1 Credit
on and accepted by a commercial bank. Maturities are generally Liquidity
six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term promissory 1 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
-------------------------------------------------------------------------------
Foreign Securities: Commercial paper of foreign issuers and 1 Market
obligations of foreign banks, overseas branches of U.S. banks Political
and supranational entities. Liquidity
Foreign
Investment
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered under the 1 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations with 1, 3 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations secured by real 1, 3 Prepayment
estate loans and pools of loans. These include collateralized Market
mortgage obligations ("CMOs") and Real Estate Mortgage Credit
Investment Conduits ("REMICs"). Regulatory
-------------------------------------------------------------------------------
</TABLE>
------
29
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Demand Features: Securities that are subject to puts and 1 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period of Management
time following demand by a Fund.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state or 1 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity bonds Political
and industrial development bonds, as well as General Tax
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Regulatory
Notes, Revenue Anticipation Notes, other short-term tax-exempt
obligations, municipal leases, obligations of municipal
housing authorities and single family revenue bonds.
-------------------------------------------------------------------------------
Short-Term Funding Agreements: Agreements issued by banks and 1 Market
highly rated insurance companies such as Guaranteed Investment Credit
Contracts ("GICs") and Bank Investment Contracts ("BICs"). Liquidity
-------------------------------------------------------------------------------
Participation Interests: Interests in municipal securities, 1 Credit
including municipal leases, from financial institutions such Tax
as commercial and investment banks, savings and loan Market
associations and insurance companies. These interests may take
the form of participations, beneficial interests in a trust,
partnership interests or any other form of indirect ownership
that allows the Funds to treat the income from the investment
as exempt from federal income tax.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company 1 Prepayment
receivables, home equity loans, truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivables or other assets. Regulatory
-------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities in the Funds may fluctuate, as will the value of your
investment in the Funds. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price and liquidity of a security can be adversely affected
prior to actual default as its credit status deteriorates and the probability
of default rises.
. Foreign Investment Risk. Risks associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency
------
30
<PAGE>
denominated investments and may widen any losses. Exchange rate volatility
also may affect the ability of an issuer to repay U.S. dollar denominated
debt, thereby increasing credit risk.
. Leverage Risk. The risk associated with securities or practices that multiply
small index or market movements into large changes in value. Leverage is
often associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities instead
or forego an investment opportunity, any of which could have a negative
effect on fund management or performance. This includes the risk of missing
out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
. Management Risk. The risk that a strategy used by a Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. There also is the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. Finally, key information about a security or market
may be inaccurate or unavailable.
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes and governmental collapse and war.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early repayment, a Fund may
fail to recover additional amounts (i.e., premiums) paid for securities with
higher interest rates, resulting in an unexpected capital loss.
. Regulatory Risk. The risk associated with federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
. Tax Risk. The risk that the issuer of the securities will fail to comply with
certain requirements of the Internal Revenue Code, which could cause adverse
tax consequences. Also, the risk that the tax treatment of municipal or other
securities could be changed by Congress thereby affecting the value of
outstanding securities.
------
31
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Funds, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
How can I get more information? You can get a free copy of the semi-
annual/annual reports or the SAI, request other information or discuss your
questions about the Funds by calling 1 800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
or visiting
WWW.ONEGROUP.COM
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information also
may be obtained, after paying a copying charge, by electronic request at the
following e-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-124
[LOGO OF ONE GROUP MUTUAL FUNDS]
<PAGE>
Money Market Funds
Service Class Shares
PROSPECTUS
November 1, 2000
[LOGO OF ONE GROUP]
One Group(R) Prime Money Market Fund
One Group(R) U.S. Treasury Securities Money Market Fund
One Group(R) Municipal Money Market Fund
------
The Securities and Ex-
change Commission has not
approved or disapproved
the shares of any of the
Funds as an investment or
determined whether this
prospectus is accurate or
complete. Anyone who
tells you otherwise is
committing a crime.
For Use by Wingspan Investment Services, Inc.
<PAGE>
Table of
CONTENTS
<TABLE>
<CAPTION>
Fund Summaries: Investments, Risk &
Performance
<S> <C>
One Group Prime Money Market Fund 2
---
One Group U.S. Treasury Securities Money
Market Fund 5
---
One Group Municipal Money Market Fund 8
---
</TABLE>
<TABLE>
<CAPTION>
More About The Funds
<S> <C>
Principal Investment
Strategies 12
---
Investment Risks 14
---
Investment Policies 14
---
Portfolio Quality and
Maturity 15
---
Temporary Defensive
Positions 16
---
</TABLE>
<TABLE>
<CAPTION>
How to Do Business with One Group
Mutual Funds
<S> <C>
Purchasing Fund Shares 17
---
Distribution and Servicing Expenses 19
---
Exchanging Fund Shares 19
---
Redeeming Fund Shares 20
---
</TABLE>
<TABLE>
<CAPTION>
Shareholder
Information
<S> <C>
Voting Rights 22
---
Dividend Policies 22
---
Tax Treatment of
Shareholders 22
---
Shareholder Inquiries 23
---
</TABLE>
<TABLE>
<CAPTION>
Management of
One Group
Mutual Funds
<S> <C>
The Advisor 24
---
Advisory Fees 24
---
</TABLE>
<TABLE>
<CAPTION>
Financial
Highlights 25
<S> <C>
---
<CAPTION>
Appendix
A:
Investment
Practices 28
<S> <C>
---
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Prime Money Market Fund
What is the goal of the Prime Money Market Fund?
The Fund seeks current income with liquidity and stability of principal.
What are the Prime Money Market Fund's Main Investment Strategies?
The Fund invests exclusively in high-quality, short-term money market
instruments. These instruments include corporate notes, commercial paper,
funding agreements, certificates of deposit and bank obligations. The Fund will
concentrate in the financial services industry, including asset-backed
commercial paper programs. The Fund will comply with SEC rules applicable to
all money market funds, including Rule 2a-7 under the Investment Company Act of
1940. For more information about the Prime Money Market Fund's investment
strategies, please read "More About the Funds" and "Principal Investment
Strategies."
What are the main risks of investing in the Prime Money Market Fund?
The main risks of investing in the Prime Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
MAIN RISKS
----------
Credit Risk. Because the Fund only invests in high-quality obligations and
limits its average maturity to 90 days or less, credit risk is minimized.
Nonetheless, if an issuer fails to pay interest or principal, the value of your
investment in the Fund could decline. Because the Fund invests in securities
that are backed by "credit enhancements" such as letters of credit, the value
of your investment in the Fund could also decrease if the value of the
securities in the portfolio decreases in response to the declining credit
quality of a credit enhancement provider.
Concentration. The Fund will invest a significant portion of its assets in the
securities of companies in the financial services industry. Because of the
Fund's greater exposure to that industry, economic, political and regulatory
developments affecting the financial services industry will have a
disproportionate impact on the Fund. These developments include changes in
interest rates, earlier than expected repayments by borrowers, an inability to
achieve the same yield on the reinvestment of prepaid obligations, and federal
and state laws which may restrict the remedies that a lender has when a
borrower defaults on a loan.
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
2
<PAGE>
------------------
FUND SUMMARY
Prime Money Market Fund
How has the Prime Money Market Fund Performed?
By showing the variability of the Prime Money Market Fund's performance from
year to year, the chart and table below help show the risk of investing in the
Fund. Please remember that the past performance of the Prime Money Market Fund
is not necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Service Class Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 7.31%
1991 5.30%
1992 2.92%
1993 2.40%
1994 3.52%
1995 5.26%
1996 4.63%
1997 4.76%
1998 4.74%
1999 4.38%
/1/For periods prior to the commencement of operations of Service Class on
April 16, 1999, the performance of Service Class shares is based on Class A
performance adjusted to reflect the difference in expenses. For the period
from January 1, 2000, through September 30, 2000, the Fund's total return was
4.04%.
--------------------------------------------------------------------------------
Best Quarter: 1.81% 2Q1990 Worst Quarter: .58% 2Q1993
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS
DATE OF
CLASS
<S> <C> <C> <C> <C>
Service Class 4/16/99 4.38% 4.75% 4.51%
</TABLE>
/1/For periods prior to the commencement of operations of Service Class on
April 16, 1999, the performance of Service Class shares is based on Class A
performance adjusted to reflect the difference in expenses.
To obtain current yield information, call toll-free 1-800-480-4111 or visit
www.onegroup.com.
------
3
<PAGE>
ONE GROUP(R)
------------------
Prime Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your investment)/1/ SERVICE CLASS
--------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
--------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
--------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
Redemption Fee NONE
--------------------------------------------------------------------
Exchange Fee NONE
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------
(expenses that are deducted from Fund
assets)/2/ SERVICE CLASS
---------------------------------------------------------
<S> <C>
Investment Advisory Fees .35%
---------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .75%
---------------------------------------------------------
Other Expenses .20%
---------------------------------------------------------
Total Annual Fund Operating Expenses 1.30%
---------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.23%)
---------------------------------------------------------
Net Expenses 1.07%
---------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.07% for Service Class shares for the
period beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or continued to hold them
at the end of the periods shown. The examples also assume that your investment
has a 5% return each year and that the Fund's operating expenses remain the
same. Your actual costs may be higher or lower than those shown below. There is
no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
SERVICE CLASS
------------------------
<S> <C>
1 Year/1/ $ 109
------------------------
3 Years 389
------------------------
5 Years 691
------------------------
10 Years 1,548
------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Service Shares would be
$132.
------
4
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
U.S. Treasury Securities Money Market Fund
What is the goal of the U.S. Treasury Securities Money Market Fund?
The Fund seeks current income with liquidity and stability of principal.
What are the U.S. Treasury Securities Money Market Fund's Main Investment
Strategies?
The Fund invests exclusively in short-term U.S. Treasury obligations, including
repurchase agreements collateralized by such Treasury obligations and when-
issued securities, U.S. Treasury bills, notes and other securities issued or
backed by the U.S. government. The Fund will comply with SEC rules applicable
to all money market funds, including Rule 2a-7 under the Investment Company Act
of 1940. For more information about the U.S. Treasury Securities Money Market
Fund's investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are the main risks of investing in the U.S. Treasury Securities Money
Market Fund?
The main risks of investing in the U.S. Treasury Securities Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
MAIN RISKS
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
5
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
U.S. Treasury Securities
Money Market Fund
How has the Prime Money Market Fund Performed?
By showing the variability of the U.S. Treasury Securities Money Market Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the U.S.
Treasury Securities Money Market Fund is not necessarily an indication of how
the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Service Class Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 6.96%
1991 4.93%
1992 2.69%
1993 2.25%
1994 3.28%
1995 5.05%
1996 4.51%
1997 4.57%
1998 4.46%
1999 4.00%
/1/For periods prior to the commencement of operations of Service Class on
April 16, 1999, the performance of Service Class shares is based on Class A
performance adjusted to reflect the differences in expenses. For the period
from January 1, 2000, through September 30, 2000, the Fund's total return was
3.78%.
--------------------------------------------------------------------------------
Best Quarter: 1.74% 2Q1990 Worst Quarter: .55% 2Q1993
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS
DATE OF
CLASS
<S> <C> <C> <C> <C>
Service Class 4/16/99 4.00% 4.52% 4.26%
</TABLE>
/1/For periods prior to the commencement of operations of Service Class on
April 16, 1999, the performance of Service Class shares is based on Class A
performance adjusted to reflect the differences in expenses.
To obtain current yield information, call toll-free 1-800-480-4111 or visit
www.onegroup.com.
------
6
<PAGE>
------------------
U.S. Treasury Securities
Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your investment)/1/ SERVICE CLASS
--------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
--------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
--------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
Redemption Fee NONE
--------------------------------------------------------------------
Exchange Fee NONE
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------
(expenses that are deducted from Fund
assets)/2/ SERVICE CLASS
---------------------------------------------------------
<S> <C>
Investment Advisory Fees .35%
---------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .75%
---------------------------------------------------------
Other Expenses .20%
---------------------------------------------------------
Total Annual Fund Operating Expenses 1.30%
---------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.23%)
---------------------------------------------------------
Net Expenses 1.07%
---------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.07% for Service Class shares for the
period beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or continued to hold them
at the end of the periods shown. The examples also assume that your investment
has a 5% return each year and that the Fund's operating expenses remain the
same. Your actual costs may be higher or lower than those shown below. There is
no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
SERVICE CLASS
------------------------
<S> <C>
1 Year/1/ $ 109
------------------------
3 Years 389
------------------------
5 Years 691
------------------------
10 Years 1,548
------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Service Shares would be
$132.
------
7
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Municipal Money
Market Fund
What is the goal of the Municipal Money Market Fund?
The Fund seeks as high a level of current interest income exempt from federal
income tax as is consistent with liquidity and stability of principal.
What are the Municipal Money Market Fund's Main Investment Strategies?
The Fund invests in high-quality, short-term money market instruments. These
instruments include short-term municipal securities, which provide tax-exempt
income. The Fund will comply with SEC rules applicable to all money market
funds, including Rule 2a-7 under the Investment Company Act of 1940. For more
information about the Municipal Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
What are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
How will my Investment be Taxed?
Up to 100% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum
tax may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income.
What are the main risks of investing in the Municipal Money Market Fund?
The main risks of investing in the Municipal Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
------
8
<PAGE>
------------------
----------------
Municipal Money Market Fund
MAIN RISKS
Credit Risk. Because the Fund only invests in high-quality obligations and
limits its average maturity to 90 days or less, credit risk is minimized.
Nonetheless, if an issuer fails to pay interest or principal, the value of your
investment in the Fund could decline. Because the Fund invests in securities
that are backed by "credit enhancements" such as letters of credit, the value
of your investment in the Fund also could decrease if the value of the
securities in the portfolio decreases in response to the declining credit
quality of a credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
9
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Municipal Money Market Fund
How has the Municipal Money Market Fund Performed?
By showing the variability of the Municipal Money Market Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the Municipal Money
Market Fund is not necessarily an indication of how the Fund will perform in
the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Service Class Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 5.20%
1991 3.80%
1992 1.88%
1993 1.60%
1994 1.98%
1995 3.04%
1996 2.60%
1997 2.74%
1998 2.54%
1999 2.36%
/1/For periods prior to the commencement of operations of Service Class on
April 16, 1999, the performance of Service Class shares is based on Class A
performance adjusted to reflect differences in expenses. For the period from
January 1, 2000, through September 30, 2000, the Fund's total return was
2.35%.
--------------------------------------------------------------------------------
Best Quarter: 1.31% 2Q1990 Worst Quarter: .36% 1Q1993
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF SINCE
CLASS 6/4/87
<S> <C> <C> <C> <C> <C>
Service Class 4/16/99 2.36% 2.66% 2.77% 3.17%
</TABLE>
/1/For periods prior to the commencement of
operations of Service Class on April 16,
1999, the performance of Service Class
shares is based on Class A performance
adjusted to reflect differences in
expenses.
To obtain current yield information, call toll-free 1-800-480-4111 or visit
www.onegroup.com.
------
10
<PAGE>
------------------
Municipal Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your investment)/1/ SERVICE CLASS
--------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
--------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
--------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
Redemption Fee NONE
--------------------------------------------------------------------
Exchange Fee NONE
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------
(expenses that are deducted from Fund
assets)/2/ SERVICE CLASS
---------------------------------------------------------
<S> <C>
Investment Advisory Fees .35%
---------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .75%
---------------------------------------------------------
Other Expenses .19%
---------------------------------------------------------
Total Annual Fund Operating Expenses 1.29%
---------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.27%)
---------------------------------------------------------
Net Expenses 1.02%
---------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to 1.02% for Service Class shares for the
period beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or continued to hold them
at the end of the periods shown. The examples also assume that your investment
has a 5% return each year and that the Fund's operating expenses remain the
same. Your actual costs may be higher or lower than those shown below. There is
no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
SERVICE CLASS
------------------------
<S> <C>
1 Year/1/ $ 104
------------------------
3 Years 382
------------------------
5 Years 682
------------------------
10 Years 1,533
------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Service Shares would be
$131.
------
11
<PAGE>
ONE GROUP(R)
------------------
More About One Group
Mutual Funds
Each of the three funds described in this prospectus is a series of One Group
Mutual Funds ("One Group") and is managed by Banc One Investment Advisors
Corporation ("Banc One Investment Advisors"). For more information about One
Group and Banc One Investment Advisors, please read "Management of One Group
Mutual Funds" and the Statement of Additional Information.
--------------------------------------------------------------------------------
Principal Investment Strategies
The three mutual funds described in this prospectus are designed to produce
high current income consistent with liquidity and stability of principal. The
principal investment strategies that are used to meet each Fund's investment
objective are described in "Fund Summaries: Investments, Risk & Performance" in
the front of this prospectus. They are also described below.
FUNDAMENTAL POLICIES
A Fund's investment strategy may involve "fundamental policies." A policy is
fundamental if it cannot be changed without the consent of a majority of the
outstanding shares of the Fund.
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund may also use strategies that are not
described below, but which are described in the Statement of Additional
Information.
--
ONE GROUP PRIME MONEY MARKET FUND.
. The Fund invests only in U.S. denominated securities.
. The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
. The Fund invests exclusively in money market instruments. These include:
1. corporate notes;
2. commercial paper;
3. funding agreements;
4. certificates of deposit; and
5. bank obligations.
------
12
<PAGE>
. The Fund will invest at least 25% of its total assets in securities issued
by companies in the financial services industry, although the Fund may
invest less than 25% of its total assets in that industry if warranted due
to adverse economic conditions and if investing less than that amount would
be in the best interests of shareholders. The financial services industry
includes banks, broker-dealers, finance companies and other issuers of
asset-backed securities.
. The Fund may lend its portfolio's securities.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average of all the current maturities (that
is, the term of the securities) of the individual securities in a Fund
calculated so as to count most heavily those securities with the highest dollar
value. Average weighted maturity is important to investors as an indication of
a Fund's sensitivity to changes in interest rates. The longer the average
weighted maturity, the more fluctuation in share price you can expect.
--
ONE GROUP U. S. TREASURY SECURITIES MONEY MARKET FUND.
. The average maturity on a dollar-weighted basis of the securities held by the
Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
--
ONE GROUP MUNICIPAL MONEY MARKET FUND.
. The average maturity on a dollar-weighted basis of the securities held by the
Fund will be 90 days or less.
. Each security held by the Fund will mature in 397 days or less.
. The Fund will acquire only those securities that present minimal credit
risks.
. As a matter of fundamental policy, the Fund will invest at least 80% of its
total assets in municipal securities.
. The Fund will purchase municipal securities only if the issuer receives
assurances from its legal counsel that the interest payable on the securities
is exempt from federal personal income tax.
. The Fund may invest as much as 100% of its assets in municipal securities
that produce income that is subject to the federal alternative minimum tax.
If you are subject to the federal alternative minimum tax, please read the
section of this prospectus entitled "Tax Treatment of Shareholders" before
you invest.
. The Fund also may invest up to 20% of its total assets in other types of
securities, such as taxable money market instruments, including repurchase
agreements. For a list of all the securities in which the Fund may invest,
please read "Investment Practices" in Appendix A.
------
13
<PAGE>
--------------------------------------------------------------------------------
Investment Risks
The main risks associated with investing in the Money Market Funds are
described in "Fund Summaries: Investments, Risk & Performance" in the front of
this prospectus. Additional risks are described below.
--
NET ASSET VALUE. There is no assurance that the Funds will meet their
investment objectives or be able to maintain a net asset value of $1.00 per
share on a continuous basis.
--
FIXED INCOME SECURITIES. Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates.
If rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases.
The value of the securities in the Fund, and the value of your investment in a
Fund, will increase and decrease as the value of a Fund's investments increase
and decrease.
--
DERIVATIVES. The Prime Money Market Fund and Municipal Money Market Fund invest
in securities that may be considered to be derivatives. These securities may be
more volatile than other investments. Derivatives present, to varying degrees,
market, credit, leverage, liquidity and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and options) that derive
their value from the performance of underlying assets or securities.
For more information about risks associated with the types of investments that
the Money Market Funds purchase, please read the "Fund Summaries: Investments,
Risk, & Performance," Appendix A and the Statement of Additional Information.
--------------------------------------------------------------------------------
Investment Policies
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
--
FUNDAMENTAL POLICIES OF EACH FUND
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of $1.00
per share, although there is no guarantee that the Funds will be able to do
so.
2. Will not make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending.
3. Will not with respect to 75% of its assets, purchase an issuer's securities
if as a result more than 5% of a Fund's total assets would be invested in
the securities of that issuer or the Fund would own more than 10% of the
outstanding voting securities of that issuer. This does not include
securities issued or guaranteed by the United States, its agencies or
instrumentalities and repurchase agreements involving these securities.
------
14
<PAGE>
--
The Prime Money Market Fund:
1. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries (except that the Fund may concentrate its investments in
securities issued by companies in the financial services industry). This
does not include obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities, domestic bank certificates of deposit or
bankers' acceptances, and repurchase agreements involving such securities,
municipal securities or governmental guarantees of municipal securities. In
addition, private activity bonds backed only by the revenues and assets of a
non-governmental user will not be deemed to be municipal securities.
--
The U.S. Treasury Securities Money Market Fund:
1. Will invest only in U.S. Treasury obligations and repurchase agreements
collateralized by such obligations.
--
The Municipal Money Market Fund:
1. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries. This does not include municipal securities or
governmental guarantees of municipal securities. In addition, private
activity bonds backed only by the revenues and assets of a non-governmental
user will not be deemed to be municipal securities.
Additional investment policies can be found in the Statement of Additional
Information.
--------------------------------------------------------------------------------
Portfolio Quality And Maturity
The quality and maturity of money market funds are subject to SEC rules.
Quality is generally restricted to the two highest short-term ratings or their
equivalent. Maturity is limited both as to total portfolio average and as to
each individual security. With respect to portfolio average, the rules limit
the Fund's average weighted maturity to 90 days. With respect to each
individual security, the remaining maturity is restricted to 397 days at
acquisition. Moreover, the SEC rules limit exposure to a single issuer to 5% of
a money market fund's assets (although there is no limit on government
securities).
------
15
<PAGE>
--------------------------------------------------------------------------------
Temporary Defensive Posiitons
To respond to unusual market conditions, the Municipal Money Market Fund may
(i) invest all or most of its assets in cash equivalents (i.e., securities that
are not municipal securities) and (ii) hold uninvested cash pending investment,
for temporary defensive purposes. These investments may result in a lower yield
than lower-quality or longer-term investments and may prevent the Fund from
meeting its investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash equivalents are highly liquid, high-quality instruments with maturities of
three months or less on the date they are purchased. They include securities
issued by the U.S. government, its agencies and instrumentalities, repurchase
agreements (other than equity repurchase agreements), certificates of deposit,
bankers' acceptances, commercial paper (rated in one of the two highest rating
categories), variable rate master demand notes, money market mutual funds and
bank money market deposit accounts.
------
16
<PAGE>
ONE GROUP(R)
------------------
How to Do Business with
One Group Mutual Funds
--------------------------------------------------------------------------------
Purchasing Fund Shares
Where Can I Buy Shares?
You may purchase Fund shares from Wingspan Investment Services, Inc., a
Shareholder Servicing Agent. Your shares will be held for you by Wingspan
Investment Services, Inc.
When Can I Buy Shares?
You may purchase Fund shares on any day that the Funds are open for business.
As your Shareholder Servicing Agent, Wingspan is responsible for sending your
purchase order to the Funds. While the following information describes the
Funds' purchase requirements, Wingspan may have a cut-off time for purchase
orders.
. Purchases may be made on any business day. This includes any day that the
Funds are open for business. The Funds will be closed on weekends, and days
on which the New York Stock Exchange ("NYSE") or the Federal Reserve are
closed, including the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans Day, Thanksgiving and Christmas Day.
. Purchase requests will be effective on the day received and you will be
eligible to receive dividends declared the same day, if such purchase orders
are received:
. before 12:00 noon, Eastern Time ("ET"), for the Municipal Money Market
Fund;
. before 4:00 p.m., ET, for the Prime Money Market Fund and the U.S.
Treasury Securities Money Market Fund.
. In addition, the Fund's custodian, State Street Bank and Trust Company, must
receive "federal funds" before the times listed above. If State Street Bank
and Trust Company does not receive federal funds by the cut-off time, the
purchase order will not be effective until the next business day on which
federal funds are timely received by State Street Bank and Trust Company.
. On occasion, the NYSE will close before 4 p.m. ET. When the NYSE closes
before the times listed above, purchase requests received after the NYSE
closes will be effective the following business day.
. The One Group Services Company (the "Distributor") can reject a purchase
order if it does not think that it is in the best interests of a Fund and/or
its shareholders to accept the order.
. Shares are electronically recorded. Therefore, certificates will not be
issued.
------
17
<PAGE>
How Much Do Shares Cost?
.Shares are sold at net asset value ("NAV").
. NAV per share is calculated by dividing the total market value of a Fund's
investment and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class. The Funds use their best
efforts to maintain their NAV at $1.00, although there is no guarantee that
they will be able to do so.
. NAV is calculated each business day as of 12:00 noon and 4:00 p.m., ET, for
the Municipal Money Market Fund; and 4:00 p.m., ET, for the Prime Money
Market Fund and the U.S. Treasury Securities Money Market Fund. On occasion,
the NYSE will close before 4:00 p.m. ET. When the NYSE closes before the
times listed above, NAV will be calculated as of the time the NYSE closes.
How Do I Open An Account?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
. The minimum initial investment is $1,000 per Fund ($100 for employees of
Bank One Corporation and its affiliates). The minimum initial investment
for an IRA is $250.
. You are required to maintain a minimum account balance equal to the minimum
initial investment in each Fund.
. Subsequent investments must be at least $25 per Fund.
. These minimums may be waived.
3. Execute a purchase order through your Wingspan Investment Account.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
4. Send a personal check (unless you choose to pay by wire or bank transfer)
payable to "Wingspan Investment Services, Inc." to:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
If you choose to pay by wire, please call 1-800-480-1111.
5. All checks must be in U.S. dollars. Wingspan Investment Services will accept
third party checks only if accompanied by an AMA deposit slip.
6. If you redeem shares purchased under the systematic investment plan (see
below) or that were purchased by check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank. One
Group generally receives payment within seven (7) business days of purchase.
7. If you have any questions, contact Wingspan Investment Services, Inc. at
1-800-977-WING.
Can I Purchase Shares Over The Telephone?
Yes. Simply select this option on your Wingspan Investment Account Application
Form and then:
. Contact Wingspan Investment Services, Inc. at 1-800-977-WING to relay your
purchase instructions.
------
18
<PAGE>
. Authorize a bank transfer or initiate a wire transfer to the following wire
address:
CHASE MANHATTAN BANK
ABA 021 000 021
DLJ PERSHING DIVISION
ACCOUNT 930-1-032992
FOR FURTHER CREDIT TO:
YOUR NAME
YOUR WINGSPAN INVESTMENT ACCOUNT NUMBER (EX: 123456789)
. You may revoke your right to make purchases over the telephone by sending a
letter to:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
--------------------------------------------------------------------------------
Distribution and Servicing Expenses
The Distributor compensates Shareholder Servicing Agents who sell shares of One
Group Mutual Funds. Compensation comes from 12b-1 fees and payments by the
Distributor and the Funds' investment advisor from their own resources.
12B-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 fees. 12b-1 fees are paid by
One Group Mutual Funds to the Distributor as compensation for its services and
expenses. The Distributor in turn pays all or part of the 12b-1 fee to brokers
and other Shareholder Servicing Agents that sell shares of One Group.
. Service Class shares pay a 12b-1 fee of .75% of the average daily net assets
of the Fund, which is currently being waived to .55% for each Fund.
. The Distributor may use up to .25% of the fees for shareholder servicing and
the remainder for distribution. During the last fiscal year, the Distributor
received 12b-1 fees.
. The Distributor may pay 12b-1 fees to its affiliates and to Banc One
Investment Advisors and its affiliates (or any sub-advisor) for brokerage and
other agency transactions.
. Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
--------------------------------------------------------------------------------
Exchanging Fund Shares
What Are My Exchange Privileges?
Service Class shares do not have exchange privileges.
------
19
<PAGE>
--------------------------------------------------------------------------------
Redeeming Fund Shares
When Can I Redeem Shares?
You may redeem all or some of your shares on any day that the Funds are open
for business.
. Redemption requests will be effective that day if received before:
(i) 12:00 noon ET, for the Municipal Money Market Fund, and
(ii) 4:00 p.m. ET, for the Prime Money Market Fund and the U.S. Treasury
Securities Money Market Fund.
On occasion, the NYSE will close before 4:00 p.m. ET. When the NYSE closes
before the times listed above, redemption requests received after the NYSE
closes will be effective the following business day.
. As your Shareholder Servicing Agent, Wingspan Investment Services, Inc. is
responsible for sending your redemption order to the Funds. Wingspan
Investment Services, Inc. may have a different cut-off time than do the
Funds.
. All required documentation in the proper form must accompany a redemption
request. One Group may refuse to honor incomplete redemption requests.
How Do I Redeem Shares?
. Unless you have selected the telephone option on your Wingspan Investment
Account Application Form, you must send a written redemption request to
Wingspan Investment Services, Inc. at the following address:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
. All requests for redemptions from IRA accounts must be in writing.
. You may request redemption forms by calling Wingspan Investment Services,
Inc. at 1-800-977-WING.
. On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1.A designated commercial bank; or
2.Wingspan Investment Services, Inc.
. Your redemption proceeds will ordinarily be paid within seven days after
receipt of the redemption request. The Funds will attempt to honor requests
for same day payment if the request is received before the times listed in
"When Can I Redeem Shares?" If redemption requests are received after these
times, the Funds will attempt to wire payment the next business day.
. The Funds also will attempt to honor requests for payments in two business
days, if the redemption request is received after the times listed above.
What Will My Shares Be Worth?
. The NAV of shares of the Funds is expected to remain constant at $1.00 per
share, although there is no assurance that this will always be the case.
. You will receive the NAV calculated after your redemption request is
received. Please read "How Much Do Shares Cost?"
Can I Redeem By Telephone?
Yes, if you selected this option on your Wingspan Investment Account
Application Form.
. Call Wingspan Investment Services, Inc. at 1-800-977-WING to relay your
redemption request.
------
20
<PAGE>
----------------
. Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
. Redemptions from your IRA account may not be made by telephone.
Can I Redeem On A Systematic Basis?
If you have an account value of at least $10,000 you may elect to receive
monthly, quarterly or annual payments of not less than $100 each. This $10,000
minimum does not apply to minimum required distributions from your One Group
IRA or other qualifying retirement plan.
. Select the "Systematic Withdrawal Plan" option on your Wingspan Investment
Account Application Form.
. Specify the amount you wish to receive and the frequency of the payments.
. You may designate a person other than yourself as the payee.
. There is no charge for this service.
. If you select this option, please keep in mind that:
1. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from an IRA or
other qualifying retirement plan. You also may elect to receive payments
of less than $100 each. Only One Group assets are considered when
calculating your minimum required distribution.
2. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
. Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more, the Fund reserves the right to pay part or all of
your redemption proceeds in readily marketable securities instead of cash. If
payment is made in securities, the Fund will value the securities selected in
the same manner in which it computes its NAV. This process minimizes the
effect of large redemptions on the Fund and its remaining shareholders.
. If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to redemptions, your account
value falls below the minimum required balance. The above provision does not
apply to accounts participating in the Systematic Withdrawal Plan. For
information on minimum required balances, please read "How Do I Open An
Account?"
. One Group may suspend your ability to redeem when:
1.Trading on the NYSE is restricted;
2.the NYSE is closed (other than weekend and holiday closings);
3.the SEC has permitted a suspension; or
4.an emergency exists.
The Statement of Additional Information offers more details about this process.
. You generally will recognize a gain or loss on a redemption for federal
income tax purposes. You should talk to your tax advisor before making a
redemption.
------
21
<PAGE>
ONE GROUP(R)
------------------
Shareholder Information
--------------------------------------------------------------------------------
Voting Rights
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each
Fund, and each class of shares within each Fund, vote separately on matters
relating solely to that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal voting rights on matters
that affect all shareholders equally.
--------------------------------------------------------------------------------
Dividend Policies
DIVIDENDS. The Funds generally declare dividends on each business day.
Dividends are distributed on the first business day of each month. Capital
gains, if any, for all Funds are distributed at least annually.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payments in cash. The price of the shares
is the NAV determined immediately following the dividend record date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street. You also may change the way you receive
dividends and distributions by calling Wingspan Investment Services, Inc. at 1-
800-977-WING.
--------------------------------------------------------------------------------
Tax Treatment of Shareholders
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange or redemption of Fund
shares may produce either a taxable gain or a loss. You are responsible for any
tax liabilities generated by your transactions.
------
22
<PAGE>
Taxation of Distributions--Prime Money Market Fund and U.S. Treasury Securities
Money Market Fund
Each Fund will distribute substantially all of its net investment income.
Dividends you receive from a Fund, whether reinvested or received in cash, will
be taxable to you. Dividends from a Fund's net investment income (generally,
all of the Fund's net investment income) will be taxable as ordinary income.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
Taxation of Dividends--Municipal Money Market Fund
The Fund will distribute substantially all of its net investment income. The
Fund may pay "exempt-interest dividends" if at least 50% of the value of Fund
assets at the end of each quarter of the Fund's taxable year consists of
obligations the interest on which is excludable from gross income. Exempt-
interest dividends are generally excludable from an investor's gross income for
regular federal income tax purposes. However, the receipt of exempt-interest
dividends may cause recipients of Social Security or Railroad Retirement
benefits to be taxed on a portion of such benefits. In addition, the receipt of
exempt-interest dividends may result in liability for federal alternative
minimum tax and for federal state (including state alternative minimum tax) and
local taxes, both for individuals and corporate shareholders. Corporate
shareholders will be required to take the interest on municipal securities into
account in determining their alternative minimum taxable income.
Taxation of Retirement Plans
Distributions by the Funds to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for tax-
exempt treatment or by an individual who has received shares as a distribution
from a retirement plan, the distributions will be taxable to the plan or
individual as described in "Tax Treatment of Shareholders." If you are
considering purchasing shares of the money market funds, particularly the
Municipal Money Market Fund, with qualified retirement plan assets, you should
consult your tax advisor for a more complete explanation of the federal, state,
local and (if applicable) foreign tax consequences of making such an
investment.
Tax Information
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the federal, state,
local or foreign tax treatment of the Funds or their shareholders.
--------------------------------------------------------------------------------
Shareholder Inquiries
If you have any questions or need additional information, please call Wingspan
Investment Services, Inc. at 1-800-977-WING.
Reporting
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
------
23
<PAGE>
ONE GROUP(R)
------------------
Management of One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor to
the Trust since its inception. In addition, Banc One Investment Advisors serves
as investment advisor to other mutual funds and individual corporate,
charitable and retirement accounts. As of June 30, 2000, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $131 billion in assets.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rate:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND NAME AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Prime Money Market Fund .32%
---------------------------------------------------------------------
One Group(R) U.S. Treasury Securities Money
Market Fund .32%
---------------------------------------------------------------------
One Group(R) Municipal Money Market Fund .27%
---------------------------------------------------------------------
</TABLE>
------
24
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Prime Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR APRIL 16,
ENDED 1999 TO
JUNE 30, JUNE 30,
SERVICE CLASS SHARES 2000 1999(A)
---------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
---------------------------------------------------------------------------
Investment Activities:
Net investment income 0.048 0.008
Distributions:
Net Investment income (0.048) (0.008)
---------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
---------------------------------------------------------------------------
TOTAL RETURN 4.94% 0.84%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 6,293 $ 73
Ratio of expenses to average net assets 1.07% 1.05%(C)
Ratio of net investment income to average net assets 5.03% 4.02%(C)
Ratio of expenses to average net assets* 1.30% 1.28%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced.
If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (A) Period from
commencement of operations. (B) Not annualized. (C)
Annualized.
------
25
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
U.S. Treasury Securities Money
Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR APRIL 16,
ENDED 1999 TO
JUNE 30, JUNE 30,
SERVICE CLASS SHARES 2000 1999(A)
---------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
---------------------------------------------------------------------------
Investment Activities:
Net investment income 0.045 0.008
Distributions:
Net investment income (0.045) (0.008)
---------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
---------------------------------------------------------------------------
TOTAL RETURN 4.54% 0.77%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 83 $ 5
Ratio of expenses to average net assets 1.07% 1.06%(C)
Ratio of net investment income to average net assets 4.44% 3.71%(C)
Ratio of expenses to average net assets* 1.30% 1.27%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced.
If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (A) Period from
commencement of operations. (B) Not annualized. (C)
Annualized.
------
26
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Municipal Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR APRIL 16,
ENDED 1999 TO
JUNE 30, JUNE 30,
SERVICE CLASS SHARES 2000 1999(A)
---------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
---------------------------------------------------------------------------
Investment Activities:
Net investment income 0.028 0.005
Distributions:
Net investment income (0.028) (0.005)
---------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
---------------------------------------------------------------------------
TOTAL RETURN 2.81% 0.50%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 442 $ 36
Ratio of expenses to average net assets 1.01% 1.00%(C)
Ratio of net investment income to average net assets 3.01% 2.45%(C)
Ratio of expenses to average net assets* 1.29% 1.29%(C)
</TABLE>
* During the period, certain fees were voluntarily reduced.
If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (A) Period from
commencement of operations. (B) Not annualized. (C)
Annualized.
------
27
<PAGE>
ONE GROUP(R)
------------------
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Funds, as well
as the risks inherent in their use. Fixed income securities are primarily
influenced by market, credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
<TABLE>
--------------------------------------------
<CAPTION>
FUND NAME FUND CODE
------------------------------------------
<S> <C>
One Group(R) Prime Money
Market Fund 1
------------------------------------------
One Group(R) U.S. Treasury
Securities
Money Market Fund 2
------------------------------------------
One Group(R) Municipal Money
Market Fund 3
</TABLE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS and 1-3 Market
CUBES. The U.S. Treasury Securities Money Market Fund does not
buy STRIPS and CUBES.
-------------------------------------------------------------------------------
Treasury Receipts: TRs, TIGRS and CATS. 1, 3 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by 1, 3 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae and Freddie Mac.
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a stated 1, 3 Market
maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in 1, 3 Liquidity
exchange for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security and the 1-3 Credit
simultaneous commitment to return the security to the seller at Market
an agreed upon price on an agreed upon date. This is treated as Liquidity
a loan.
-------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a security and the 1, 2 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Fund.
-------------------------------------------------------------------------------
</TABLE>
------
28
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Securities Lending: The lending of up to 33 1/3% of the Fund's 1 Credit
total assets. In return, the Fund will receive cash, other Market
securities and/or letters of credit as collateral. Leverage
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase or 1-3 Market
contract to purchase securities at a fixed price for delivery Leverage
at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other money market 1, 3 Market
mutual funds, including One Group money market funds and
shares of other money market funds for which Banc One
Investment Advisors or its affiliates serve as investment
advisor or administrator. Banc One Investment Advisors will
waive certain fees when investing in funds for which it serves
as investment advisor.
-------------------------------------------------------------------------------
Extendable Commercial Notes: Variable rate notes which 1, 3 Market
normally mature within a short period of time (e.g., one Credit
month) but which may be extended by the issuer for a maximum Liquidity
maturity of 13 months.
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time drafts drawn 1, 3 Credit
on and accepted by a commercial bank. Maturities are generally Liquidity
six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term promissory 1, 3 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
-------------------------------------------------------------------------------
Foreign Securities: Commercial paper of foreign issuers and 1, 3 Market
obligations of foreign banks, overseas branches of U.S. banks Political
and supranational entities. Liquidity
Foreign
Investment
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered under the 1, 3 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations with 1, 3 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand.
-------------------------------------------------------------------------------
</TABLE>
------
29
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Mortgage-Backed Securities: Debt obligations secured by 1, 3 Prepayment
real estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to puts and 1, 3 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed Management
period of time following demand by a Fund.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state or 1, 3 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as General Tax Regulatory
Obligation Notes, Tax Anticipation Notes, Bond
Anticipation Notes, Revenue Anticipation Notes, other
short-term tax-exempt obligations, municipal leases,
obligations of municipal housing authorities and single
family revenue bonds.
-------------------------------------------------------------------------------
Short-Term Funding Agreements: Agreements issued by banks 1 Market
and highly rated insurance companies such as Guaranteed Credit
Investment Contracts ("GICs") and Bank Investment Liquidity
Contracts ("BICs").
-------------------------------------------------------------------------------
Participation Interests: Interests in municipal 1, 3 Credit
securities, including municipal leases, from financial Tax Market
institutions such as commercial and investment banks,
savings and loan associations and insurance companies.
These interests may take the form of participations,
beneficial interests in a trust, partnership interests or
any other form of indirect ownership that allows the Funds
to treat the income from the investment as exempt from
federal income tax.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company 1, 3 Prepayment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities Credit
backed by other types of receivables or other assets. Regulatory
-------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price and liquidity
of a security can be adversely affected prior to actual default as its credit
status deteriorates and the probability of default rises.
------
30
<PAGE>
. Leverage Risk. The risk associated with securities or practices (such as
borrowing) that multiply small index or market movements into large changes
in value.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities instead
or forego an investment opportunity, any of which could have a negative
effect on fund management or performance. This includes the risk of missing
out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
. Management Risk. The risk that a strategy used by a Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a fall
in values, while a fall in rates typically causes a rise in values. Finally,
key information about a security or market may be inaccurate or unavailable.
This is particularly relevant to investments in foreign securities.
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes and governmental collapse and war.
. Foreign Investment Risk. Risks associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other obligations are prepaid, a Fund may have to reinvest
in securities with a lower yield. Further, with early repayment, a Fund may
fail to recoup any premium paid, resulting in an unexpected capital loss.
. Tax Risk. The risk that the issuer of the securities will fail to comply with
certain requirements of the Internal Revenue Code, which could cause adverse
tax consequences. Also, the risk that the tax treatment of municipal or other
securities could be changed by Congress thereby affecting the value of
outstanding securities.
. Regulatory Risk. The risk associated with federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
------
31
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Funds, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
How can I get more information? You can get a free copy of the semi-
annual/annual reports or the SAI, request other information or discuss your
questions about the Funds by calling 1 800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
OR VISITING
WWW.ONEGROUP.COM
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of the information also may
be obtained, after paying a copying charge, by electronic request to the
following e-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
(Investment Company Act File No. 811-4236)
TOG-F-231
[LOGO OF ONE GROUP]
<PAGE>
Index Funds
Class I Shares
PROSPECTUS
November 1, 2000
[LOGO OF ONE GROUP]
One Group(R) Equity Index Fund
One Group(R) Market Expansion Index Fund
One Group(R) International Equity Index Fund
------
The Securities and Ex-
change Commission has not
approved or disapproved
the shares of any of the
Funds as an investment or
determined whether this
prospectus is accurate or
complete. Anyone who
tells you otherwise is
committing a crime.
For Use by Wingspan Investment Services, Inc.
<PAGE>
Table of
CONTENTS
<TABLE>
<CAPTION>
Fund Summaries: Investments, Risk &
Performance
<S> <C>
One Group Equity Index Fund 2
-----
One Group Market Expansion Index Fund 5
-----
One Group International Equity Index Fund 9
-----
</TABLE>
<TABLE>
<CAPTION>
More About the Funds
<S> <C>
Principal Investment
Strategies 13
-----
Investment Risks 14
-----
Investment Policies 16
-----
Portfolio Quality 16
-----
Temporary Defensive
Positions 17
-----
Portfolio Turnover 17
-----
</TABLE>
<TABLE>
<CAPTION>
How to Do Business with One Group Mutual
Funds
<S> <C>
Purchasing Fund Shares 18
-----
Exchanging Fund Shares 20
-----
Redeeming Fund Shares 21
-----
</TABLE>
<TABLE>
<CAPTION>
Shareholder Information
<S> <C>
Voting Rights 24
-----
Dividend Policies 24
-----
Tax Treatment of
Shareholders 25
-----
Shareholder Statements and Reports 25
-----
</TABLE>
<TABLE>
<CAPTION>
Management of One Group Mutual Funds
<S> <C>
The Advisor 26
------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Financial Highlights 27
-----
Appendix A: Investment Practices 30
-----
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
Equity Index Fund
What is the goal of the Equity Index Fund?
The Fund seeks investment results that correspond to the aggregate price and
dividend performance of securities in the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index")./1/
What are the Equity Index Fund's Main Investment Strategies?
The Fund invests mainly in stocks included in the S&P 500 Index. The Fund may
also invest in stock index futures and other equity derivatives. Banc One
Investment Advisors attempts to track the performance of the S&P 500 Index to
achieve a correlation of 0.95 between the performance of the Fund and that of
the S&P 500 Index without taking into account the Fund's expenses. For more
information about the Equity Index Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Equity Index Fund?
The main risks of investing in the Equity Index Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Equity Index Fund will change every day in response to market
conditions. You may lose money if you invest in the Equity Index Fund. For
additional information on risk, please read "Investment Risks."
What is the goal of the Equity Index Fund?
MAIN RISKS
----------
Index Investing. The Fund attempts to track the performance of the S&P 500
Index. Therefore, securities may be purchased, retained and sold by the Fund at
times when an actively managed fund would not do so. If the value of securities
that are heavily weighted in the index changes, you can expect a greater risk
of loss than would be the case if the Fund were not fully invested in such
securities.
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
S&P 500 Index stock prices in particular) may decline over short or extended
periods of time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
/1/"S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with the Fund.
------
2
<PAGE>
------------------
Equity Index Fund
How has the Equity Index Fund Performed?
By showing the variability of the Equity Index Fund's performance from year to
year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Equity Index Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1992 6.85%
1993 9.37%
1994 0.75%
1995 37.07%
1996 22.59%
1997 33.00%
1998 28.24%
1999 20.54%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was -1.56%.
--------------------------------------------------------------------------------
Best Quarter: 21.26% 4Q1998 Worst Quarter: -9.96% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results.
Average Annual Total Returns through December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF SINCE
CLASS 7/2/91
<S> <C> <C> <C> <C>
One Group Equity Index Fund 7/2/91 20.54% 28.14% 19.72%
S&P 500 Index/1/ 21.04% 28.56% 19.87%
</TABLE>
/1/The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market. The performance of
the index does not reflect the deduction of expenses associated with a
mutual fund, such as investment management fees. By contrast, the
performance of the Fund reflects the deduction of these expenses.
------
3
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Equity Index Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------------------
<S> <C>
(fees paid directly from your investment)/1/ CLASS I
-------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases NONE
-------------------------------------------------------------------------------
(as a percentage of offering price)
-------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) NONE
-------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
-------------------------------------------------------------------------------
Redemption Fee NONE
-------------------------------------------------------------------------------
Exchange Fee NONE
-------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------
(expenses that are deducted from Fund assets)/2/ CLASS I
-------------------------------------------------------------------------------
Investment Advisory Fees .30%
-------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
-------------------------------------------------------------------------------
Other Expenses .27%
-------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .57%
-------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.22%)
-------------------------------------------------------------------------------
Net Expenses .35%
-------------------------------------------------------------------------------
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .35% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown.
There is no sales charge (load) on reinvested dividends.
<CAPTION>
CLASS I
-------------------------------------------------------------------------------
<S> <C>
1 Year/1/ $ 36
-------------------------------------------------------------------------------
3 Years $160
-------------------------------------------------------------------------------
5 Years $296
-------------------------------------------------------------------------------
10 Years $693
-------------------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Class I shares would be
$58.
------
4
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Market Expansion Index Fund
What are the Market Expansion Index Fund's main investment strategies?
----------------
What is the goal of the Market Expansion Index Fund?
The Fund seeks to provide a return which substantially duplicates the price and
yield performance of domestically traded common stocks in the small- and mid-
capitalization equity markets, as represented by a market capitalization
weighted combination of the Standard & Poor's Small Cap 600 Index ("S&P Small
Cap 600") and the Standard & Poor's Mid Cap 400 Index ("S&P Mid Cap 400")./1/
What are the Market Expansion Index Fund's Main Investment Strategies?
The Fund invests in a representative sampling of stocks of medium-sized and
small U.S. companies that are included in the S&P Small Cap 600 and S&P Mid Cap
400 and which trade on the New York and American Stock Exchanges as well as
over-the-counter stocks that are part of the National Market System. (Not all
of the stocks in the indices are included in the Fund.) The Fund uses a
sampling methodology to determine which stocks to purchase or sell in order to
closely replicate the performance of the combined indices. The Fund seeks to
achieve a correlation between its portfolio and that of the indices of at least
0.95, without taking into account the Fund's expenses. For more information
about the Market Expansion Index Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Market Expansion Index Fund?
The main risks of investing in the Market Expansion Index Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Market Expansion Index Fund and its yield will change
every day in response to economic and other market conditions. You may lose
money if you invest in the Market Expansion Index Fund. For additional
information on risk, please read "Investment Risks."
MAIN RISKS
Index Investing. The Fund attempts to track the performance of the S&P Small
Cap 600 Index and the S&P Mid Cap 400 Index. Therefore, securities may be
purchased, retained and sold by the Fund at times when an actively managed fund
would not do so. If the value of securities that are heavily weighted in the
index changes, you can expect a greater risk of loss than would be the case if
the Fund were not fully invested in such securities.
Market Risk. The Fund invests in equity securities (such as stocks) which are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
small-cap and mid-cap stock prices in particular) may decline over short or
extended periods of time. When the value of the Fund's securities goes down,
your investment in the Fund decreases in value.
1 "S&P Small Cap 600" and "S&P Mid Cap 400" are registered service marks of
Standard & Poor's corporation, which does not sponsor and is in no way
affiliated with the Fund.
------
5
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Market Expansion Index Fund
Smaller Companies. The Fund's investments in smaller, newer companies may be
riskier than investments in larger, more established companies. Securities of
smaller companies tend to be less liquid than securities of larger companies.
In addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their stock price.
This may cause unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
6
<PAGE>
------------------
Market Expansion Index Fund
How has the Market Expansion Index Fund Performed?
By showing the variability of the Market Expansion Index Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the Market Expansion
Index Fund is not necessarily an indication of how the Fund will perform in the
future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1999 11.56%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 16.57%.
--------------------------------------------------------------------------------
Best Quarter: 15.10% 4Q1999 Worst Quarter: -7.52% 1Q1999
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results.
Average Annual Total Returns through December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF SINCE 7/31/98
CLASS
<S> <C> <C> <C>
Class I 7/31/98 11.56% 15.45%
S&P MidCap 400 Index/1/ 14.72% 20.91%
S&P SmallCap 600 Index/2/ 12.40% 9.15%
</TABLE>
/1/The S&P MidCap 400 Index is an unmanaged index generally representing the
mid-size company segment of the U.S. market. The performance of the index
does not reflect the deduction of expenses associated with a mutual fund,
such as investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses.
/2/The S&P SmallCap 600 Index is an unmanaged index generally representative of
the performance of small-capitalization companies in the U.S. stock market.
The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
expenses.
------
7
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Market Expansion Index Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your investment)/1/ CLASS I
-------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
-------------------------------------------------------------------
(as a percentage of offering price)
-------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) NONE
-------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
-------------------------------------------------------------------
Redemption Fee NONE
-------------------------------------------------------------------
Exchange Fee NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from Fund assets)/2/ CLASS I
-------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .35%
-------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
-------------------------------------------------------------------
Other Expenses .53%
-------------------------------------------------------------------
Total Annual Fund Operating Expenses .88%
-------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.31%)
-------------------------------------------------------------------
Net Expenses .57%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .57% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS I
------------------
<S> <C>
1 Year/1/ $ 58
------------------
3 Years 250
------------------
5 Years 457
------------------
10 Years 1,056
------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses for Class I shares would be
$90.
------
8
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
International Equity Index Fund
What is the goal of the International Equity Index Fund?
The Fund seeks to provide investment results that correspond to the aggregate
price and dividend performance of the securities in the MSCI EAFE GDP Index./1/
What are the International Equity Index Fund's Main Investment Strategies?
The Fund invests mainly in foreign stocks included in the MSCI EAFE GDP Index.
The Fund may also invest in stock index futures. Banc One Investment Advisors
attempts to track the performance of the MSCI EAFE GDP Index to achieve a
correlation of 0.90 between the performance of the Fund and that of the MSCI
EAFE GDP Index, without taking into account the Fund's expenses. As part of its
investment strategy, the Fund may invest in securities of emerging
international markets such as Mexico, Chile and Brazil. The Sub-Advisor selects
securities of emerging markets that are included in the Morgan Stanley Emerging
Market Free Index based on size, risk and the ease of investing in the
country's market (e.g., reasonable settlement procedures). Most of the Fund's
assets will be denominated in foreign currencies. For more information about
the International Equity Index Fund's investment strategies, please read "More
About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the International Equity Index Fund?
The main risks of investing in the International Equity Index Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the International Equity Index Fund will change every day in
response to market conditions. You may lose money if you invest in the
International Equity Index Fund. For additional information on risk, please
read "Investment Risks."
/1/Gross Domestic Product Weighted Morgan Stanley Capital International Europe,
Australasia and Far East Index. MSCI EAFE GDP Index is a registered service
mark of Morgan Stanley Capital International, which does not sponsor and is
in no way affiliated with the Fund.
------
9
<PAGE>
------------------
ONE GROUP(R)
------------------
----------------
FUND SUMMARY
International Equity Index Fund
MAIN RISKS
Index Investing. The Fund attempts to track the performance of the MSCI EAFE
GDP Index. Therefore, securities may be purchased, retained and sold by the
Fund at times when an actively managed fund would not do so. If the value of
securities that are heavily weighted in the index change, you can expect a
greater risk of loss than would be the case if the Fund were not fully invested
in such securities.
Foreign Securities. Investments in foreign securities involve risks in addition
to those of U.S. investments. These risks include political and economic risks,
currency fluctuations, higher transaction costs, delayed settlement, and less
stringent investor protection and disclosure standards of some foreign markets.
These risks can make foreign investments more volatile and potentially less
liquid than U.S. investments.
Emerging Market Risk. The Fund may invest up to 10% of its net assets in
securities of emerging international markets. The risks associated with foreign
securities are magnified in countries in "emerging markets." These countries
may have relatively unstable governments and less-established market economies
than developed countries. Emerging markets may face greater social, economic,
regulatory and political uncertainties. These risks make emerging market
securities more volatile and less liquid than securities issued in more
developed countries.
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
stocks comprising the MSCI EAFE GDP Index in particular) may decline over short
or extended periods of time. When the value of the Fund's securities goes down,
your investment in the Fund decreases in value.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
10
<PAGE>
------------------
International Equity Index Fund
How has the International Equity Index Fund Performed?
By showing the variability of the International Equity Index Fund's performance
from year to year, the chart and table below help show the risk of investing in
the Fund. Please remember that the past performance of the International Equity
Index Fund is not necessarily an indication of how the Fund will perform in the
future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1993 29.60%
1994 2.90%
1995 10.19%
1996 6.61%
1997 5.68%
1998 21.57%
1999 33.42%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was -13.38%.
--------------------------------------------------------------------------------
Best Quarter: 20.46% 4Q1998 Worst Quarter: -14.47% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results.
Average Annual Total Returns through December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF SINCE 10/28/92
CLASS
<S> <C> <C> <C> <C>
One Group International
Equity Index Fund 10/28/92 33.42% 15.03% 15.01%
MSCI EAFE GDP Index/1/ 31.00% 16.00% 16.78%
</TABLE>
/1/The MSCI EAFE GDP Index is an unmanaged index generally representative of
the performance of international stock markets. The performance of the index
does not reflect the deduction of expenses associated with a mutual fund,
such as investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses.
------
11
<PAGE>
ONE GROUP(R)
------------------
------------------
FUND SUMMARY
International Equity Index Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your investment)/1/ CLASS I
-------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
-------------------------------------------------------------------
(as a percentage of offering price)
-------------------------------------------------------------------
Maximum Deferred Sales Charge Load NONE
-------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
-------------------------------------------------------------------
Redemption Fee NONE
-------------------------------------------------------------------
Exchange Fee NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from Fund assets)/2/ CLASS I
-------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .55%
-------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
-------------------------------------------------------------------
Other Expenses .38%
-------------------------------------------------------------------
Total Annual Fund Operating Expenses .93%
-------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ NONE
-------------------------------------------------------------------
Net Expenses .93%
-------------------------------------------------------------------
</TABLE>
/1/If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
/2/Expense information has been restated to reflect current fees.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .93% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
CLASS I
-------------------------------------------------------------------
1 Year $ 95
-------------------------------------------------------------------
3 Years 296
-------------------------------------------------------------------
5 Years 515
-------------------------------------------------------------------
10 Years 1,143
-------------------------------------------------------------------
------
12
<PAGE>
ONE GROUP(R)
------------------
More About The Funds
Each of the three funds described in this prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. The
Funds also offer Class A, Class B, and Class C shares through a separate
prospectus. For more information on these share classes, please contact your
Shareholder Servicing Agent or call The One Group Services Company at 1-800-
480-4111. For more information about One Group and Banc One Investment
Advisors, please read "Management of One Group Mutual Funds" and the Statement
of Additional Information.
--------------------------------------------------------------------------------
Principal Investment Strategies
This prospectus describes three mutual funds that attempt to track the
performance of a specified index or indices. Unlike an actively managed fund,
these Funds purchase and sell securities based on changes in the applicable
index or indices. The principal investment strategies that are used to meet
each Fund's investment objective are described in the "Fund Summaries:
Investments, Risk, & Performance." They are also described below. There can be
no assurance that the Funds will achieve their investment objectives. Please
note that each Fund may also use strategies that are not described below, but
which are described in the Statement of Additional Information.
--
ONE GROUP EQUITY INDEX FUND. The Fund invests in stocks included in the S&P 500
Index. (The Fund also invests in stock index futures and other equity
derivatives.) Banc One Investment Advisors seeks to achieve a correlation of
0.95 between the performance of the Fund and that of the S&P 500 Index. The
Fund may hold up to 10% of its total assets in cash or cash equivalents.
(Assets held in margin deposits and segregated accounts for futures contracts
are not considered cash and cash equivalents for purposes of this 10%
limitation.)
. The percentage of a stock that the Fund holds will be approximately the same
percentage that the stock represents in the S&P 500 Index.
. Banc One Investment Advisors generally picks stocks in the order of their
weightings in the S&P 500 Index, starting with the heaviest weighted stock.
. The Fund attempts to achieve a correlation between the performance of its
Fund and that of the S&P 500 Index of at least 0.95, without taking into
account Fund expenses. Perfect correlation would be 1.00.
--
ONE GROUP MARKET EXPANSION INDEX FUND. The Fund invests in stocks included in
the S&P SmallCap 600 Index and S&P MidCap 400 Index.
. The Fund also may invest up to 10% of its net assets in foreign securities,
including Depositary Receipts.
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13
<PAGE>
. Up to 10% of the Fund's total assets may be held in cash and cash
equivalents. (Assets held in margin deposits and segregated accounts for
futures contracts are not considered cash and cash equivalents for purposes
of this 10% limitation.)
--
ONE GROUP INTERNATIONAL EQUITY INDEX FUND. The Fund invests in stocks included
in the MSCI EAFE GDP Index. (The Fund also invests in stock index futures.)
Banc One Investment Advisors seeks to achieve a correlation between the
performance of the Fund and that of the MSCI EAFE GDP Index of at least 0.90,
without taking into account expenses. Perfect correlation would be 1.00.
. At least 65% of the Fund's total assets will be invested in foreign equity
securities, consisting of common stocks (including American Depositary
Receipts) and preferred stocks, securities convertible to common stock
(provided they are traded on an exchange or over-the-counter), warrants and
receipts.
. No more than 10% of the Fund's assets will be held in cash or cash
equivalents. (Assets held in margin deposits and segregated accounts for
futures contracts are not considered cash and cash equivalents for purposes
of this 10% limitation.)
. Up to 10% of the Fund's net assets may be invested in securities of emerging
international markets such as Mexico, Chile and Brazil included in the Morgan
Stanley Market Free Index. These investments may be made directly or through
local exchanges, through publicly traded closed-end country funds through
"passive foreign investment companies."
. Up to 20% of the Fund's total assets may be invested in debt securities
issued or guaranteed by foreign governments or any of their political
subdivisions, agencies, or instrumentalities, or by supranational issuers
rated in one of the three highest rating categories.
. A substantial portion of the Fund's assets will be denominated in foreign
currencies.
--------------------------------------------------------------------------------
Investment Risks
The risks associated with investing in the Index Funds are described below and
in "Fund Summaries: Investments, Risk, & Performance" at the front of this
prospectus.
--
DERIVATIVES. The Funds invest in securities that may be considered to be
derivatives. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity
and management risks. A Fund's use of derivatives may cause the Fund to
recognize higher amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use such instruments.
WHAT IS A DERIVATIVE?
Derivatives are securities or
contracts (like futures and
options) that derive their value
from the performance of underlying
assets or securities.
--
SMALL CAPITALIZATION COMPANIES. Investments in smaller, younger companies may
be riskier and more volatile than investments in larger, more established
companies. These companies may be more vulnerable to changes in economic
conditions, specific industry conditions, market fluctuations and other factors
affecting the profitability of other companies. Because economic events may
------
14
<PAGE>
have a greater impact on smaller companies, there may be a greater and more
frequent fluctuation in their stock price. This may cause frequent and
unexpected increases or decreases in the value of your investment.
--
FOREIGN SECURITIES. Investments in foreign securities involve risks different
from investments in U.S. securities. These risks include the risks associated
with higher transaction costs, delayed settlements, currency controls and
adverse economic developments. This also includes the risk that fluctuations in
the exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may erode or
reverse any gains produced by foreign currency denominated investments and
widen any losses. Exchange rate volatility also may affect the ability of an
issuer to repay U.S. dollar denominated debt, thereby increasing credit risk.
Because of these risk factors, the share price of the International Equity
Index Fund is expected to be volatile, and you should be able to sustain
sudden, and sometimes substantial, fluctuations in the value of your
investment.
--
EUROPE. Europe includes countries with highly-developed markets as well as
countries with emerging markets. Many developed countries in Western Europe are
members of the European Union and the European Monetary Union which require
compliance with stringent fiscal and monetary controls. The markets of Eastern
European countries continue to remain relatively undeveloped and are sensitive
to political and economic developments.
--
ASIA. Asia includes countries in all stages of economic development from the
highly developed market economy of Japan to the emerging market economy of the
People's Republic of China. Generally, Asian economies face over-extension of
credit, currency devaluation, rising unemployment, decreased exports and
economic recessions. Currency devaluation in any one country may have a
negative effect on the entire region. The markets in each Asian country
suffered significant downturns and volatility in recent years. Although the
Asian market are recovering, continued volatility may persist.
--
LATIN AMERICA. Latin American countries are considered to be emerging market
economies that are marked by high interest rates, inflation and unemployment.
Currency devaluation in any one country may have an adverse affect on the
entire region. The markets in many Latin American countries have experienced
significant downturns as well as significant volatility in recent years.
Although the Latin American market appears to be recovering, continued
volatility may persist. A small number of companies and industries, including
the telecommunications sector, represent a large portion of the market in many
Latin American countries.
For more information about risks associated with the types of investments that
the Index Funds purchase, please read "Fund Summaries: Investments, Risk, &
Performance," Appendix A and the Statement of Additional Information.
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15
<PAGE>
--------------------------------------------------------------------------------
Investment Policies
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
Each Fund may not:
1. Purchase an issuer's securities if as a result more than 5% of its total
assets would be invested in the securities of that issuer or the Fund would
own more than 10% of the outstanding voting securities of that issuer. This
does not include securities issued or guaranteed by the United States, its
agencies or instrumentalities, and repurchase agreements involving these
securities. This restriction applies with respect to 75% of a Fund's total
assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Make loans, except that a Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending.
One Group Equity Index Fund may not:
1. Invest more than 10% of its total assets in securities issued or guaranteed
by the United States, its agencies or instrumentalities. Repurchase
agreements held in margin deposits and segregated accounts for futures
contracts are not considered issued or guaranteed by the United States, its
agencies or instrumentalities for purposes of this 10% limitation.
Additional investment policies can be found in the Statement of Additional
Information.
--------------------------------------------------------------------------------
Portfolio Quality
Various rating organizations (like Standard & Poor's Corporation and Moody's
Investors Service) assign ratings to securities. Equity securities, which will
make up the bulk of the Funds' investments, are not rated by rating
organizations. Generally, ratings are divided into two main categories:
"Investment Grade Securities" and "Non-Investment Grade Securities." Although
there is always a risk of default, rating agencies believe that issuers of
Investment Grade Securities have a high probability of making payments on such
securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment
Grade Securities. The Funds only purchase securities that meet the rating
criteria described below. Banc One Investment Advisors will look at a
security's rating at the time of investment. If the securities are unrated,
Banc One Investment Advisors must determine that they are of comparable quality
to rated securities.
--
RATINGS OF THE INDEX FUNDS' SECURITIES
. Short-term corporate obligations, such as commercial paper, notes and
variable rate demand obligations, must be rated in one of the two highest
investment grade categories at the time of investment.
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16
<PAGE>
. Corporate bonds generally will be rated in one of the three highest
investment grade categories. Banc One Investment Advisors reserves the right
to invest in corporate bonds that present attractive opportunities and are
rated in the lowest investment grade category. These corporate bonds may be
riskier than higher rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
--------------------------------------------------------------------------------
Temporary Defensive Positions
To respond to unusual market conditions, the Equity Index Fund, the Market
Expansion Index Fund and the International Equity Index Fund may invest up to
10% of their total assets in cash and cash equivalents 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. (Assets held in margin deposits and segregated accounts for futures
contracts are not considered cash and cash equivalents for purposes of these
limitations.)
WHAT IS A CASH EQUIVALENT?
Cash equivalents are highly
liquid, high-quality instruments
with maturities of three months or
less on the date they are
purchased. They include securities
issued by the U.S. government, its
agencies and instrumentalities,
repurchase agreements (other than
equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper
(rated in one of the two highest
rating categories), variable rate
master demand notes, money market
mutual funds and bank money market
deposit accounts.
--------------------------------------------------------------------------------
Portfolio Turnover
The Funds may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Funds and may result in additional tax consequences to you. The
portfolio turnover rate for each Fund for the fiscal year ended June 30, 2000,
is shown on the Financial Highlights. To the extent portfolio turnover results
in short-term capital gains, such gains will generally be taxed at ordinary
income tax rates.
------
17
<PAGE>
ONE GROUP(R)
------------------
How to Do Business with
One Group Mutual Funds
--------------------------------------------------------------------------------
Purchasing Fund Shares
Where Can I Buy Shares?
You may purchase Fund shares from Wingspan Investment Services, Inc., a
Shareholder Servicing Agent. Your shares will be held for you by Wingspan
Investment Services, Inc.
When Can I Buy Shares?
You may purchase Fund shares on any day that the Funds are open for business.
As your Shareholder Servicing Agent, Wingspan Investment Services, Inc. is
responsible for sending your purchase order to the Funds. While the following
information describes the Funds' purchase requirements, Wingspan Investment
Services, Inc. may have an earlier cut-off time for purchase orders.
. Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends and days on which the New
York Stock Exchange ("NYSE") is closed, including the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day.
. Purchase requests received before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close before 4 p.m. ET. When
that happens, purchase requests received after the NYSE closes will be
effective the following business day.
. The One Group Services Company (the "Distributor") can reject a purchase
order if it does not think that it is in the best interests of a Fund and/or
its shareholders to accept the order.
. Shares are electronically recorded. Therefore, certificates will not be
issued.
How Much Do Shares Cost?
. Shares are sold at net asset value ("NAV").
. Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
. NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
. A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, NAV will be calculated as of the
time the NYSE closes.
------
18
<PAGE>
How Do I Open An Account?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
. The minimum initial investment is $200,000 per Fund. The minimum initial
investment for an IRA and 403(b) is $250.
. You are required to maintain a minimum account balance equal to the
minimum initial investment in each Fund.
. Subsequent investments must be at least $25 per Fund.
. These minimums may be waived.
3. Execute a purchase order through your Wingspan Investment Account.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
4. Send a personal check (unless you choose to pay by wire or bank transfer)
payable to "Wingspan Investment Services, Inc." to:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
If you choose to pay by wire, please call 1-800-480-4111.
5. All checks must be in U.S. dollars. Wingspan Investment Services will
accept third party checks only if accompanied by an AMA deposit slip.
6. If you redeem shares purchased by check, One Group will delay forwarding
your redemption proceeds until payment has been collected from your bank.
One Group generally receives payment within seven (7) business days of
purchase.
7. If you have any questions, contact Wingspan Investment Services at
1-800-977-WING.
Can I Purchase Shares Over The Telephone?
Yes. Simply select this option on your Wingspan Investment Account Application
Form and then:
. Contact Wingspan Investment Services, Inc. at 1-800-977-WING to relay your
purchase instructions.
. Authorize a bank transfer or initiate a wire transfer to the following
wire address:
CHASE MANHATTAN BANK
ABA 021 000 021
DLJ PERSHING DIVISION
ACCOUNT 930-1-032992
FOR FURTHER CREDIT TO:
YOUR NAME
YOUR WINGSPAN INVESTMENT ACCOUNT NUMBER (EX: 123456789)
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19
<PAGE>
. You may revoke your right to make purchases over the telephone by sending a
letter to:
WINGSPAN INVESTMENT SERVICES
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
--------------------------------------------------------------------------------
Can I Automatically Invest On A Systematic Basis?
Yes. You may purchase additional Class I shares by making automatic monthly
investments from your bank account. To establish a Systematic Investment Plan:
. Select the "Systematic Investment Plan" option on your Wingspan Investment
Account Form.
. Provide the necessary information about the bank account from which your
investments will be made.
. Shares purchased under a Systematic Investment Plan may not be redeemed for
five (5) business days.
. One Group currently does not charge for this service, but may impose a charge
in the future.
. You may revoke your election to make systematic investments by calling
Wingspan Investment Services, Inc. at 1-800-977-WING or by sending a letter
to:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
--------------------------------------------------------------------------------
Exchanging Fund Shares
What Are My Exchange Privileges?
You may make the following exchanges:
. Class I shares of a Fund may be exchanged for Class I shares of another One
Group Fund in this prospectus.
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in dollar cost averaging. To learn more about
it, please call Wingspan Investment Services at 1-800-977-WING.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days
written notice.
When Are Exchanges Processed?
Exchanges are processed the same business day they are received, provided:
. State Street Bank and Trust Company receives the request by 4:00 p.m., ET;
. One Group has all of the information necessary to process the exchange;
. You have received a current prospectus of the Fund or Funds in which you wish
to invest; and
. You have contacted Wingspan Investment Services, Inc.
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20
<PAGE>
Do I Pay A Sales Charge On An Exchange?
Generally, you will not pay a sales charge on an exchange. However:
. You will pay a sales charge if you own Class I shares of a Fund and you want
to exchange those shares for Class A shares, unless you qualify for a sales
charge waiver.
Are Exchanges Taxable?
Generally:
. An exchange between classes of shares of the same Fund is not taxable for
federal income tax purposes.
. An exchange between Funds is considered a sale and generally results in a
capital gain or loss for federal income tax purposes.
. You should talk to your tax advisor before making an exchange.
Are There Limits On Exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
. To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity. Exchange activity is excessive if it exceeds
two substantive exchange redemptions within 30 days of each other.
. Excessive exchange activity will result in revocation of your exchange
privilege.
. In addition, One Group reserves the right to reject any exchange request
(even those that are not excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or otherwise adversely
affect other shareholders.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to exchanges, your account
value falls below the minimum required balance. For information on minimum
required balances, please read, "How Do I Open An Account?"
--------------------------------------------------------------------------------
Redeeming Fund Shares
When Can I Redeem Shares?
You may redeem all or some of your shares on any day that the Funds are open
for business. Redemption requests received before 4:00 p.m. ET (or when the
NYSE closes) will be effective that day.
. As your Shareholder Servicing Agent, Wingspan Investment Services, Inc. is
responsible for sending your redemption order to the Funds. Wingspan
Investment Services, Inc. may have a different cut-off time than do the
Funds.
. All required documentation in the proper form must accompany a redemption
request. One Group may refuse to honor incomplete redemption requests.
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21
<PAGE>
How Do I Redeem Shares?
Unless you have selected the telephone option on your Wingspan Investment
Account Form, you must send a written redemption request to Wingspan Investment
Services, Inc. at the following address:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
. All requests for redemptions from IRA accounts must be in writing.
. You may request redemption forms by calling Wingspan Investment Services,
Inc. at 1-800-977-WING.
. On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. a designated commercial bank; or
2. Wingspan Investment Services, Inc.
. Your redemption proceeds will be paid within seven days after receipt of the
redemption request.
What Will My Shares Be Worth?
. If the Fund receives your redemption request by 4:00 p.m. ET (or when the
NYSE closes), you will receive that day's NAV.
Can I Redeem By Telephone?
Yes, if you selected this option on your Wingspan Investment Account Form.
. Call Wingspan Investment Services, Inc. at 1-800-977-WING to relay your
redemption request.
. Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Wingspan Investment Account Form.
. Redemptions from your IRA account may not be made by telephone.
Can I Redeem On A Systematic Basis?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each. This $10,000
minimum does not apply to minimum required distributions from your One Group
IRA or other qualifying retirement plan.
. Select the "Systematic Withdrawal Plan" option on your Wingspan Investment
Account Form.
. Specify the amount you wish to receive and the frequency of the payments.
. You may designate a person other than yourself as the payee.
. There is no charge for this service.
. If you select this option, please keep in mind that:
1. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from your One
Group IRA or other One Group qualifying retirement plan. Only One Group
assets are considered when calculating your minimum required distribution.
2. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
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22
<PAGE>
----------------
Additional Information Regarding Redemptions
. Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more of a Fund's assets, the Fund reserves the right to pay
part or all of your redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the Fund will value the
securities selected in the same manner in which it computes its NAV. This
process minimizes the effect of large redemptions on the Fund.
. If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
. Due to the relatively high cost of maintaining small accounts, One Group
reserves the right to either charge a sub-minimum account fee of $10 or
redeem all shares and close the account if, due to redemptions, your account
value falls below the minimum required balance. The above provision does not
apply to accounts participating in the Systematic Withdrawal Plan. For
information on minimum required balances, please read, "How Do I Open An
Account?"
. One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
. You generally will recognize a gain or loss on a redemption for federal
income tax purposes. You should talk to your tax advisor before making a
redemption.
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23
<PAGE>
ONE GROUP(R)
-------------------
Shareholder Information
--------------------------------------------------------------------------------
Voting Rights
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each
Fund, and each class of shares within each Fund, vote separately on matters
relating solely to that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal voting rights on matters
that affect all shareholders equally.
--------------------------------------------------------------------------------
Dividend Policies
DIVIDENDS. Except for the International Equity Index Fund, the Funds generally
declare dividends on the last business day of each quarter. The International
Equity Index Fund generally declares dividends on the last business day of each
year. Dividends for the Funds are distributed on the first business day of the
next month after they are declared. Capital gains, if any, for all Funds are
distributed at least annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payments in cash. The price of the shares
is the NAV determined immediately following the dividend record date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street. You also may call Wingspan Investment
Services, Inc. at 1-800-977-WING to make this change.
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<PAGE>
Tax Treatment of Shareholders
--------------------------------------------------------------------------------
Tax Treatment of Shareholders
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange, or redemption of Fund
shares generally will produce either a taxable gain or a loss. You are
responsible for any tax liabilities generated by your transactions.
Taxation of Distributions
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses) and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) on at least an
annual basis. Dividends you receive from a Fund, whether reinvested or received
in cash, will be taxable to you. Dividends from a Fund's net investment income
will be taxable as ordinary income and distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
The International Equity Index Fund's investments in foreign securities may be
subject to foreign withholding taxes. In that case, the Fund's yield on those
securities would be reduced. Shareholders may be entitled to claim a credit or
deduction with respect to foreign taxes. In addition, the Fund's investments in
foreign securities or foreign currencies may increase or accelerate the Fund's
recognition of ordinary income and may affect the timing or amount of the
Fund's distributions.
Taxation of Retirement Plans
Distributions by the Funds to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for tax-
exempt treatment or by an individual who has received shares as a distribution
from a retirement plan, the distributions will be taxable to the plan or
individual as described in "Taxation of Distributions." If you are considering
purchasing shares with qualified retirement plan assets, you should consult
your tax advisor for a more complete explanation of the federal, state, local
and (if applicable) foreign tax consequences of making such an investment.
Tax Information
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature. No
attempt has been made to present a complete explanation of the federal, state,
local or foreign tax treatment of the Funds or their shareholders.
--------------------------------------------------------------------------------
Shareholder Statements and Reports
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
If you have any questions or need additional information, please write Wingspan
Investment Services, Inc. at 300 S. Riverside Plaza, Suite 0860, Chicago, IL
60670 or call 1-800-977-WING.
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25
<PAGE>
ONE GROUP(R)
------------------
Management of
One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor to
the Trust since its inception. In addition, Banc One Investment Advisors serves
as investment advisor to other mutual funds and individual corporate,
charitable and retirement accounts. As of June 30, 2000, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $131 billion in assets.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND NAME AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Equity Index Fund .15%
---------------------------------------------------------------------
One Group(R) International Equity Index
Fund/1/ .55%
---------------------------------------------------------------------
One Group(R) Market Expansion Index Fund .08%
---------------------------------------------------------------------
</TABLE>
/1/ Includes fees paid by Banc One Investment Advisors to Independence
International, the former sub-advisor to the International Equity Index
Fund.
------
26
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Equity Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
SINGLE Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 31.79 $ 27.16 $ 21.80 $ 16.66 $ 14.03
------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.31 0.31 0.33 0.35 0.33
Net realized and
unrealized gains
(losses) from
investments 1.86 5.54 5.98 5.27 3.16
------------------------------------------------------------------------------
Total from Investment
Activities 2.17 5.85 6.31 5.62 3.49
------------------------------------------------------------------------------
Distributions:
Net investment income (0.30) (0.30) (0.32) (0.33) (0.33)
In excess of net
investment income - - - - (0.01)
Net realized gains (0.45) (0.92) (0.63) (0.15) (0.52)
Total Distributions (0.75) (1.22) (0.95) (0.48) (0.86)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 33.21 $ 31.79 $ 27.16 $ 21.80 $ 16.66
------------------------------------------------------------------------------
TOTAL RETURN 6.86% 22.50% 29.73% 34.30% 25.47%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,987,505 $1,855,947 $671,422 $480,819 $321,058
Ratio of expenses to
average net assets 0.35% 0.35% 0.35% 0.30% 0.30%
Ratio of net investment
income to average net
assets 0.95% 1.14% 1.37% 1.87% 2.18%
Ratio of expenses to
average net assets* 0.57% 0.57% 0.62% 0.61% 0.59%
Portfolio turnover(A) 7.89% 5.37% 4.32% 5.81% 9.08%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
27
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Market Expansion Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR SIX MONTHS JULY 31,
ENDED ENDED 1998 TO
JUNE 30, JUNE 30, DECEMBER 31,
CLASS I 2000 1999 (A) 1998(B)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.63 $ 10.52 $ 10.00
-------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.07 0.03 0.03
Net realized and unrealized gains (losses)
from investments 1.15 0.40 0.93
Capital contributions from Investment
Advisor 0.02 -- --
-------------------------------------------------------------------------------
Total from Investment Activities 1.24 0.43 0.96
-------------------------------------------------------------------------------
Distributions:
Net investment income (0.07) (0.03) (0.03)
Net realized gains (2.73) (0.29) (0.41)
Total Distributions (2.80) (0.32) (0.44)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.07 $ 10.63 $ 10.52
-------------------------------------------------------------------------------
TOTAL RETURN 14.30% 4.54%(C) 9.91%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $28,699 $28,871 $27,483
Ratio of expenses to average net assets 0.57% 0.57%(D) 0.56%(D)
Ratio of net investment income to average
net assets 0.72% 0.68%(D) 0.75%(D)
Ratio of expenses to average net assets* 0.95% 0.97%(D) 1.12%(D)
Portfolio turnover(E) 64.29% 36.50% 20.18%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus
Market Expansion Index Fund became the Market Expansion Index Fund. The
Financial Highlights for the periods prior to March 22, 1999 represent the
Pegasus Market Expansion Index Fund. (B) Period from commencement of
operations. (C) Not annualized. (D) Annualized. (E) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
------
28
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
International Equity Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is incorporated by the in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
CLASS I 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 18.63 $ 17.97 $ 16.89 $ 15.17 $ 13.93
Investment Activities:
Net investment income (loss) 0.14 0.19 0.21 0.15 0.11
Net realized and unrealized
gains (losses) from
investments 3.22 1.71 1.32 2.02 1.43
--------------------------------------------------------------------------------
Total from Investment
Activities 3.36 1.90 1.53 2.17 1.54
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.05) (0.39) (0.02) (0.17) (0.16)
In excess of net investment
income -- -- -- (0.13) (0.02)
Net realized gains (0.29) (0.85) (0.43) (0.15) (0.12)
Total Distributions (0.34) (1.24) (0.45) (0.45) (0.30)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 21.65 $ 18.63 $ 17.97 $ 16.89 $ 15.17
--------------------------------------------------------------------------------
TOTAL RETURN 18.09% 11.27% 9.54% 14.64% 11.22%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $795,657 $657,902 $586,741 $449,949 $347,790
Ratio of expenses to average
net assets 0.86% 0.85% 0.88% 0.86% 0.97%
Ratio of net investment
income to average net
assets 0.66% 1.03% 1.29% 1.00% 1.04%
Ratio of expenses to average
net assets* 0.86% 0.85% 0.88% 0.86% 1.00%
Portfolio turnover(A) 13.85% 33.99% 9.90% 9.61% 6.28%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
29
<PAGE>
ONE GROUP(R)
------------------
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Funds, as well
as the risks inherent in their use. Equity securities are subject mainly to
market risk. Fixed income securities are primarily influenced by market, credit
and prepayment risks, although certain securities may be subject to additional
risks. For a more complete discussion, see the Statement of Additional
Information. Following the table is a more complete discussion of risk.
<TABLE>
-------------------------------------------
<CAPTION>
FUND NAME FUND CODE
-------------------------------------------
<S> <C>
One Group(R) Equity Index
Fund 1
-------------------------------------------
One Group(R) Market
Expansion Index Fund 2
-------------------------------------------
One Group(R) International
Equity Index Fund 3
</TABLE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS and 1-3 Market
CUBES.
-------------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs and CATS. 1-3 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by 1-3 Market
AGENCIES and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae and Freddie Mac.
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a stated 1-3 Market
maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in 1-3 Liquidity
exchange for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
Common Stock: Shares of ownership of a company. 1-3 Market
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security and the 1-3 Credit
simultaneous commitment to return the security to the seller at Market
an agreed upon price on an agreed upon date. This is treated as Liquidity
a loan.
-------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a security and the 1-3 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Fund.
-------------------------------------------------------------------------------
</TABLE>
------
30
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Securities Lending: The lending of up to 33 1/3% of the Fund's 1-3 Credit
total assets. In return, the Fund will receive cash, other Market
securities and/or letters of credit. Leverage
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase or 1-3 Market
contract to purchase securities at a fixed price for delivery Leverage
at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other mutual funds, 1-3 Market
including One Group money market funds and shares of other
money market funds for which Banc One Investment Advisors or
its affiliates serve as investment advisor or administrator.
Banc One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment advisor.
-------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock that can 1-3 Market
convert to common stock. Credit
-------------------------------------------------------------------------------
Call and Put Options: A call option gives the buyer the right 1-3 Management
to buy, and obligates the seller of the option to sell, a Liquidity
security at a specified price at a future date. A put option Credit
gives the buyer the right to sell, and obligates the seller of Market
the option to buy, a security at a specified price at a future Leverage
date. The Funds will sell only covered call and secured put
options.
-------------------------------------------------------------------------------
Futures and Related Options: A contract providing for the 1-3 Management
future sale and purchase of a specified amount of a specified Market
security, class of securities or an index at a specified time Credit
in the future and at a specified price. Liquidity
Leverage
-------------------------------------------------------------------------------
Real Estate Investment Trusts ("REITS"): Pooled investment 1-3 Liquidity
vehicles which invest primarily in income producing real Management
estate or real estate related loans or interest. Market
Regulatory
Tax
Prepayment
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time drafts drawn 1-3 Credit
on and accepted by a commercial bank. Maturities are generally Liquidity
six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term promissory 1-3 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
-------------------------------------------------------------------------------
</TABLE>
------
31
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Foreign Securities: Stocks issued by foreign companies, as 1-3 Market
well as commercial paper of foreign issuers and obligations of Political
foreign banks, overseas branches of U.S. banks and Liquidity
supranational entities. Includes American Depositary Receipts Foreign
and Global Depositary Receipts, and American Depositary Investment
Securities and European Depositary Receipts.
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered under the 1-3 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations with 1-3 Credit
interest rates which are reset daily, weekly, quarterly or Liquidity
some other period and which may be payable to the Fund on Market
demand.
-------------------------------------------------------------------------------
Rights and Warrants: Securities, typically issued with 1-3 Market
preferred stock or bonds, that give the holder the right to Credit
buy a proportionate amount of common stock at a specified
price.
-------------------------------------------------------------------------------
Preferred Stock: A class of stock that generally pays a 1-3 Market
dividend at a specified rate and has preference over common
stock in the payment of dividends and in liquidation.
-------------------------------------------------------------------------------
Swaps, Caps and Floors: A Fund may enter into these 1-3 Management
transactions to manage its exposure to changing interest rates Credit
and other factors. Swaps involve an exchange of obligations by Liquidity
two parties. Caps and floors entitle a purchaser to a Market
principal amount from the seller of the cap or floor to the
extent that a specified index exceeds or falls below a
predetermined interest rate or amount.
-------------------------------------------------------------------------------
New Financial Products: New options and futures contracts and 1-3 Management
other financial products continue to be developed and the Credit
Funds may invest in such options, contracts and products. Market
Liquidity
-------------------------------------------------------------------------------
Structured Instruments: Debt securities issued by agencies and 2, 3 Market
instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
currency exchange rates, interest rates or one or more other Foreign
referenced indices. Investment
-------------------------------------------------------------------------------
Obligations of Supranational Agencies: Obligations of 3 Credit
supranational agencies which are chartered to promote economic Foreign
development and are supported by various governments and Investment
governmental agencies.
-------------------------------------------------------------------------------
</TABLE>
------
32
<PAGE>
Investment Risks
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Currency Futures and Related Options: The Funds may engage in 3 Management
transactions in financial futures and related options, which Liquidity
are generally described above. The Funds will enter into these Credit
transactions in foreign currencies for hedging purposes only. Market
Political
Leverage
Foreign
Investment
-------------------------------------------------------------------------------
Forward Foreign Exchange Transactions: Contractual agreement 3 Management
to purchase or sell one specified currency for another Liquidity
currency at a specified future date and price. The Funds will Credit
enter into forward foreign exchange transactions for hedging Market
purposes only. Political
Leverage
Foreign
Investment
-------------------------------------------------------------------------------
Index Shares: Ownership interests in unit investment trusts 1-3 Market
and other pooled investment vehicles that hold a portfolio of
securities or stocks designed to track the price performance
and dividend yield of a particular index such as Standard &
Poor's Depositary Receipts ("SPDRs") and Nasdaq 100's. The
Equity Index Fund invests only in SPDRs.
-------------------------------------------------------------------------------
</TABLE>
Investment Risks
--------------------------------------------------------------------------------
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to
actual default as its credit status deteriorates and the probability of
default rises.
. Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also may
be embedded directly in the characteristics of other securities.
Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
Fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching between
the derivative and underlying security, and there can be no assurance that
a Fund's hedging transactions will be effective.
------
33
<PAGE>
Speculative. To the extent that a derivative is not used as a hedge, the
Fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to
take advantage of it are tied up in less advantageous investments.
. Management Risk. The risk that a strategy used by a Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. There is
also the risk that the current interest rate may not accurately reflect
existing market rates. For fixed income securities, market risk is largely,
but not exclusively, influenced by changes in interest rates. A rise in
interest rates typically causes a fall in values, while a fall in rates
typically causes a rise in values. Finally, key information about a security
or market may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
. Foreign Investment Risk. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S.
dollar denominated debt, thereby increasing credit risk.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other obligations are prepaid, a Fund may have to reinvest
in securities with a lower yield. Further, with early prepayment, a Fund may
fail to recover any premium paid, resulting in an unexpected capital loss.
. Tax Risk. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which could cause
adverse tax consequences. Also, the risk that the tax treatment of municipal
or other securities could be changed by Congress thereby affecting the value
of outstanding securities.
------
34
<PAGE>
. Regulatory Risk. The risk associated with federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
. Zero Coupon Risk. The market prices of securities structured as zero coupon
or pay-in-kind securities are generally affected to a greater extent by
interest rate changes. These securities tend to be more volatile than
securities which pay interest periodically.
------
35
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Funds, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
How can I get more information? You can get a free copy of the semi-
annual/annual reports or the SAI, request other information or discuss your
questions about the Funds by calling 1 800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
OR VISITING
WWW.ONEGROUP.COM
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information also
may be obtained, after paying a copying charge, by electronic request at the
following e-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
(Investment Company Act File No. 811-4236)
TOG-F-230
[LOGO OF ONE GROUP MUTUAL FUNDS]
<PAGE>
One Group(R) Bond Fund
Class I Shares
PROSPECTUS
November 1, 2000
[LOGO OF ONE GROUP]
------
The Securities and Ex-
change Commission has not
approved or disapproved
the shares of any of the
Funds as an investment or
determined whether this
prospectus is accurate or
complete. Anyone who
tells you otherwise is
committing a crime.
<PAGE>
Table of
CONTENTS
<TABLE>
<CAPTION>
Fund Summary: Investments, Risks and Performance
<S> <C>
One Group Bond Fund 2
-------
</TABLE>
<TABLE>
<CAPTION>
More About The Fund
<S> <C>
Principal Investment Strategies 6
-------
Investment Risks 7
-------
Investment Policies 7
-------
Portfolio Quality 8
-------
Temporary Defensive Positions 8
-------
Portfolio Turnover 9
-------
</TABLE>
<TABLE>
<S> <C>
Purchasing Fund Shares 9
-------
</TABLE>
<TABLE>
<CAPTION>
Shareholder Information
<S> <C>
Voting Rights 10
-------
Dividend Policies 10
-------
Tax Treatment of Shareholders 10
-------
Shareholder Inquiries 11
-------
</TABLE>
<TABLE>
<CAPTION>
Management of One Group Mutual Funds
<S> <C>
The Advisor 12
-------
The Fund Managers 12
-------
</TABLE>
<TABLE>
<S> <C>
Financial Highlights 13
-------
Appendix A: Investment Practices 14
-------
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Bond Fund
What is the goal of the Bond Fund?
The Fund seeks to maximize total return by investing primarily in a diversified
portfolio of intermediate- and long-term debt securities.
What are the Bond Fund's Main Investment Strategies?
The Fund invests mainly in investment grade bonds and debt securities. These
include mortgage-backed and asset-backed securities. Banc One Investment
Advisors analyzes four major factors in managing and constructing the Fund:
duration, market sector, maturity concentrations and individual securities.
Banc One Investment Advisors looks for market sectors and individual securities
that it believes will perform well over time. Banc One Investment Advisors
selects individual securities after performing a risk/reward analysis that
includes an evaluation of interest rate risk, credit risk, and the complex
legal and technical structure of the transaction. For more information about
the Bond Fund's investment strategies, please read "More About the Funds" and
"Principal Investment Strategies."
What is a Bond?
A "bond" is a debt security with a remaining maturity of 90 days or more issued
by the U.S. government or its agencies and instrumentalities, a corporation, or
a municipality, securities issued or guaranteed by a foreign government or its
agencies and instrumentalities, securities issued or guaranteed by domestic and
supranational banks, mortgage-related and mortgage-backed securities, asset-
backed securities, stripped government securities and zero coupon obligations.
What are the main risks of investing in the Bond Fund?
The main risks of investing in the Bond Fund and the circumstances likely to
adversely affect your investment are described below. The share price of the
Bond Fund and its yield will change every day in response to interest rates and
other market conditions. You may lose money if you invest in the Bond Fund. For
additional information on risk, please read "Investment Risks."
------
2
<PAGE>
------------------
Bond Fund
MAIN RISKS
----------------
Interest Rate Risk. The Fund mainly invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of the Fund's investments decreases. Securities with greater interest
rate sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of a Fund. Lower credit quality also may affect a
security's liquidity and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment strategy, the Fund
invests in mortgage-backed and asset-backed securities. The issuers of these
securities and other callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in prepayment rates can
affect the return on investment and yield of mortgage- and asset-backed
securities. When mortgages and other obligations are prepaid and when
securities are called, the Fund may have to reinvest in securities with a lower
yield. The Fund also may fail to recover additional amounts (i.e., premiums)
paid for securities with higher interest rates, resulting in an unexpected
capital loss.
Derivative Risk. The Fund invests in securities that may be considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
3
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Bond Fund
How has the Bond Fund Performed?
By showing the variability of the Bond Fund's performance from year to year,
the chart and table below help show the risk of investing in the Fund. Please
remember that the past performance of the Bond Fund is not necessarily an
indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 9.25%
1991 15.67%
1992 6.57%
1993 11.33%
1994 -6.91%
1995 23.68%
1996 5.08%
1997 9.92%
1998 8.19%
1999 -0.87%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 6.95%. The above quoted performance data includes the
performance of a common trust fund, the predecessor to the Pegasus Bond Fund
and the Pegasus Bond Fund for the period prior to the consolidation with One
Group Bond Fund on March 22, 1999. The predecessor to the Pegasus Bond Fund
commenced operations on June 1, 1991, subsequent to the transfer of assets
from a common trust fund with materially equivalent investment objectives,
policies, guidelines and restrictions as the Fund. The quoted performance of
the Fund includes the performance of the common trust fund for periods prior
to the commencement of operations of the predecessor to the Pegasus Bond Fund
as adjusted to reflect the expenses associated with the Fund. The common
trust fund was not registered with the SEC and was not subject to the
investment restrictions, limitation and diversification requirements imposed
by law on registered mutual funds. If the common trust fund had been
registered, its return may have been lower.
--------------------------------------------------------------------------------
Best Quarter: 7.61% 2Q1995 Worst Quarter: -2.66% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 12/31/83
<S> <C> <C> <C> <C> <C>
Class I 6/1/91 -0.87% 8.91% 7.90% 9.28%
Lehman Brothers -0.82% 7.73% 7.70% 9.58%
Aggregate
Bond Index/2/
Lipper -1.39% 6.63% 6.59% *
Intermediate
U.S. Government
Index/3/
</TABLE>
/1/The above quoted performance data includes the performance of a common trust
fund, the predecessor to the Pegasus Bond Fund and the Pegasus Bond Fund for
the period prior to the consolidation with the One Group Bond Fund on March
22, 1999. The predecessor to the Pegasus Bond Fund commenced operations on
June 1, 1991, subsequent to the transfer of assets from a common trust fund
with materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for periods prior to the commencement of
operations of the predecessor to the Pegasus Bond Fund as adjusted to reflect
the expenses associated with the Fund. The common trust fund was not
registered with the SEC and was not subject to the investment restrictions,
limitation and diversification requirements imposed by law on registered
mutual funds. If the common trust fund had been registered, its returns would
have been lower.
/2/The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole. The performance of the index
does not reflect the deduction of expenses associated with a mutual fund,
such as investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses.
/3/The Lipper Intermediate U.S. Government Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
* Index did not exist.
------
4
<PAGE>
------------------
One Group Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------
(as a percentage of offering price)
------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
------------------------------------------------------------------
Redemption Fee NONE
------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from Fund assets)/1/ CLASS I
------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .60%
------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
------------------------------------------------------------------
Other Expenses .23%
------------------------------------------------------------------
Total Annual Fund Operating Expenses .83%
------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/2/ (.23%)
------------------------------------------------------------------
Net Expenses .60%
------------------------------------------------------------------
</TABLE>
/1/Expense information has been restated to reflect current fees.
/2/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .60% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assumes that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if either you redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below.
<TABLE>
<CAPTION>
class i
------------------------------------------------------------------
<S> <C>
1 Year/1/ $ 61
------------------------------------------------------------------
3 Years 242
------------------------------------------------------------------
5 Years 438
------------------------------------------------------------------
10 Years 1,004
------------------------------------------------------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be $85.
------
5
<PAGE>
ONE GROUP(R)
------------------
More About The Fund
The Fund described in this prospectus is a series of One Group Mutual Funds and
is managed by Banc One Investment Advisors Corporation. For more information
about One Group and Banc One Investment Advisors, please read "Management of
One Group Mutual Funds" and the Statement of Additional Information.
--------------------------------------------------------------------------------
Principal
Investment
Strategies
The One Group Bond Fund is designed to maximize total return. Banc One
Investment Advisors analyzes four major factors in managing and constructing
the Fund: duration, market sector, maturity concentrations and individual
securities. The portfolio attempts to enhance total return by selecting market
sectors that offer risk/reward advantages based on structural risks and credit
trends.
The principal investment strategy that is used to meet the Fund's investment
objective is described in "Fund Summary: Investments, Risk & Performance" in
the front of this prospectus. It is also described below. There can be no
assurance that the Fund will achieve its investment objective. Please note that
the Fund may also use strategies that are not described below, but which are
described in the Statement of Additional Information.
FUNDAMENTAL POLICIES
A Fund's investment strategy may
involve "fundamental policies". A
policy is fundamental if it cannot
be changed without the consent of
a majority of the outstanding
shares of the Fund.
The Fund invests in all types of debt securities rated as investment grade, as
well as convertible securities, preferred stock, and loan participations.
. The Fund invests at least 65% of its total assets in debt securities of all
types with intermediate to long maturities.
. As a matter of fundamental policy, at least 65% of the Fund's total assets
will consist of bonds.
. The Fund may purchase taxable or tax-exempt municipal securities.
. The Fund may invest in debt securities that are rated in the lowest
investment grade category.
. The Fund's average weighted maturity will normally range between four and
twelve years, although the Fund may shorten its weighted average if deemed
appropriate for temporary defensive purposes.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the
average of all the current
maturities (that is, the term of
the securities) of the individual
securities in a Fund calculated so
as to count most heavily those
securities with the highest dollar
value. Average weighted maturity is
important to investors as an
indication of a Fund's sensitivity
to changes in interest rates. The
longer the average weighted
maturity, the more fluctuation in
share price you can expect.
------
6
<PAGE>
--------------------------------------------------------------------------------
Investment Risks
The risks associated with investing in the Fund are described below and in
"Fund Summary: Investments, Risk & Performance" at the front of this
prospectus.
--
FIXED INCOME SECURITIES. Investments by the Fund in fixed income securities
(for example, bonds) will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally decreases. On the other hand, if rates fall, the value of the
investments generally increases. The value of the securities in the Fund, and
the value of your investment in the Fund, will increase and decrease as the
value of the Fund's investments increase and decrease.
--
DERIVATIVES. The Fund invests in securities that may be considered to be
derivatives. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity
and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or
contracts (like futures and
options) that derive their value
from the performance of underlying
assets or securities.
LOWER-RATED SECURITIES. The Fund may purchase debt securities rated in the
lowest investment grade category. Securities in this rating category are
considered to have speculative characteristics. Changes in economic conditions
or other circumstances may have a greater effect on the ability of issuers of
these securities to make principal and interest payments than they do on
issuers of higher-grade securities.
For more information about risks associated with the types of investments that
the Fund purchases, please read "Fund Summary: Investments, Risk &
Performance," Appendix A and the Statement of Additional Information.
--------------------------------------------------------------------------------
Investment Policies
The Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Fund. The full text of the
fundamental policies can be found in the Statement of Additional Information.
The Fund will not:
1. Purchase an issuer's securities if as a result more than 5% of its total
assets would be invested in the securities of that issuer or the Fund would
own more than 10% of the outstanding voting securities of that issuer. This
does not include securities issued or guaranteed by the United States, its
agencies or instrumentalities, securities of other registered investment
companies and repurchase agreements involving these securities. This
restriction applies with respect to 75% of a Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities, and repurchase
agreements involving such securities.
------
7
<PAGE>
3. Make loans, except that a Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending.
--------------------------------------------------------------------------------
Portfolio Quality And Maturity
Various rating organizations (like Standard & Poor's Corporation and Moody's
Investors Service) assign ratings to securities (other than equity securities).
Generally, ratings are divided into two main categories: "Investment Grade
Securities" and "Non-Investment Grade Securities." Although there is always a
risk of default, rating agencies believe that issuers of Investment Grade
Securities have a high probability of making payments on such securities. Non-
Investment Grade Securities include securities that, in the opinion of the
rating agencies, are more likely to default than Investment Grade Securities.
Banc One Investment Advisors will look at a security's rating at the time of
investment. If the securities are unrated, Banc One Investment Advisors must
determine that they are of comparable quality to rated securities.
The Bond Fund only purchases securities that meet the following criteria:
--
DEBT SECURITIES
. The Fund may invest in debt securities rated in any of the four investment
grade rating categories.
--
PREFERRED STOCK
. The Fund may only invest in preferred stock rated in any of the four highest
rating categories.
--
MUNICIPAL SECURITIES
. The Fund may only invest in municipal bonds rated in any of the four
investment grade rating categories.
. The Fund may only invest in other municipal securities, such as tax-exempt
commercial paper, notes and variable rate demand obligations that are rated
in the highest or second highest investment grade rating categories.
--
COMMERCIAL PAPER
. The Fund may invest in commercial paper rated in the highest or second
highest rating category.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
--------------------------------------------------------------------------------
Temporary Defensive Posiitons
To respond to unusual market conditions, the Fund may invest all or a portion
of its assets in cash and cash equivalents for temporary defensive purposes.
Investments in cash and cash equivalents may result in a lower yield than
lower-quality or longer-term investments and may prevent the Fund from meeting
its investment objective.
------
8
<PAGE>
While the Fund is engaged in a temporary defensive position, it will not be
pursuing its investment objective. Therefore, the Fund will pursue a temporary
defensive position only when market conditions warrant.
WHAT IS A CASH EQUIVALENT?
Cash equivalents are highly liquid,
high-quality instruments with
maturities of three months or less
on the date they are purchased.
They include securities issued by
the U.S. government, its agencies
and instrumentalities, repurchase
agreements (other than equity
repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper
(rated in one of the two highest
rating categories), variable rate
master demand notes, money market
mutual funds and bank money market
deposit accounts.
--------------------------------------------------------------------------------
Portfolio Turnover
The Fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Fund. The portfolio turnover rate for the Fund for the fiscal year ended
June 30, 2000, is shown on the Financial Highlights.
--------------------------------------------------------------------------------
Purchasing Fund Shares
How Much Do Shares Cost?
. Shares are sold at net asset value ("NAV").
. NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
. A Fund's NAV changes every business day.
. NAV is calculated each business day following the close of the NYSE at 4:00
p.m. ET. On occasion, the NYSE will close before 4 p.m. ET. When that
happens, NAV will be calculated as of the time the NYSE closes.
. It is the responsibility of your Plan Administrator to send your purchase or
redemption order to the Fund. Please contact your Plan Administrator for
information regarding cut-off times for purchase and redemption requests.
. The Fund is open for business every day, other than weekends and days on
which the New York Stock Exchange ("NYSE") is closed, including the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas Day.
How Do I Buy Fund Shares?
. Please contact your Plan Administrator for information on participating in
your company's plan.
------
9
<PAGE>
ONE GROUP(R)
------------------
Shareholder Information
--------------------------------------------------------------------------------
VOTING RIGHTS
The Fund does not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
The Fund, and each class of shares within each Fund, votes separately on
matters relating solely to that Fund or class, or which affect that Fund or
class differently. However, all shareholders will have equal voting rights on
matters that affect all shareholders equally.
--------------------------------------------------------------------------------
DIVIDEND POLICIES
DIVIDENDS. The Fund generally declares dividends on the last business day of
each month. Dividends are distributed on the first business day of the next
month after they are declared.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gains distributions in additional shares of the same Fund and class.
The value of the shares distributed is the NAV determined immediately following
the dividend record date.
--------------------------------------------------------------------------------
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF DISTRIBUTIONS. The Fund will distribute substantially all of its
net investment income (including, for this purpose, the excess of net short-
term capital gains over net long-term capital losses) and net capital gains
(i.e., the excess of net long-term capital gains over net short-term capital
losses) on at least an annual basis.
TAXATION OF RETIREMENT PLANS
Distributions by the Fund to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for tax-
exempt treatment or by an individual who has received shares as a distribution
from a retirement plan, the distributions will be taxable to the plan or
individual. If you are considering purchasing shares with qualified retirement
plan assets, you should consult your tax advisor for a more complete
explanation of the federal, state, local and (if applicable) foreign tax
consequences of making such an investment.
TAXATION OF ZERO COUPON SECURITIES
The Fund may acquire certain securities issued with original issue discount
(including zero coupon securities). Current federal tax requires that a holder
(such as a Fund) of such a security must include in taxable income a portion of
the original issue discount which accrues during the tax year on such security
even if a Fund receives no payment in cash on the security during the year. As
an investment company, a Fund must pay out substantially all of its net
investment income each
------
10
<PAGE>
year, including any original issue discount. Accordingly, a Fund may be
required to pay out in income distribution each year an amount that is greater
than the total amount of cash interest a Fund actually received. Such
distributions will be made from the cash assets of a Fund or by liquidation of
investments if necessary. If a distribution of cash necessitates the
liquidation of investments, Banc One Investment Advisors will select which
securities to sell.
--------------------------------------------------------------------------------
Shareholder Inquiries
If you have any questions or need additional information, please contact your
Plan Administrator.
------
11
<PAGE>
ONE GROUP(R)
------------------
Management of One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Fund and
continuously reviews, supervises and administers the Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group Mutual
Funds. Banc One Investment Advisors has served as investment advisor to the
Trust since its inception. In addition, Banc One Investment Advisors serves as
investment advisor to other mutual funds and individual corporate, charitable
and retirement accounts. As of June 30, 2000, Banc One Investment Advisors, an
indirect wholly-owned subsidiary of Bank One Corporation, managed over $131
billion in assets.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Fund paid advisory fees at the following rate:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Bond Fund .39%
------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
The Fund Managers
The Fund is managed by a team, which includes a Fund manager, research analysts
and fixed income traders. The team works together to establish general duration
and sector strategies for the Fund. Each team member makes recommendations
about the securities in the Fund. The research analysts and trading personnel
provide individual security and sector recommendations, while the portfolio
managers select and allocate individual securities in a manner designed to meet
the investment objectives of the Fund.
------
12
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). The information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED ------------------------------------------
CLASS I JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01
----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.65 0.35 0.65 0.66 0.68 0.63
Net realized and
unrealized gains
(losses) from
investments (0.26) (0.44) 0.19 0.32 (0.18) 1.45
----------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.39 (0.09) 0.84 0.98 0.50 2.08
----------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.65) (0.35) (0.65) (0.66) (0.68) (0.64)
Total Distributions (0.65) (0.35) (0.65) (0.66) (0.68) (0.64)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.08 $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45
----------------------------------------------------------------------------------------------------
Total Return 3.94% (0.87%)(B) 8.17% 9.97% 5.08% 23.75%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,687,041 $1,330,527 $1,277,246 $1,101,894 $757,627 $485,851
Ratio of expenses to
average net assets 0.60% 0.64%(C) 0.64% 0.61% 0.66% 0.74%
Ratio of net investment
income to average net
assets 6.44% 6.65%(C) 6.10% 6.41% 6.71% 6.39%
Ratio of expenses to
average net assets* 0.83% 0.75%(C) 0.64% 0.61% 0.66% 0.74%
Portfolio turnover(D) 16.19% 10.89% 34.69% 17.60% 24.92% 41.91%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Bond Fund
became the One Group Bond Fund. The Financial Highlights for the periods prior
to March 22, 1999 represent the Pegasus Bond Fund. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
------
13
<PAGE>
ONE GROUP(R)
------------------
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Fund invests in a variety of securities and employs a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Fund, as well
as the risks inherent in their use. Fixed income securities are primarily
influenced by market, credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
<TABLE>
<CAPTION>
Instrument Risk Type
---------------------------------------------------------------------
<S> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS and Market
CUBES.
---------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs and CATS. Market
---------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by Market
agencies and instrumentalities of the U.S. government. Credit
These include Ginnie Mae, Fannie Mae and Freddie Mac.
---------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a Market
stated maturity. Credit
Liquidity
---------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in Liquidity
exchange for the deposit of funds. Credit
Market
---------------------------------------------------------------------
Repurchase Agreements: The purchase of a security and the Credit
simultaneous commitment to return the security to the Market
seller at an agreed upon price on an agreed upon date. Liquidity
This is treated as a loan.
---------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a security and Market
the simultaneous commitment to buy the security back at an Leverage
agreed upon price on an agreed upon date. This is treated
as a borrowing by a Fund.
---------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% of the Credit
Fund's total assets. In return, the Fund will receive Market
cash, other securities and/or letters of credit as Leverage
collateral.
---------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase Market
or contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
---------------------------------------------------------------------
</TABLE>
------
14
<PAGE>
<TABLE>
<CAPTION>
Instrument Risk Type
----------------------------------------------------------------------
<S> <C>
Investment Company Securities: Shares of other mutual Market
funds, including One Group money market funds and shares
of other money market funds for which Banc One Investment
Advisors or its affiliates serve as investment advisor or
administrator. Banc One Investment Advisors will waive
certain fees when investing in funds for which it serves
as investment advisor.
----------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock that can Market
convert to common stock. Credit
----------------------------------------------------------------------
Call and Put Options: A call option gives the buyer the Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price at a future date. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security at a Leverage
specified price at a future date. The Fund will sell
covered call and secured put options.
----------------------------------------------------------------------
Futures and Related Options: A contract providing for the Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
----------------------------------------------------------------------
Real Estate Investment Trusts ("REITs"): Pooled investment Liquidity
vehicles which invest primarily in income-producing real Management
estate or real estate related loans or interest. Market
Regulatory
Tax
Prepayment
----------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time drafts Credit
drawn on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
----------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few days to Market
nine months.
----------------------------------------------------------------------
Foreign Securities: Stocks issued by foreign companies, as Market
well as commercial paper of foreign issuers and Political
obligations of foreign banks, overseas branches of U.S. Liquidity
banks and supranational entities. Includes American Foreign
Depositary Receipts and Global Depositary Receipts, Investment
American Depositary Securities and European Depositary
Receipts.
----------------------------------------------------------------------
Restricted Securities: Securities not registered under the Liquidity
Securities Act of 1933, such as privately placed Market
commercial paper and Rule 144A securities. Credit
----------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations with Credit
interest rates which are reset daily, weekly, quarterly or Liquidity
some other period and which may be payable to the Fund on Market
demand.
----------------------------------------------------------------------
</TABLE>
------
15
<PAGE>
<TABLE>
<CAPTION>
Instrument Risk Type
----------------------------------------------------------------------
<S> <C>
Preferred Stock: A class of stock that generally pays a Market
dividend at a specified rate and has preference over
common stock in the payment of dividends and in
liquidation.
----------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations secured by Prepayment
real estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs"), and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
----------------------------------------------------------------------
Corporate Debt Securities: Corporate bonds and non- Market
convertible debt securities. Credit
----------------------------------------------------------------------
Demand Features: Securities that are subject to puts and Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed Management
period of time following demand by a Fund.
----------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company Prepayment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities Credit
backed by other types of receivables or other assets. Regulatory
----------------------------------------------------------------------
Mortgage Dollar Rolls: A transaction in which a Fund sells Prepayment
securities for delivery in a current month and Market
simultaneously contracts with the same party to repurchase Regulatory
similar but not identical securities on a specified future
date.
----------------------------------------------------------------------
Adjustable Rate Mortgage Loans ("ARMS"): Loans in a Prepayment
mortgage pool which provide for a fixed initial mortgage Market
interest rate for a specified period of time, after which Credit
the rate may be subject to periodic adjustments. Regulatory
----------------------------------------------------------------------
Swaps, Caps and Floors: A Fund may enter into these Management
transactions to manage its exposure to changing interest Credit
rates and other factors. Swaps involve an exchange of Liquidity
obligations by two parties. Caps and floors entitle a Market
purchaser to a principal amount from the seller of the cap
or floor to the extent that a specified index exceeds or
falls below a predetermined interest rate or amount.
----------------------------------------------------------------------
New Financial Products: New options and futures contracts Management
and other financial products continue to be developed and Credit
the Fund may invest in such options, contracts and Market
products. Liquidity
----------------------------------------------------------------------
Structured Instruments: Debt securities issued by agencies Market
and instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
currency exchange rates, interest rates or one or more Foreign
other referenced indices. Investment
----------------------------------------------------------------------
</TABLE>
------
16
<PAGE>
<TABLE>
<CAPTION>
Instrument Risk Type
----------------------------------------------------------------------
<S> <C>
Municipal Securities: Securities issued by a state or Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as Tax
General Obligation Notes, Tax Anticipation Notes, Bond Regulatory
Anticipation Notes, Revenue Anticipation Notes, Project
Notes, other short-term tax-exempt obligations, municipal
leases, obligations of municipal housing authorities and
single family revenue bonds.
----------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other debt that Credit
pay no interest, but are issued at a discount from their Market
value at maturity. When held to maturity, their entire Zero Coupon
return equals the difference between their issue price
and their maturity value.
----------------------------------------------------------------------
Zero-Fixed-Coupon Debt Securities: Zero coupon debt Credit
securities which convert on a specified date to interest Market
bearing debt securities. Zero Coupon
----------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative multi- Prepayment
class mortgage securities usually structured with two Market
classes of shares that receive different proportions of Credit
the interest and principal from a pool of mortgage-backed Regulatory
obligations. These include IOs and POs.
----------------------------------------------------------------------
Inverse Floating Rate Instruments: Floating rate debt Market
instruments with interest rates that reset in the Leverage
opposite direction from the market rate of interest to Credit
which the inverse floater is indexed.
----------------------------------------------------------------------
Loan Participations and Assignments: Participations in, Credit
or assignments of all or a portion of loans to Political
corporations or to governments, including governments of Liquidity
the less developed countries ("LDCs"). Foreign
Investment
Market
----------------------------------------------------------------------
Fixed Rate Mortgage Loans: Investments in fixed rate Credit
mortgage loans or mortgage pools which bear simple Prepayment
interest at fixed annual rates and have short- to long- Regulatory
term final maturities. Market
----------------------------------------------------------------------
Short-Term Funding Agreements: Agreements issued by banks Credit
and highly rated U.S. insurance companies such as Liquidity
Guaranteed Investment Contracts ("GICs") and Bank Market
Investment Contracts ("BICs").
</TABLE>
------
17
<PAGE>
--------------------------------------------------------------------------------
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Fund may fluctuate, as will the value of
your investment in the Fund. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to actual
default as its credit status deteriorates and the probability of default
rises.
. Leverage Risk. The risk associated with securities or practices that multiply
small index or market movements into large changes in value. Leverage is
often associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
Fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching between
the derivative and underlying security, and there can be no assurance that a
Fund's hedging transactions will be effective.
Speculative. To the extent that a derivative is not used as a hedge, the
Fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater than
the derivative's original cost.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
. Management Risk. The risk that a strategy used by a Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. Finally, key information about a security or market
may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
------
18
<PAGE>
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes and governmental collapse and war.
. Foreign Investment Risk. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other obligations are prepaid, a Fund may have to reinvest
in securities with a lower yield. Further, with early prepayment, a Fund may
fail to recover any premium paid, resulting in an unexpected capital loss.
. Tax Risk. The risk that the issuer of the securities will fail to comply with
certain requirements of the Internal Revenue Code, which could cause adverse
tax consequences. Also, the risk that the tax treatment of municipal or other
securities could be changed by Congress thereby affecting the value of
outstanding securities.
. Regulatory Risk. The risk associated with federal and state laws that may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
. Zero Coupon Risk. The market prices of securities structured as zero coupon
or pay-in-kind securities are generally affected to a greater extent by
interest rate changes. These securities tend to be more volatile than
securities that pay interest periodically.
------
19
<PAGE>
--------------------------------------------------------------------------------
If you want more information about the Funds, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus by
reference.
How can I get more information? You can get a free copy of the semi-
annual/annual reports or the SAI, request other information or discuss your
questions about the Fund by contacting your Plan Administrator.
You can also review and copy the Fund's reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information also
may be obtained, after paying a copying charge, at the following e-mail
address: [email protected] or by writing the Public Reference Section of the
SEC, Washington, D.C. 20549-6009.
(Investment Company Act File No. 811-4236)
TOG-F-228
<PAGE>
[LOGO OF ONE GROUP MUTUAL FUNDS]
PROSPECTUS
November 1, 2000
One Group(R) Prime Money Market Fund
One Group(R) Bond Fund
One Group(R) Mid Cap Growth Fund
One Group(R) Large Cap Growth Fund
One Group(R) Diversified Equity Fund
One Group(R) Equity Index Fund
One Group(R) Investor Growth & Income Fund
One Group(R) Investor Conservative Growth Fund
------
The Securities and Ex-
change Commission has not
approved or disapproved
the shares of any of the
Funds as an investment or
determined whether this
prospectus is accurate or
complete. Anyone who
tells you otherwise is
committing a crime.
For use by Bank One Cor-
poration Savings and In-
vestment Plan
<PAGE>
Table of
CONTENTS
<TABLE>
<CAPTION>
Fund Summaries: Investments, Risk &
Performance
<S> <C>
One Group Prime Money Market Fund 2
---
One Group Bond Fund 6
---
One Group Mid Cap Growth Fund 10
---
One Group Large Cap Growth Fund 13
---
One Group Diversified Equity Fund 16
---
One Group Equity Index Fund 19
---
One Group Investor Growth & Income Fund 22
---
One Group Investor Conservative Growth
Fund 26
---
</TABLE>
<TABLE>
<CAPTION>
More About the Funds
<S> <C>
Principal Investment
Strategies 29
---
Investment Risks 33
---
Investment Policies 35
---
Portfolio Quality 36
---
Temporary Defensive
Positions 38
---
Portfolio Turnover 38
---
</TABLE>
<TABLE>
<CAPTION>
How to Do Business
with One Group Mutual
Funds
<S> <C>
Purchasing Fund Shares 39
---
</TABLE>
<TABLE>
<CAPTION>
Shareholder
Information
<S> <C>
Voting Rights 40
---
Dividend Policies 40
---
Tax Treatment of
Shareholders 40
---
Shareholder Inquiries 41
---
</TABLE>
<TABLE>
<CAPTION>
Management of One
Group Mutual
Funds
<S> <C>
The Advisor 42
---
Advisory Fees 42
---
The Fund Managers 42
---
</TABLE>
<TABLE>
<CAPTION>
Financial
Highlights 43
<S> <C>
---
<CAPTION>
Appendix
A:
Investment
Practices 47
<S> <C>
---
</TABLE>
<PAGE>
ONE GROUP(R)
------------------
MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer -- an individual who applies for or obtains a financial product
or service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don"t have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer -- a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information -- any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you
a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or
former customers with anyone, except as required or permitted by law. This
means we may disclose all of the information we collect, as described above, to
companies who help us maintain and service your account. For instance, we will
share information with the transfer agent for One Group Mutual Funds. The
transfer agent needs this information to process your purchase, redemption and
exchange transactions and to update your account. In addition, we may share
nonpublic personal information to protect against fraud, to respond to
subpoenas or as described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries
that perform marketing services on our behalf and with which we have joint
marketing agreements. However, we only provide information about you to that
broker-dealer or financial intermediary from whom you purchased your One Group
shares. In addition, our joint marketing agreements prohibit recipients of this
information from disclosing or using the information for any purpose other than
the purposes for which it is provided to them.
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to
respond directly to that child, seek parental consent or provide parental
notice. We are not responsible for the data collection and use practices of
nonaffiliated third parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers,
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
------
1
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Prime Money Market Fund
What is the goal of the Prime Money Market Fund?
The Fund seeks current income with liquidity and stability of principal.
What are the Prime Money Market Fund's Main Investment Strategies?
The Fund invests exclusively in high-quality, short-term money market
instruments. These instruments include corporate notes, commercial paper,
funding agreements, certificates of deposit, bank obligations and deposit
notes. The Fund will concentrate in the financial services industry, including
asset-backed commercial paper programs. The Fund will comply with SEC rules
applicable to all money market funds, including Rule 2a-7 under the Investment
Company Act of 1940. For more information about the Prime Money Market Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are the main risks of investing in the Prime Money Market Fund?
The main risks of investing in the Prime Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
------
2
<PAGE>
------------------
----------------
Prime Money Market Fund
MAIN RISKS
Credit Risk. Because the Fund only invests in high-quality obligations and
limits its average maturity to 90 days or less, credit risk is minimized.
Nonetheless, if an issuer fails to pay interest or principal, the value of your
investment in the Fund could decline. Because the Fund invests in securities
that are backed by "credit enhancements" such as letters of credit, the value
of your investment in the Fund also could decrease if the value of the
securities in the portfolio decreases in response to the declining credit
quality of a credit enhancement provider.
Concentration. The Fund will invest a significant portion of its assets in the
securities of companies in the financial services industry. Because of the
Fund's greater exposure to that industry, economic, political and regulatory
developments affecting the financial services industry will have a
disproportionate impact on the Fund. These developments include changes in
interest rates, earlier than expected repayments by borrowers, an inability to
achieve the same yield on the reinvestment of prepaid obligations, and federal
and state laws which may restrict the remedies that a lender has when a
borrower defaults on a loan.
Interest Rate Risk. The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its investment
objective of maintaining a net asset value of $1.00 per share on a continuous
basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
------
3
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Prime Money Market Fund
How has the Prime Money Market Fund Performed?
By showing the variability of the Prime Money Market Fund's performance from
year to year, the chart and table below help show the risk of investing in the
Fund. Please remember that the past performance of the Prime Money Market Fund
is not necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 7.90%
1991 5.88%
1992 3.58%
1993 2.97%
1994 4.09%
1995 5.83%
1996 5.20%
1997 5.32%
1998 5.30%
1999 4.95%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.47%.
--------------------------------------------------------------------------------
Best Quarter: 1.95% 2Q1990 Worst Quarter: 0.72% 2Q1993
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
Average Annual Total Returns through December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS
DATE OF CLASS
<S> <C> <C> <C> <C>
Class I 8/1/85 4.95% 5.32% 5.09%
</TABLE>
To obtain current yield information, call toll-free 1-800-480-4111 or visit
www.onegroup.com.
------
4
<PAGE>
------------------
Prime Money Market Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
--------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
--------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
--------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
--------------------------------------------------------------------
Exchange Fee NONE
--------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(expenses that are deducted from Fund assets)/1/ CLASS I
--------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .35%
--------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
--------------------------------------------------------------------
Other Expenses .20%
--------------------------------------------------------------------
Total Annual Fund Operating Expenses .55%
--------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/2/ (.03%)
--------------------------------------------------------------------
Net Expenses .52%
--------------------------------------------------------------------
</TABLE>
/1/Expense information has been restated to reflect current fees.
/2/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .52% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS I
------------------
<S> <C>
1 Year/1/ $ 53
------------------
3 Years 173
------------------
5 Years 304
------------------
10 Years 686
------------------
</TABLE>
/1/Without contractual fee waivers, 1 year expenses would be $56.
------
5
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Bond Fund
----------------
What is the goal of the Bond Fund?
The Fund seeks to maximize total return by investing primarily in a diversified
portfolio of intermediate- and long-term debt securities.
What are the Bond Fund's Main Investment Strategies?
The Fund invests mainly in investment grade bonds and debt securities. These
include mortgage-backed and asset-backed securities. Banc One Investment
Advisors analyzes four major factors in managing and constructing the Fund:
duration, market sector, maturity concentrations and individual securities.
Banc One Investment Advisors looks for market sectors and individual securities
that it believes will perform well over time. Banc One Investment Advisors
selects individual securities after performing a risk/reward analysis that
includes an evaluation of interest rate risk, credit risk, and the complex
legal and technical structure of the transaction. For more information about
the Bond Fund's investment strategies, please read "More About the Funds" and
"Principal Investment Strategies."
What is a Bond?
A "bond" is a debt security with a remaining maturity of 90 days or more issued
by the U.S. government or its agencies and instrumentalities, a corporation, or
a municipality, securities issued or guaranteed by a foreign government or its
agencies and instrumentalities, securities issued or guaranteed by domestic and
supranational banks, mortgage-related and mortgage-backed securities, asset-
backed securities, stripped government securities and zero coupon obligations.
What are the main risks of investing in the Bond Fund?
The main risks of investing in the Bond Fund and the circumstances likely to
adversely affect your investment are described below. The share price of the
Bond Fund and its yield will change every day in response to interest rates and
other market conditions. You may lose money if you invest in the Bond Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Interest Rate Risk. The Fund mainly invests in bonds and other debt securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of the Fund's investments
generally declines. On the other hand, if rates fall, the value of the
investments generally increases. Your investment will decline in value if the
value of the Fund's investments decreases. Securities with greater interest
rate sensitivity and longer maturities tend to produce higher yields, but are
subject to greater fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income generated, but may affect
the value of your investment.
------
6
<PAGE>
------------------
Bond Fund
Credit Risk. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an issuer's financial condition
changes. Lower credit quality may lead to greater volatility in the price of a
security and in shares of a Fund. Lower credit quality also may affect a
security's liquidity and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment strategy, the Fund
invests in mortgage-backed and asset-backed securities. The issuers of these
securities and other callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in prepayment rates can
affect the return on investment and yield of mortgage- and asset-backed
securities. When mortgages and other obligations are prepaid and when
securities are called, the Fund may have to reinvest in securities with a lower
yield. The Fund also may fail to recover additional amounts (i.e., premiums)
paid for securities with higher interest rates, resulting in an unexpected
capital loss.
Derivative Risk. The Fund invests in securities that may be considered to be
derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your investment
in the Fund may decline. Derivatives generally are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
How has the Bond Fund performed?
By showing the variability of the Bond Fund's performance from year to year,
the chart and table below help show the risk of investing in the Fund. Please
remember that the past performance of the Bond Fund is not necessarily an
indication of how the Fund will perform in the future.
------
7
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Bond Fund
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 9.25%
1991 15.67%
1992 6.57%
1993 11.33%
1994 -6.91%
1995 23.68%
1996 5.08%
1997 9.92%
1998 8.19%
1999 -0.87%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 6.95%. The above quoted performance data includes the
performance of a common trust fund, the predecessor to the Pegasus Bond Fund
and the Pegasus Bond Fund for the period prior to the consolidation with the
One Group Bond Fund on March 22, 1999. The predecessor to the Pegasus Bond
Fund commenced operations on June 1, 1991, subsequent to the transfer of
assets from a common trust fund with materially equivalent investment
objectives, policies, guidelines and restrictions as the Fund. The quoted
performance of the Fund includes the performance of the common trust fund
for periods prior to the commencement of operations of the predecessor to
the Pegasus Bond Fund as adjusted to reflect the expenses associated with
the Fund. The common trust fund was not registered with the SEC and was not
subject to the investment restrictions, limitations and diversification
requirements imposed by law on registered mutual funds. If the common trust
fund had been registered, its return may have been lower.
--------------------------------------------------------------------------------
Best Quarter: 7.61% 2Q1995 Worst Quarter: -2.66% 1Q1994
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to broad measures of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 12/31/83
<S> <C> <C> <C> <C> <C>
Class I 6/1/91 - 0.87% 8.91% 7.90% 9.28%
----------------------------------------------------------------------
Lehman Brothers
Aggregate
Bond Index/2/ - 0.82% 7.73% 7.70% 9.58%
----------------------------------------------------------------------
Lipper
Intermediate
U.S. Government
Index/3/ - 1.39% 6.63% 6.59% *
</TABLE>
/1/The above quoted performance data includes the performance of a common trust
fund, the predecessor to the Pegasus Bond Fund and the Pegasus Bond Fund for
the period prior to the consolidation with the One Group Bond Fund on March
22, 1999. The predecessor to the Pegasus Bond Fund commenced operations on
June 1, 1991, subsequent to the transfer of assets from a common trust fund
with materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for periods prior to the commencement
of operations of the predecessor to the Pegasus Bond Fund as adjusted to
reflect the expenses associated with the Fund. The common trust fund was not
registered with the SEC and was not subject to the investment restrictions,
limitations and diversification requirements imposed by law on registered
mutual funds. If the common trust fund had been registered, its returns
would have been lower.
/2/The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond markets as a whole. The performance of the index
does not reflect the deduction of expenses associated with a mutual fund,
such as investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses.
/3/The Lipper Intermediate U. S. Government Index consists of the equally
weighted average monthly return of the largest funds within the universe of
all funds in the category.
* Index did not exist.
------
8
<PAGE>
------------------
Bond Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
--------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
--------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
--------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
--------------------------------------------------------------------
Exchange Fee NONE
--------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(expenses that are deducted from Fund assets)/1/ CLASS I
--------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .60%
--------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
--------------------------------------------------------------------
Other Expenses .23%
--------------------------------------------------------------------
Total Annual Fund Operating Expenses .83%
--------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/2/ (.23%)
--------------------------------------------------------------------
Net Expenses .60%
--------------------------------------------------------------------
</TABLE>
/1/Expense information has been restated to reflect current fees.
/2/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .60% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown.
<TABLE>
<CAPTION>
CLASS I
------------------
<S> <C>
1 Year/1/ $ 61
------------------
3 Years 242
------------------
5 Years 438
------------------
10 Years 1,004
------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be $85.
------
9
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Mid Cap Growth Fund
What is the goal of the Mid Cap Growth Fund?
The Fund seeks growth of capital and secondarily, current income by investing
primarily in equity securities.
What are the Mid Cap Growth Fund's Main Investment Strategies?
The Fund invests in securities that have the potential to produce above-average
earnings growth per share over a one- to three- year period. The Fund typically
invests in mid-cap companies with market capitalizations of $500 million to $10
billion. Typically, the Fund acquires shares of established companies with a
history of above-average growth, as well as those companies expected to enter
periods of above-average growth. Not all the securities purchased by the Fund
will pay dividends. The Fund also invests in smaller companies in emerging
growth industries. For more information about the Mid Cap Growth Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
What are the main risks of investing in the Mid Cap Growth Fund?
The main risks of investing in the Mid Cap Growth Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Mid Cap Growth Fund will change every day in response to market
conditions. You may lose money if you invest in the Mid Cap Growth Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
mid-cap growth stock prices in particular) may decline over short or extended
periods of time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Smaller Companies. Investments in smaller, newer companies may be riskier than
investments in larger, more-established companies. Securities of smaller
companies tend to be less liquid than securities of larger companies. In
addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their stock price.
This may cause unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
10
<PAGE>
------------------
Mid Cap Growth Fund
How Has the Mid Cap Growth Fund performed?
By showing the variability of the Mid Cap Growth Fund's performance from year
to year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Mid Cap Growth Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 1.37%
1991 42.91%
1992 9.54%
1993 12.73%
1994 -3.72%
1995 27.87%
1996 20.29%
1997 30.08%
1998 37.34%
1999 29.11%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 27.07%.
--------------------------------------------------------------------------------
Best Quarter: 39.91% 4Q1998 Worst Quarter: -17.05% 3Q1990
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to broad measures of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results.
Average Annual Total Returns through December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 3/2/89
<S> <C> <C> <C> <C> <C>
Class I 3/2/89 29.11% 28.82% 19.84% 20.25%
--------------------------------------------------------------------
S&P MidCap 400
Index/1/ 14.72% 23.05% 17.32% 18.34%
--------------------------------------------------------------------
Russell Mid Cap
Growth Index/2/ 51.29% 28.02% 18.95% 19.87%
--------------------------------------------------------------------
S&P MidCap
400/BARRA
Growth Index/3/ 28.74% 27.78% * *
</TABLE>
/1/The S&P MidCap 400 Index is an unmanaged index generally representative of
the performance of the mid-size company segment of the U.S. market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contract, the performance of the Fund reflects the deduction of these
expenses. The benchmark index for the Mid Cap Growth Index has changed from
the Russell Mid Cap Growth Index to the S&P Mid Cap 400 Index in order to
better represent the investment policies of the Fund for comparison
purposes.
/2/The Russell Mid Cap Growth Index is an unmanaged index generally
representative of the mid-cap growth market. The performance of the index
does not reflect the deduction of expenses associated with a mutual fund,
such as investment management fees. By contrast, the performance of the Fund
reflects the deduction of these expenses.
/3/The S&P MidCap 400/BARRA Growth Index is an unmanaged index representing the
performance of the lowest price-to-book securities in the S&P MidCap 400
Index. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees.
By contrast, the performance of the Fund reflects the deduction of these
expenses.
* Index did not exist.
------
11
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Mid Cap Growth Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your investment) class i
--------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
--------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
--------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
--------------------------------------------------------------------
Exchange Fee NONE
--------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(expenses that are deducted from Fund assets)/1/ CLASS I
--------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .73%
--------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
--------------------------------------------------------------------
Other Expenses .26%
--------------------------------------------------------------------
Total Annual Fund Operating Expenses .99%
--------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement NONE
--------------------------------------------------------------------
Net Expenses .99%
--------------------------------------------------------------------
</TABLE>
/1/Expense information has been restated to reflect current fees.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them for the periods shown. The examples also assume that your investment has a
5% return each year and that the Fund's operating expenses remain the same.
Your actual costs may be higher or lower than those shown.
<TABLE>
<CAPTION>
CLASS I
-----------------
<S> <C>
1 Year $ 101
-----------------
3 Years 315
-----------------
5 Years 547
-----------------
10 Years 1,213
-----------------
</TABLE>
------
12
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Large Cap Growth Fund
What is the goal of the Large Cap Growth Fund?
The Fund seeks long-term capital appreciation and growth of income by investing
primarily in equity securities.
What are the Large Cap Growth Fund's Main Investment Strategies?
The Fund invests mainly in equity securities of large, well-established
companies. The weighted average capitalization of companies in which the Fund
invests normally will exceed the median market capitalization of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500 Index")./1/ For more
information about the Large Cap Growth Fund's investment strategies, please
read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Large Cap Growth Fund?
The main risks of investing in the Large Cap Growth Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Large Cap Growth Fund will change every day in response to market
conditions. You may lose money if you invest in the Large Cap Growth Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
large-cap growth stock prices in particular) may decline over short or extended
periods of time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
/1/"S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with the Fund.
------
13
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Large Cap Growth Fund
How has the Large Cap Growth Fund Performed?
By showing the variability of the Large Cap Growth Fund's performance from year
to year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Large Cap Growth Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1993 13.95%
1994 5.56%
1995 27.04%
1996 17.25%
1997 32.84%
1998 44.71%
1999 27.81%
/1/ For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was -5.31%.
--------------------------------------------------------------------------------
Best Quarter: 24.51% 4Q1998 Worst Quarter: -6.66% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to broad measures of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results.
Average Annual Total Returns through December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS PERFORMANCE
DATE OF CLASS SINCE 2/28/92
<S> <C> <C> <C> <C>
Class I 2/28/92 27.81% 29.62% 21.78%
------------------------------------------------------------------
Russell 1000 Growth
Index/1/ 33.16% 32.42% 21.58%
------------------------------------------------------------------
S&P 500/BARRA Growth
Index/2/ 28.25% 33.64% 22.29%
</TABLE>
/1/ The Russell 1000 Growth Index is an
unmanaged index representing the
performance of those Russell 1000
companies with higher price-to-book
ratios and higher forecasted growth
values. The performance of the index
does not reflect the deduction of
expenses associated with a mutual fund,
such as investment management fees. By
contrast, the performance of the Fund
reflects the deduction of these
expenses. The benchmark index for the
Large Cap Growth Fund has been changed
from the S&P 500/BARRA Growth Index to
the Russell 1000 Growth Index in order
to better represent the investment
policies of the Fund for comparison
purposes.
/2/ The S&P 500/BARRA Growth Index is an
unmanaged index representing the
performance of the highest price-to-book
securities in the S&P 500 Index. The
performance of the index does not
reflect the deduction of expenses
associated with a mutual fund, such as
investment management fees. By contrast,
the performance of the Fund reflects the
deduction of these expenses.
------
14
<PAGE>
Large Cap Growth Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
--------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
--------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
--------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
--------------------------------------------------------------------
Exchange Fee NONE
--------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(expenses that are deducted from Fund assets)/1/ CLASS I
--------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .69%
--------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
--------------------------------------------------------------------
Other Expenses .24%
--------------------------------------------------------------------
Total Annual Fund Operating Expenses .93%
--------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/2/ NONE
--------------------------------------------------------------------
Net Expenses .93%
--------------------------------------------------------------------
</TABLE>
/1/ Expense information has been restated to reflect current fees.
/2/ Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
fund operating expenses to .93% for the period beginning November 1, 2000,
and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below.
<TABLE>
<CAPTION>
CLASS I
-----------------
<S> <C>
1 Year $ 95
-----------------
3 Years 296
-----------------
5 Years 515
-----------------
10 Years 1,143
-----------------
</TABLE>
------
15
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Diversified Equity Fund
What is the goal of the Diversified Equity Fund?
The Fund seeks long-term capital growth and growth of income with a secondary
objective of providing a moderate level of current income.
What are the Diversified Equity Fund's Main Investment Strategies?
The Fund invests mainly in common stocks of companies that have good
fundamentals and reasonable valuations with the potential for continued
earnings growth over time. The Fund uses a multi-style approach, meaning that
it may invest across different capitalization levels targeting both value- and
growth-oriented companies. Because the Fund seeks return over the long term,
Banc One Investment Advisors will not attempt to time the market. For more
information about the Diversified Equity Fund's investment strategies, please
read "More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Diversified Equity Fund?
The main risks of investing in the Diversified Equity Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Diversified Equity Fund will change every day in
response to market conditions. You may lose money if you invest in the
Diversified Equity Fund. For additional information on risk, please read
"Investment Risks."
MAIN RISKS
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general may
decline over short or extended periods of time. When the value of the Fund's
securities goes down, your investment in the Fund decreases in value.
Smaller Companies. Investments in smaller, newer companies may be riskier than
investments in larger, more-established companies. Securities of smaller
companies tend to be less liquid than securities of larger companies. In
addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their stock price.
This may cause unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
16
<PAGE>
Diversified Equity Fund
How Has the Diversified Equity Fund Performed?
By showing the variability of the Diversified Equity Fund performance from year
to year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Diversified Equity Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1990 1.40%
1991 38.13%
1992 13.64%
1993 7.33%
1994 -3.64%
1995 27.54%
1996 21.80%
1997 34.84%
1998 28.32%
1999 13.78%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 3.00%. The above quoted performance data includes the
performance of the Paragon Value Equity Income Fund for the period before its
consolidation with the One Group Diversified Equity Fund on March 26, 1996.
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.
--------------------------------------------------------------------------------
Best Quarter: 21.47% 4Q1998 Worst Quarter: -11.31% 3Q1990
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to broad measures of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results.
Average Annual Total Returns through December 31, 1999/1/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR 5 YEARS 10 YEARS PERFORMANCE
DATE OF CLASS SINCE 12/29/89
<S> <C> <C> <C> <C> <C>
Class I 3/26/96 13.78% 25.05% 17.54% 17.62%
----------------------------------------------------------------------
S&P 500 Index/2/ 21.04% 28.56% 18.21% 18.21%
----------------------------------------------------------------------
S&P
SuperComposite
1500 Index/3/ 20.26% 27.55% * *
</TABLE>
/1/The above-quoted performance data includes the performance of the Paragon
Value Equity Income Fund for the period before its consolidation with the One
Group Diversified Equity Fund on March 26, 1996. 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.
/2/The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market. The performance of
the index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management fees. By contrast, the performance of the
Fund reflects the deduction of these expenses.
/3/The S&P SuperComposite 1500 Index is an unmanaged index consisting of those
stocks making up the S&P 500, S&P MidCap 400 and S&P SmallCap 600 indices
representing approximately 87% of the total U.S. equity market
capitalization. The performance of the index does not reflect the deduction
of expenses associated with a mutual fund, such as investment management
fees. By contrast, the performance of the Fund reflects the deduction of
these expenses.
* Index did not exist.
------
17
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Diversified Equity Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
--------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
--------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
--------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
--------------------------------------------------------------------
Exchange Fee NONE
--------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(expenses that are deducted from Fund assets)/1/ CLASS I
--------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .72%
--------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
--------------------------------------------------------------------
Other Expenses .23%
--------------------------------------------------------------------
Total Annual Fund Operating Expenses .95%
--------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement NONE
--------------------------------------------------------------------
Net Expenses .95%
--------------------------------------------------------------------
</TABLE>
/1/Expense information has been restated to reflect current fees.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below.
<TABLE>
<CAPTION>
CLASS I
-----------------
<S> <C>
1 Year $ 97
-----------------
3 Years 303
-----------------
5 Years 525
-----------------
10 Years 1,166
-----------------
</TABLE>
------
18
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Equity Index Fund
What is the goal of the Equity Index Fund?
The Fund seeks investment results that correspond to the aggregate price and
dividend performance of securities in the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index")./1/
What are the Equity Index Fund's Main Investment Strategies?
The Fund invests mainly in stocks included in the S&P 500 Index. The Fund may
also invest in stock index futures and other equity derivatives. Banc One
Investment Advisors attempts to track the performance of the S&P 500 Index to
achieve a correlation of 0.95 between the performance of the Fund and that of
the S&P 500 Index without taking into account the Fund's expenses. For more
information about the Equity Index Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
What are the main risks of investing in the Equity Index Fund?
The main risks of investing in the Equity Index Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Equity Index Fund will change every day in response to market
conditions. You may lose money if you invest in the Equity Index Fund. For
additional information on risk, please read "Investment Risks."
MAIN RISKS
Index Investing. The Fund attempts to track the performance of the S&P 500
Index. Therefore, securities may be purchased, retained and sold by the Fund at
times when an actively managed fund would not do so. If the value of securities
that are heavily weighted in the index changes, you can expect a greater risk
of loss than would be the case if the Fund were not fully invested in such
securities.
Market Risk. The Fund invests in equity securities (such as stocks) that are
more volatile and carry more risks than some other forms of investment. The
price of equity securities may rise or fall because of economic or political
changes or changes in a company's financial condition. Equity securities are
also subject to "stock market risk" meaning that stock prices in general (or
S&P 500 Index stock prices in particular) may decline over short or extended
periods of time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
/1/"S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with the Fund.
------
19
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Equity Index Fund
How has the Equity Index Fund Performed?
By showing the variability of the Equity Index Fund's performance from year to
year, the chart and table below help show the risk of investing in the Fund.
Please remember that the past performance of the Equity Index Fund is not
necessarily an indication of how the Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1992 6.85%
1993 9.37%
1994 0.75%
1995 37.07%
1996 22.59%
1997 33.00%
1998 28.24%
1999 20.54%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was -1.56%.
--------------------------------------------------------------------------------
Best Quarter: 21.26% 4Q1998 Worst Quarter: -9.96% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual year-
by-year results.
Average Annual Total Returns through December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE
INCEPTION DATE 1 YEAR 5 YEARS SINCE
OF CLASS 7/2/91
<S> <C> <C> <C> <C>
Class I 7/2/91 20.54% 28.14% 19.72%
-----------------------------------------------------------
S&P 500 Index/1/ 21.04% 28.56% 19.87%
</TABLE>
/1/The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market. The performance of
the index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management fees. By contrast, the performance of the
Fund reflects the deduction of these expenses.
------
20
<PAGE>
------------------
Equity Index Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
--------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
--------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
--------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
--------------------------------------------------------------------
Exchange Fee NONE
--------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(expenses that are deducted from Fund assets)/1/ CLASS I
--------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .30%
--------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
--------------------------------------------------------------------
Other Expenses .27%
--------------------------------------------------------------------
Total Annual Fund Operating Expenses .57%
--------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/2/ (.22%)
--------------------------------------------------------------------
Net Expenses .35%
--------------------------------------------------------------------
</TABLE>
/1/Expense information has been restated to reflect current fees.
/2/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .35% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below.
<TABLE>
<CAPTION>
CLASS I
------------------
<S> <C>
1 Year/1/ $ 36
------------------
3 Years 160
------------------
5 Years 296
------------------
10 Years 693
------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be $58.
------
21
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Growth & Income Fund
What is the goal of One Group Investor Growth & Income Fund?
The Fund seeks long-term capital appreciation and growth of income by investing
primarily in a diversified group of One Group mutual funds which invest
primarily in equity securities.
What are the main investment strategies of One Group Investor Growth & Income
Fund?
One Group Investor Growth & Income Fund is a "Fund of Funds." The Fund's
investment strategy is to invest in a diversified group of other One Group
mutual funds. Because this is a growth and income fund, the majority of the
Fund's assets will be invested in One Group equity and bond funds, although a
portion of its assets also will be invested in One Group money market funds.
The Fund's investment return is diversified by its investment in the underlying
mutual funds which invest in growth and income stocks, foreign securities, debt
securities, and cash or cash equivalents. For more information about the Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
Who should invest in One Group Investor Growth & Income Fund?
Shares are available for long-term investors, including tax-advantaged
retirement accounts. The Funds should not be used for short-term trading
purposes.
What are the main risks of investing in One Group Investor Growth & Income
Fund?
The main risks of investing in the One Group Investor Growth & Income Fund and
the circumstances likely to adversely affect your investment are described
below. The share price of One Group Investor Growth & Income Fund will change
every day in response to market conditions. You may lose money if you invest in
One Group Investor Growth & Income Fund. For additional information on risk,
please read "Investment Risks."
MAIN RISKS
Investments in Mutual Funds. The Fund's investments are concentrated in
underlying One Group funds, so the Fund's investment performance is directly
related to the performance of the underlying funds. The Fund's net asset value
will change with changes in the equity and bond markets and the value of the
mutual funds in which it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the underlying funds. As a
result, the Fund does not have the same flexibility to invest as a mutual fund
without such constraints. In addition, the Fund indirectly pays a portion of
the expenses of the underlying funds.
Equity Funds. Equity funds invest primarily in equity securities (such as
stocks) that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of economic
or political changes or changes in a company's financial condition. Equity
securities also are subject to "stock market risk," meaning that stock prices
in general may decline over short or extended periods of time. When the value
stocks held by an underlying One Group equity fund go down, the value of your
investment in One Group Investor Growth & Income Fund will be affected.
------
22
<PAGE>
------------------
Investor Growth & Income Fund
Fixed Income Funds. Bond funds invest primarily in fixed income securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. The value of your investment in One Group Investor Growth
& Income Fund will change as the value of investments of the underlying One
Group funds increases and decreases.
Index Funds. An index fund's investment objective is to track the performance
of a specified index. Therefore, securities may be purchased, retained and sold
by an index fund at times when an actively managed fund would not do so. If the
value of securities that are heavily weighted on an index change, you can
expect a greater risk of loss than may be the case if a fund were not fully
invested in such securities.
Securities of Technology Companies: The stock price of technology companies
tends to be more volatile than the stock price of companies in other
industries. In addition, the valuation of many technology stocks could be high
when considered by such traditional measures of value as price-to-earnings
ratios. Competitive pressures also may have a significant effect on the
financial condition of technology-sensitive companies. Further, because of the
rapid pace of technological development, products and services produced by
companies in which the Fund invests may become obsolete or have relatively
short product cycles. As a result, the underlying Fund's value and its returns
may be considerably more volatile and pose greater risks than the values and
returns of other mutual funds that invest in companies in the technology
sector.
Smaller Companies. Investments in smaller, newer companies may be riskier than
investments in larger, more-established companies. Small companies may be more
vulnerable to economic, market and industry changes. Because economic events
have a greater impact on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause unexpected and frequent
decreases in the value of the underlying Fund's investment. Finally, emerging
companies in the technology sector may not be profitable and may not anticipate
earning profits in the foreseeable future.
Foreign Securities. Funds investing in foreign securities are subject to
special risks in addition to those of U.S. investments. These risks include
political and economic risks, currency fluctuations, higher transaction costs,
delayed settlement, and less stringent investor protection and disclosure
standards of some foreign markets. These risks can make foreign investments
more volatile and potentially less liquid than U.S. investments.
Emerging Markets. The risks associated with foreign securities are magnified in
countries in "emerging markets." These countries may have relatively unstable
governments and less-established market economies than developed countries.
Emerging markets may face greater social, economic, regulatory and political
uncertainties. These risks make emerging market securities more volatile and
less liquid than securities issued in more developed countries.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
------
23
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Investor Growth & Income Fund
How has the One Group Investor Growth & Income Fund Performed?
By showing the variability of the One Group Investor Growth & Income Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the
Investor Growth & Income Fund is not necessarily an indication of how the Fund
will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1997 20.87%
1998 19.10%
1999 12.06%
/1/For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 5.51%.
--------------------------------------------------------------------------------
Best Quarter: 14.92% 4Q1998 Worst Quarter: -6.51% 3Q1998
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results.
Average Annual Total Returns through December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 12/10/96
<S> <C> <C> <C>
Class I 12/10/96 12.06% 16.77%
-------------------------------------------------------------------
S&P SuperComposite 1500
Index/1/ 20.26% 26.41%
-------------------------------------------------------------------
Lipper Mix/2/ 16.39% 15.90%
</TABLE>
/1/The S&P SuperComposite 1500 Index is an unmanaged index generally
representative of large and small companies in the U.S. stock market. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as management fees. By contrast, the
performance of the One Group Investor Growth & Income Fund reflects the
deduction of these expenses.
/2/The Lipper Mix consists of the average monthly returns of the Lipper 1000
Index (60%), the Lipper International Index (5%), and the Lipper
Intermediate U.S. Government Index (35%). The Lipper Universe consists of
the equally weighted average monthly returns for all the funds within the
category.
------
24
<PAGE>
------------------
Investor Growth & Income Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------
(expenses that are deducted from Fund assets)/1/ CLASS I
------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .05%
------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
------------------------------------------------------------------
Other Expenses .23%
------------------------------------------------------------------
Total Annual Fund Operating Expenses/2/ .28%
------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement/3/ (.08%)
------------------------------------------------------------------
Net Expenses .20%
------------------------------------------------------------------
</TABLE>
/1/Expense information has been restated to reflect current fees.
/2/The Fund indirectly pays a portion of the expenses incurred by the
underlying funds. After combining the total operating expenses of the Fund
with those of the underlying funds, the estimated average weighted expense
ratio would be 1.04% for Class I shares.
/3/Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .20% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continue to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below.
<TABLE>
<CAPTION>
CLASS I
------------------
<S> <C>
1 Year/1/ $ 20
------------------
3 Years 82
------------------
5 Years 149
------------------
10 Years 348
------------------
</TABLE>
/1/Without contractual fee waivers, 1 Year expenses would be $29.
------
25
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Conservative Growth Fund
What is the goal of One Group Investor Conservative Growth Fund?
The Fund seeks income and capital appreciation by investing primarily in a
diversified group of One Group mutual funds which invest primarily in fixed
income and equity securities.
What are the Main Investment Strategies of One Group Investor Conservative
Growth Fund?
One Group Investor Conservative Growth Fund is a "Fund of Funds." The Fund's
investment strategy is to invest in a diversified group of other One Group
mutual funds. Because this is a conservative growth fund, the majority of the
Fund's assets will be invested in One Group bond funds, although a portion of
its assets also will be invested in One Group equity and money market funds.
The Fund's investment return is diversified by its investment in the underlying
mutual funds which invest in growth and income stocks, foreign securities, debt
securities, and cash or cash equivalents. For more information about the Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
Who should invest in One Group Investor Conservative Growth Fund?
Shares are available for long-term investors, including tax-advantaged
retirement accounts. The Funds should not be used for short-term trading
purposes.
What are the main risks of investing in One Group Investor Conservative Growth
Fund?
The main risks of investing in the One Group Investor Conservative Growth Fund
and the circumstances likely to adversely affect your investment are described
below. The share price of One Group Investor Conservative Growth Fund will
change every day in response to market conditions. You may lose money if you
invest in One Group Investor Conservative Growth Fund. For additional
information on risk, please read "Investment Risks."
MAIN RISKS
Investments in Mutual Funds. The Fund's investments are concentrated in
underlying One Group funds, so the Fund's investment performance is directly
related to the performance of the underlying funds. The Fund's net asset value
will change with changes in the equity and bond markets and the value of the
mutual funds in which it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the underlying funds. As a
result, the Fund does not have the same flexibility to invest as a mutual fund
without such constraints. In addition, the Fund indirectly pays a portion of
the expenses of the underlying funds.
Equity Funds. Equity funds invest primarily in equity securities (such as
stocks) that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of economic
or political changes or changes in a company's financial condition. Equity
securities also are subject to "stock market risk," meaning that stock prices
in general may decline over short or extended periods of time. When the value
stocks held by an underlying One Group equity fund go down, the value of your
investment in One Group Investor Conservative Growth Fund will be affected.
------
26
<PAGE>
------------------
Investor Conservative Growth Fund
Fixed Income Funds. Bond funds invest primarily in fixed income securities.
These securities will increase or decrease in value based on changes in
interest rates. If rates increase, the value of a fund's investments generally
declines. On the other hand, if rates fall, the value of the investments
generally increases. The value of your investment in One Group Investor
Conservative Growth Fund will change as the value of investments of the
underlying One Group funds increases and decreases.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
How has the One Group Investor Conservative Growth Fund Performed?
By showing the variability of the One Group Investor Conservative Growth Fund's
performance from year to year, the chart and table below help show the risk of
investing in the Fund. Please remember that the past performance of the
Investor Conservative Growth Fund is not necessarily an indication of how the
Fund will perform in the future.
The Bar Chart shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions.
Bar Chart (per calendar year)/1/ -- Class I Shares
--------------------------------------------------------------------------------
[GRAPH]
1997 12.50%
1998 11.71%
1999 4.51%
/1/ For the period from January 1, 2000, through September 30, 2000, the Fund's
total return was 4.76%.
--------------------------------------------------------------------------------
Best Quarter: 6.21% 2Q1997 Worst Quarter: -1.56% 3Q1999
--------------------------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual year-by-
year results.
Average Annual Total Returns through December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YEAR PERFORMANCE
DATE OF CLASS SINCE 12/10/96
<S> <C> <C> <C>
Class I 12/10/96 4.51% 9.18%
-------------------------------------------------------------------
Lehman Brothers Intermediate
Aggregate Bond Index/1/ 0.99% 5.71%
-------------------------------------------------------------------
Lipper Mix/2/ 5.53% 9.15%
</TABLE>
/1/ The Lehman Brothers Intermediate Aggregate Bond Index is an unmanaged index
comprised of U.S. government, mortgage, corporate and asset-backed
securities with maturities of one to ten years. The performance of the
index does not reflect the deduction of expenses associated with a mutual
fund, such as management fees. By contrast, the performance of the One
Group Investor Conservative Growth Fund reflects the deduction of these
expenses.
/2/ The Lipper Mix consists of the average monthly returns of the Lipper 1000
Index (20%), the Lipper International Index (5%) and the Lipper
Intermediate U.S. Government Index (75%). The Lipper Universe consists of
the equally weighted average monthly returns for all the funds within the
category.
------
27
<PAGE>
ONE GROUP(R)
------------------
FUND SUMMARY
Investor Conservative Growth Fund
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
-------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
-------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
-------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
-------------------------------------------------------------------
Exchange Fee NONE
-------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(expenses that are deducted from Fund assets)/1/ CLASS I
-------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .05%
-------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
-------------------------------------------------------------------
Other Expenses .21%
-------------------------------------------------------------------
Total Annual Fund Operating Expenses/2/ .26%
-------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (.06%)
-------------------------------------------------------------------
Net Expenses/3/ .20%
-------------------------------------------------------------------
</TABLE>
/1/ Expense information has been restated to reflect current fees.
/2/ The Fund indirectly pays a portion of the expenses incurred by the
underlying funds. After combining the total operating expenses of the Fund
with those of the underlying funds, the estimated average weighted expense
ratio would be .91% for Class I shares.
/3/ Banc One Investment Advisors Corporation and the Administrator have
contractually agreed to waive fees and/or reimburse expenses to limit total
annual fund operating expenses to .20% for Class I shares for the period
beginning November 1, 2000, and ending on October 31, 2001.
Examples
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continued to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below.
<TABLE>
<CAPTION>
CLASS I
------------------
<S> <C>
1 Year/1/ $ 20
------------------
3 Years 78
------------------
5 Years 140
------------------
10 Years 325
------------------
</TABLE>
/1/ Without contractual fee waivers, 1 Year expenses would be $27.
------
28
<PAGE>
ONE GROUP(R)
------------------
More About the Funds
Each of the eight funds described in this prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of One Group Mutual Funds" and the Statement of Additional
Information.
--------------------------------------------------------------------------------
Principal Investment Strategies
This prospectus describes eight mutual funds with a variety of investment
objectives.
. One Group Prime Money Market Fund is designed to produce high current income
consistent with liquidity or capital preservation and stability of principal.
. One Group Bond Fund is designed to maximize total return. Banc One Investment
Advisors analyzes four major factors in managing and constructing the Fund:
duration, market sector, maturity concentrations and individual securities.
The portfolios attempt to enhance total return by selecting market sectors
that offer risk/reward advantages based on structural risks and credit
trends.
. One Group Mid Cap Growth, Large Cap Growth, Diversified Equity and Equity
Index are designed for a variety of objectives, including capital
appreciation and current income.
. One Group Investor Growth & Income and Conservative Growth are designed to
provide diversification across the three major asset classes: stocks, bonds
and cash or cash equivalents. Diversification is achieved by investing in
other One Group mutual funds. A brief description of these underlying One
Group funds can be found in Appendix A. The Funds attempt to take advantage
of the most attractive types of stocks and bonds by shifting their asset
allocation to favor mutual funds that focus on the most promising securities.
The principal investment strategies that are used to meet each Fund's
investment objective are described in "Fund Summaries: Investments, Risk &
Performance" in the front of this prospectus. They are also described below.
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund may also use strategies that are not
described below, but which are described in the Statement of Additional
Information.
FUNDAMENTAL POLICIES
A Fund's investment strategy may
involve "fundamental policies." A
policy is fundamental if it cannot
be changed without the consent of
a majority of the outstanding
shares of the Fund.
------
29
<PAGE>
--
ONE GROUP PRIME MONEY MARKET FUND. The Fund invests only in U.S. denominated
securities.
. The average maturity on a dollar-weighted basis of the securities held by the
Fund will be 90 days or less.
.Each security held by the Fund will mature in 397 days or less.
.The Fund will acquire only those securities that present minimal credit risks.
.The Fund invests exclusively in money market instruments. These include:
1. corporate notes;
2. commercial paper;
3. funding agreements;
4. certificates of deposit; and
5. bank obligations.
. The Fund will invest at least 25% of its total assets in securities issued
by companies in the financial services industry, although the Fund may
invest less than 25% of its total assets in that industry if warranted due
to adverse economic conditions and if investing less than that amount would
be in the best interests of shareholders. The financial services industry
includes banks, broker-dealers, finance companies and other issuers of
asset-backed securities.
. The Fund may lend its portfolio's securities.
--
ONE GROUP BOND FUND. The Fund invests in all types of debt securities rated as
investment grade, as well as convertible securities, preferred stock, and loan
participations.
. The Fund invests at least 65% of its total assets in debt securities of all
types with intermediate to long maturities.
. As a matter of fundamental policy, at least 65% of the Fund's total assets
will consist of bonds.
. The Fund also may purchase taxable or tax-exempt municipal securities.
. The Fund may invest in debt securities that are rated in the lowest
investment grade category.
. The Fund's average weighted maturity ordinarily will normally range between
four and twelve years, although the Fund may shorten its weighted average
maturity if deemed appropriate for temporary defensive purposes.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the
average of all the current
maturities (that is, the term of
the securities) of the individual
securities in a fund calculated so
as to count most heavily those
securities with the highest dollar
value. Average weighted maturity
is important to investors as an
indication of a fund's sensitivity
to changes in interest rates. The
longer the average weighted
maturity, the more fluctuation in
share price you can expect.
------
30
<PAGE>
--
ONE GROUP MID CAP GROWTH FUND. The Fund invests in securities of companies that
have the potential to produce above-average earnings growth per share over a
one to three-year period.
. At least 80% of the Fund's total assets will be invested in equity
securities of mid-cap companies, including common stocks and debt securities
and preferred stocks that are convertible to common stocks. Mid-cap
companies are defined as companies with market capitalizations of $500
million to $10 billion.
. A portion of the Fund's assets will be held in cash equivalents.
--
ONE GROUP LARGE CAP GROWTH FUND. The Fund invests mainly in equity securities
of large, well-established companies. The weighted average capitalization of
companies in which the Fund invests normally will exceed the median market
capitalization of the S&P 500 Index.
. At least 65% of the Fund's total assets will be invested in the equity
securities of large, well-established companies.
--
ONE GROUP DIVERSIFIED EQUITY FUND. The Fund invests mainly in common stocks of
companies that have the potential for continued earnings growth with strong
fundamentals and a reasonable value.
. At least 65% of the Fund's total assets will be invested in equity
securities.
. Although the Fund may invest up to 35% of the Fund's total assets in U.S.
government securities, other investment grade fixed income securities, cash,
and cash equivalents, the Fund's main investment strategy is to invest in
equity securities.
--
ONE GROUP EQUITY INDEX FUND. The Fund invests in stocks included in the S&P 500
Index. (The Fund also invests in stock index futures and other equity
derivatives.) The Fund may hold up to 10% of its total assets in cash or cash
equivalents. (Assets held in margin deposits and segregated accounts for
futures contracts are not considered cash or cash equivalents for purposes of
the 10% limitation.)
HOW DOES INDEX INVESTING WORK IN
THE EQUITY INDEX FUND?
. The percentage of stock that
the Fund holds will be
approximately the same
percentage that the stock
represents in the S&P 500
Index.
. Banc One Investment Advisors
generally picks stocks in the
order of their weightings in
the S&P 500 Index, starting
with the heaviest-weighted
stock.
. The Fund attempts to achieve a
correlation between the
performance of its Fund and
that of the S&P 500 Index of at
least 0.95, without taking into
account Fund expenses. Perfect
correlation would be 1.00.
------
31
<PAGE>
--
ONE GROUP INVESTOR GROWTH & INCOME FUND.
. The Fund is diversified between stocks and bonds, with an emphasis on
stocks.
1. From 60% to 80% of the Fund's total assets are invested in One Group
equity funds.
2. From 20% to 40% of its total assets are invested in One Group bond funds.
3. Up to 10% of its total assets are invested in a One Group money market
fund.
. The Fund also is diversified across a variety of mutual funds, which in turn
invest in different industries, economic sectors and geographic regions. The
Fund invests its assets in the underlying mutual funds within the following
ranges:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND TOTAL ASSETS
-------------------------------------------------
<S> <C>
One Group(R) Prime Money Market
Fund 0-10%
-------------------------------------------------
One Group(R) Short-Term Bond Fund 0-30%
-------------------------------------------------
One Group(R) Intermediate Bond
Fund 0-30%
-------------------------------------------------
One Group(R) Income Bond Fund 0-30%
-------------------------------------------------
One Group(R) Bond Fund 0-30%
-------------------------------------------------
One Group(R) High Yield Bond Fund 0-30%
-------------------------------------------------
One Group(R) Government Bond Fund 0-30%
-------------------------------------------------
One Group(R) Ultra Short-Term Bond
Fund 0-30%
-------------------------------------------------
One Group(R) Mid Cap Value Fund 0-40%
-------------------------------------------------
One Group(R) Mid Cap Growth Fund 0-40%
-------------------------------------------------
One Group(R) International Equity
Index Fund 0-40%
-------------------------------------------------
One Group(R) Diversified
International Fund 0-40%
-------------------------------------------------
One Group(R) Large Cap Growth Fund 0-50%
-------------------------------------------------
One Group(R) Large Cap Value Fund 0-60%
-------------------------------------------------
One Group(R) Diversified Mid Cap
Fund 0-40%
-------------------------------------------------
One Group(R) Diversified Equity
Fund 0-60%
-------------------------------------------------
One Group(R) Small Cap Growth Fund 0-40%
-------------------------------------------------
One Group(R) Small Cap Value Fund 0-40%
-------------------------------------------------
One Group(R) Equity Income Fund 0-60%
-------------------------------------------------
One Group(R) Equity Index Fund 0-60%
-------------------------------------------------
One Group(R) Technology Fund 0-10%
</TABLE>
. The Fund also may hold cash and cash equivalents.
------
32
<PAGE>
--
ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND.
. The Fund is diversified between stocks and bonds, with an emphasis on bonds.
1. From 20% to 40% of the Fund's total assets are invested in One Group
equity funds.
2. From 60% to 80% of its total assets are invested in One Group bond funds.
3. Up to 10% of its total assets are invested in a One Group money market
fund.
. The Fund also is diversified across a variety of mutual funds, which in turn
invest in different industries, economic sectors and geographic regions. The
Fund invests its assets in the underlying mutual funds within the following
ranges:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND TOTAL ASSETS
-------------------------------------------------
<S> <C>
One Group(R) Prime Money Market
Fund 0-10%
-------------------------------------------------
One Group(R) Short-Term Bond Fund 0-70%
-------------------------------------------------
One Group(R) Intermediate Bond
Fund 0-70%
-------------------------------------------------
One Group(R) Income Bond Fund 0-70%
-------------------------------------------------
One Group(R) Bond Fund 0-70%
-------------------------------------------------
One Group(R) High Yield Bond Fund 0-15%
-------------------------------------------------
One Group(R) Government Bond Fund 0-70%
-------------------------------------------------
One Group(R) Ultra Short-Term Bond
Fund 0-70%
-------------------------------------------------
One Group(R) Mid Cap Value Fund 0-20%
-------------------------------------------------
One Group(R) Mid Cap Growth Fund 0-20%
-------------------------------------------------
One Group(R) International Equity
Index Fund 0-20%
-------------------------------------------------
One Group(R) Diversified
International Fund 0-20%
-------------------------------------------------
One Group(R) Large Cap Growth Fund 0-20%
-------------------------------------------------
One Group(R) Large Cap Value Fund 0-20%
-------------------------------------------------
One Group(R) Diversified Mid Cap
Fund 0-20%
-------------------------------------------------
One Group(R) Diversified Equity
Fund 0-20%
-------------------------------------------------
One Group(R) Small Cap Growth Fund 0-20%
-------------------------------------------------
One Group(R) Small Cap Value Fund 0-20%
-------------------------------------------------
One Group(R) Equity Income Fund 0-20%
-------------------------------------------------
One Group(R) Equity Index Fund 0-20%
</TABLE>
. The Fund also may hold cash and cash equivalents.
--------------------------------------------------------------------------------
Investment Risks
The risks associated with investing in the Funds are described below and in
"Fund Summaries: Investments, Risk & Performance" at the front of this
prospectus.
--
NET ASSET VALUE. There is no assurance that the Prime Money Market Fund will
meet its investment objectives or be able to maintain a net asset value of
$1.00 per share on a continuous basis.
------
33
<PAGE>
FIXED INCOME SECURITIES. Investments by the Prime Money Market Fund and the
Bond Fund in fixed income securities (for example, bonds) will increase or
decrease in value based on changes in interest rates. If rates increase, the
value of a Fund's investments generally decreases. On the other hand, if rates
fall, the value of the investments generally increases. The value of the
securities in the One Group Bond Fund, and the value of your investment in the
One Group Bond Fund, will increase and decrease as the value of the One Group
Bond Fund's investments increases and decreases.
--
DERIVATIVES. The Funds invest in securities that may be considered to be
derivatives. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity
and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or
contracts (like futures and
options) that derive their value
from the performance of underlying
assets or securities.
--
LOWER RATED SECURITIES. The Bond Fund may purchase debt securities rated in the
lowest investment grade category. Securities in this rating category are
considered to have speculative characteristics. Changes in economic conditions
or other circumstances may have a greater effect on the ability of issuers of
these securities to make principal and interest payments than they do on
issuers of higher grade securities.
The Investor Growth & Income Fund and the Investor Conservative Growth Fund
invest in a variety of other One Group funds. The funds in which the Investor
Funds invest are referred to in this prospectus as the "Investor Portfolios."
The main risks of investing in the Investor Funds are described above and in
"Fund Summaries: Investments, Risk & Performance." Additional risks associated
with investing in the Investor Portfolios are described below.
--
JUNK BONDS. One Group High Yield Bond Fund and One Group Income Bond Fund
invest in debt securities that are considered to be speculative. These
securities are issued by companies which are highly leveraged, less
creditworthy or financially distressed. While these investments generally
provide a higher yield than higher rated debt securities, the high degree of
risk involved in these investments can result in substantial or total losses.
The market price of these securities can change suddenly and unexpectedly.
--
INTERNATIONAL FUNDS. Foreign securities are subject to special risks. These
risks may include future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits, currency controls,
higher transaction costs and delayed settlements of transactions. Securities of
some foreign companies are less liquid, and their prices more volatile, than
securities of comparable U.S. companies. Additionally, there may be less public
information available about foreign issuers. Since the underlying funds may
invest in securities denominated in foreign currencies, changes in exchange
rates also may affect the value of investments in the underlying funds.
------
34
<PAGE>
--
EMERGING MARKETS. The risks associated with foreign securities are magnified in
countries in "emerging markets." These countries may have relatively unstable
governments and less established market economies than developed countries.
Emerging markets may face greater social, economic, regulatory and political
uncertainties. These risks make emerging market securities more volatile and
less liquid than securities issued in more developed countries.
--
SMALLER COMPANIES. Investments by funds in smaller, newer companies may be
riskier than investments in larger, more-established companies. Securities of
smaller companies tend to be less liquid than securities of large companies. In
addition, small companies may be more vulnerable to economic, market and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their debt
securities and/or stock price. This may cause unexpected and frequent decreases
in the value of underlying funds investing in small companies, and may affect
your investment in the funds.
For more information about risks associated with the types of investments that
the Funds purchase, please read "Fund Summaries: Investments, Risk &
Performance," Appendix A and the Statement of Additional Information.
--------------------------------------------------------------------------------
Investment Policies
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
Each Fund, other than the Prime Money Market Fund:
1. Will not purchase an issuer's securities if as a result more than 5% of its
total assets would be invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting securities of any of that
issuer. This does not include securities issued or guaranteed by the United
States, its agencies or instrumentalities, securities of other registered
investment companies and repurchase agreements involving these securities.
This restriction applies with respect to 75% of a Fund's total assets.
2. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries. This does not include obligations issued or guaranteed
by the U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Will not make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending.
The Equity Index Fund:
1. Will not invest more than 10% of its total assets in securities issued or
guaranteed by the United States, its agencies or instrumentalities.
Repurchase agreements held in margin deposits and segregated accounts for
futures contracts are not considered issued or guaranteed by the United
States, its agencies or instrumentalities for purposes of this 10%
limitation.
------
35
<PAGE>
The Prime Money Market Fund:
1. Will use its best efforts to maintain a constant net asset value of $1.00
per share, although there is no guarantee that the Funds will be able to do
so.
2. Will not make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending.
3. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries (except that the Fund may concentrate its investments
in securities issued by companies in the financial services industry). This
does not include obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities, domestic bank certificates of deposit
or bankers' acceptances, and repurchase agreements involving such
securities, municipal securities or governmental guarantees of municipal
securities. In addition, private activity bonds backed only by the revenues
and assets of a non-governmental user will not be deemed to be municipal
securities.
4. Will not purchase an issuer's securities if as a result more than 5% of a
Fund's total assets would be invested in the securities of that issuer or
the Fund would own more than 10% of the outstanding voting securities of
that issuer. This does not include securities issued or guaranteed by the
United States, its agencies or instrumentalities, and repurchase agreements
involving these securities. This restriction applies with respect to 75% of
a Fund's total assets. The Funds may invest the remaining 25% of their
total assets without regard to this restriction as permitted by applicable
law.
--------------------------------------------------------------------------------
Portfolio Quality
Various rating organizations (like Standard & Poor's Corporation and Moody's
Investors Service) assign ratings to securities (other than equity securities).
Generally, ratings are divided into two main categories: "Investment Grade
Securities" and "Non-Investment Grade Securities." Although there is always a
risk of default, rating agencies believe that issuers of Investment Grade
Securities have a high probability of making payments on such securities. Non-
Investment Grade Securities include securities that, in the opinion of the
rating agencies, are more likely to default than Investment Grade Securities.
The Funds only purchase securities that meet the rating criteria described
below. Banc One Investment Advisors will look at a security's rating at the
time of investment. If the securities are unrated, Banc One Investment Advisors
must determine that they are of comparable quality to rated securities.
--
THE PRIME MONEY MARKET FUND
. The quality and maturity of money market funds are subject to SEC rules.
Quality is generally restricted to the two highest short-term ratings or
their equivalent. Maturity is limited both as to total portfolio average and
as to each individual security. With respect to portfolio average, the rules
limit the Fund's average weighted maturity to 90 days. With respect to each
individual security, the remaining maturity is restricted to 397 days at
acquisition. Moreover, the SEC rules limit exposure to a single issuer to 5%
of a money market fund's assets (although there is no limit on government
securities).
------
36
<PAGE>
--
THE BOND FUND AND THE INVESTOR PORTFOLIOS
. Debt Securities
1. Two Investor Portfolios, the Government Bond Fund and the Treasury &
Agency Fund, may invest in debt securities rated in any of the three
highest investment grade rating categories.
2. The Bond Fund, two Investor Portfolios, the Ultra Short-Term Bond Fund,
the Intermediate Bond Fund, and the Short-Term Bond Fund, may invest in
debt securities rated in any of the four investment grade rating
categories.
3. Two Investor Portfolios, the Income Bond Fund and the High Yield Bond
Fund, may purchase securities in any rating category. Please read "Fund
Summaries: Investments, Risk & Performance" and "Junk Bonds" for more
information about the Income Bond Fund and the High Yield Bond Fund.
. Preferred Stock
1. The Bond Fund, two Investor Portfolios, the Ultra Short-Term Bond Fund,
the Short-Term Bond Fund, and the Intermediate Bond Fund, may only invest
in preferred stock rated in any of the four highest rating categories.
2. Two Investor Portfolios, the Income Bond Fund and the High Yield Bond
Fund, may invest in preferred stock in any rating category.
. Municipal Securities
1. The Bond Fund, two Investor Portfolios, the Ultra Short-Term Bond Fund,
the Short-Term Bond Fund, and Intermediate Bond Fund, may only invest in
municipal bonds rated in any of the four investment grade rating
categories.
2. The Bond Fund as well as two Investor Portfolios, the Ultra Short-Term
Bond Fund and the Intermediate Bond Fund, may only invest in other
municipal securities, such as tax-exempt commercial paper, notes, and
variable rate demand obligations which are rated in the highest or second
highest investment grade rating categories. The Short-Term Bond Fund may
invest in such securities only if they are rated in the highest
investment grade rating category.
3. Two Investor Portfolios, the Income Bond Fund and the High Yield Bond
Fund, may invest in municipal securities rated in ANY category.
. Commercial Paper
1. The Bond Fund, two Investor Portfolios, the Intermediate Bond Fund, the
Short-Term Bond Fund, and the Ultra Short-Term Bond Fund, may invest in
commercial paper rated in the highest or second highest rating category.
2. Two Investor Portfolios, the High Yield Bond Fund and the Income Bond
Fund, may invest in commercial paper in any rating category.
--
THE MID CAP GROWTH, LARGE CAP GROWTH, DIVERSIFIED EQUITY AND EQUITY INDEX FUNDS
. Municipal Securities
1. If a Fund invests in municipal bonds, the bonds must be rated as
investment grade.
2. Other municipal securities, such as tax-exempt commercial paper, notes
and variable rate demand obligations, must be rated in one of the two
highest investment grade categories at the time of investment.
------
37
<PAGE>
.Debt Securities
1. Corporate bonds generally will be rated in one of the three highest
investment grade categories.
2. Banc One Investment Advisors reserves the right to invest in corporate
bonds which present attractive opportunities and are rated in the lowest
investment grade category. These corporate bonds are usually riskier than
higher rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
--------------------------------------------------------------------------------
Temporary Defensive Positions
To provide liquidity for the Investor Funds and to allow all of the Funds to
respond to unusual market conditions, the Funds may invest all or a portion of
their assets in cash and cash equivalents for temporary defensive purposes. The
Investor Funds only invest in cash equivalents. They will not hold a
significant portion of their assets in cash. The Equity Index Fund may invest
no more than 10% of its total assets in cash and cash equivalents. (Assets held
in margin deposits are segregated accounts for futures contracts are not
considered cash and cash equivalents for purposes of this 10% limitation.)
Investments in cash and cash equivalents may result in a lower yield than
lower-quality or longer-term investments and may prevent the Funds from meeting
their investment objectives.
While the Funds are engaged in a temporary defensive position, they will not be
pursuing their investment objectives. Therefore, the Funds will pursue a
temporary defensive position only when market conditions warrant.
WHAT IS A CASH EQUIVALENT?
Cash equivalents are highly
liquid, high-quality instruments
with maturities of three months or
less on the date they are
purchased. They include securities
issued by the U.S. government, its
agencies and instrumentalities,
repurchase agreements (other than
equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper
(rated in one of the two highest
rating categories), variable rate
master demand notes, money market
mutual funds and bank money market
deposit accounts.
--------------------------------------------------------------------------------
Portfolio Turnover
The Funds may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Funds. The portfolio turnover rate for each Fund for the fiscal year
ended June 30, 2000, is shown on the Financial Highlights.
------
38
<PAGE>
ONE GROUP(R)
------------------
-
How to Do Business with One Group Mutual Funds
--------------------------------------------------------------------------------
Purchasing Fund Shares
How much do shares cost?
. Shares are sold at net asset value ("NAV").
. NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
. A Fund's NAV changes every business day.
. NAV is calculated each business day following the close of the NYSE at 4:00
p.m. ET. On occasion, the NYSE will close before 4 p.m. ET. When that
happens, NAV will be calculated as of the time the NYSE closes.
. It is the responsibility of the Bank One Corporation Savings and Investment
Plan to send your purchase or redemption order to the Fund(s). Please contact
the Bank One Corporation Savings and Investment Plan at 1-888-506-401K for
information regarding cut-off times for purchase and redemption requests.
. The Funds are open for business every day, other than weekends and days on
which the New York Stock Exchange ("NYSE") is closed, including the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas Day. The Prime Money Market Fund is also closed on days on which
the Federal Reserve is closed, including Columbus Day and Veterans Day.
How do I buy fund shares?
. Please call 1-888-506-401K for information on participating in the Bank One
Corporation Savings and Investment Plan.
------
39
<PAGE>
ONE GROUP(R)
------------------
Shareholder Information
Voting Rights
--------------------------------------------------------------------------------
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
Each Fund, and each class of shares within each Fund, vote separately on
matters relating solely to that Fund or class, or which affect that Fund or
class differently. However, all shareholders will have equal voting rights on
matters that affect all shareholders equally.
--------------------------------------------------------------------------------
Dividend Policies
DIVIDENDS. The Funds generally declare dividends quarterly. The Investor
Conservative Growth Fund and the Bond Fund, however, generally declare
dividends monthly, and the Prime Money Market Fund generally declares dividends
on each business day. Dividends are distributed on the first business day of
the next month after they are declared.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment.
DIVIDEND REINVESTMENT. You automatically will receive all income dividends and
capital gains distributions in additional shares of the same Fund and class.
The value of the shares distributed is the NAV determined immediately following
the dividend record date.
--------------------------------------------------------------------------------
Tax Treatment of Shareholders
Taxation of Distributions.
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses) and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) on at least an
annual basis.
Taxation of Retirement Plans
Distributions by the Funds to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for tax-
exempt treatment or by an individual who has received shares as a distribution
from a retirement plan, the distributions will be taxable to the plan or
individual. If you are considering purchasing shares with qualified retirement
plan assets, you should consult your tax advisor for a more complete
explanation of the federal, state, local and (if applicable) foreign tax
consequences of making such an investment.
------
40
<PAGE>
Taxation of Zero Coupon Securities
The Bond Fund may acquire certain securities issued with original issue
discount (including zero coupon securities). Current federal tax laws require
that a holder (such as a Fund) of such a security must include in taxable
income a portion of the original issue discount which accrues during the tax
year on such security even if a Fund receives no payment in cash on the
security during the year. As an investment company, a Fund must pay out
substantially all of its net investment income each year, including any
original issue discount. Accordingly, a Fund may be required to pay out in
income distribution each year an amount which is greater than the total amount
of cash interest a Fund actually received. Such distributions will be made from
the cash assets of a Fund or by liquidation of investments if necessary. If a
distribution of cash necessitates the liquidation of investments, Banc One
Investment Advisors will select which securities to sell.
--------------------------------------------------------------------------------
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please contact the
Bank One Corporation Savings and Investment Plan at 1-888-506-401K.
------
41
<PAGE>
ONE GROUP(R)
------------------
Management of One Group Mutual Funds
--------------------------------------------------------------------------------
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment
program. Banc One Investment Advisors performs its responsibilities subject to
the supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor to
the Trust since its inception. In addition, Banc One Investment Advisors serves
as investment advisor to other mutual funds and individual corporate,
charitable and retirement accounts. As of June 30, 2000, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $131 billion in assets.
--------------------------------------------------------------------------------
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
annual rate
as percentage of
fund average daily net assets
<S> <C>
One Group(R) Prime Money Market Fund .32%
---------------------------------------------------------------------
One Group(R) Bond Fund .39%
---------------------------------------------------------------------
One Group(R) Mid Cap Growth Fund .73%
---------------------------------------------------------------------
One Group(R) Large Cap Growth Fund .69%
---------------------------------------------------------------------
One Group(R) Diversified Equity Fund .72%
---------------------------------------------------------------------
One Group(R) Equity Index Fund .15%
---------------------------------------------------------------------
One Group(R) Investor Growth & Income Fund .02%
---------------------------------------------------------------------
One Group(R) Investor Conservative Growth
Fund .02%
---------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
The Fund Managers
The Funds are managed by teams of Fund managers, research analysts and other
investment management professionals. For all the Funds, except the
International Equity Index Fund and the Equity Index Fund, each team member
makes recommendations about the securities in the Funds. The research analysts
provide in-depth industry analysis and recommendations, while the portfolio
managers determine strategy, industry weightings, Fund holdings and cash
positions.
------
42
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand the Funds'
performance for the last five years or the period of the Funds' operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Funds (assuming
reinvestment of all dividends and distributions). This information for the
Funds has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Funds' financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
PRIME MONEY MARKET FUND
CLASS I 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.054 0.049 0.053 0.051 0.054
Distributions:
Net investment income (0.054) (0.049) (0.053) (0.051) (0.054)
------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------
Total Return 5.51% 4.98% 5.39% 5.20% 5.49%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $6,224,509 $5,398,206 $2,616,698 $2,563,768 $2,186,562
Ratio of expenses to
average net assets 0.52% 0.50% 0.51% 0.48% 0.44%
Ratio of net investment
income to average net
assets 5.39% 4.79% 5.26% 5.06% 5.34%
Ratio of expenses to
average net assets* 0.55% 0.54% 0.58% 0.56% 0.55%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED SIX MONTHS ENDED ------------------------------------------
BOND FUND CLASS I JUNE 30, 2000 JUNE 30, 1999(A) 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01
----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.65 0.35 0.65 0.66 0.68 0.63
Net realized and
unrealized gains
(losses) from
investments (0.26) (0.44) 0.19 0.32 (0.18) 1.45
----------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.39 (0.09) 0.84 0.98 0.50 2.08
----------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.65) (0.35) (0.65) (0.66) (0.68) (0.64)
Total Distributions (0.65) (0.35) (0.65) (0.66) (0.68) (0.64)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.08 $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45
----------------------------------------------------------------------------------------------------
Total Return 3.94% (0.87%)(B) 8.17% 9.97% 5.08% 23.75%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,687,041 $1,330,527 $1,277,246 $1,101,894 $757,627 $485,851
Ratio of expenses to
average net assets 0.60% 0.64%(C) 0.64% 0.61% 0.66% 0.74%
Ratio of net investment
income to average net
assets 6.44% 6.65%(C) 6.10% 6.41% 6.71% 6.39%
Ratio of expenses to
average net assets* 0.83% 0.75%(C) 0.64% 0.61% 0.66% 0.74%
Portfolio turnover(D) 16.19% 10.89% 34.69% 17.60% 24.92% 41.91%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Upon reorganizing as a fund of One Group Mutual Funds, the Pegasus Bond
Fund became the One Group Bond Fund. The Financial Highlights for the
periods prior to March 22, 1999 represent the Pegasus Bond Fund. (B) Not
annualized. (C) Annualized. (D) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
------
43
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand the Funds'
performance for the last five years or the period of the Funds' operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Funds (assuming
reinvestment of all dividends and distributions). This information for the
Funds has been audited by PricewaterhouseCoopers LLP whose report, along with
the Funds' financial statements, is incorporated by reference in the Statement
of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
MID CAP GROWTH FUND
CLASS I 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 25.32 $ 22.51 $ 19.46 $ 18.81 $ 18.40
------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.10) (0.07) (0.07) 0.25 0.20
Net realized and
unrealized gains
(losses) from
investments 8.59 5.58 5.70 3.59 3.83
------------------------------------------------------------------------------
Total from Investment
Activities 8.49 5.51 5.63 3.84 4.03
------------------------------------------------------------------------------
Distributions:
Net investment income - - - (0.25) (0.20)
In excess of net
investment income - - - (0.02) -
Net realized gains (4.08) (2.70) (2.58) (2.92) (3.42)
Total Distributions (4.08) (2.70) (2.58) (3.19) (3.62)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 29.73 $ 25.32 $ 22.51 $ 19.46 $ 18.81
------------------------------------------------------------------------------
Total Return 36.65% 28.39% 31.11% 22.75% 24.63%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,624,824 $1,164,884 $868,901 $623,911 $532,525
Ratio of expenses to
average net assets 0.99% 0.99% 1.00% 0.99% 1.00%
Ratio of net investment
income to average net
assets (0.38%) (0.35%) (0.36%) 1.32% 1.15%
Ratio of expenses to
average net assets* 0.99% 0.99% 1.00% 0.99% 1.01%
Portfolio turnover(A) 181.78% 141.46% 158.43% 301.35% 435.30%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------
LARGE CAP GROWTH FUND
CLASS I 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 26.15 $ 22.71 $ 19.44 $ 15.44 $ 13.47
----------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) (0.03) - 0.04 0.12 0.18
Net realized and
unrealized gains
(losses) from
investments 3.90 5.80 6.13 4.79 2.14
----------------------------------------------------------------------------------
Total from Investment
Activities 3.87 5.80 6.17 4.91 2.32
----------------------------------------------------------------------------------
Distributions:
Net investment income - - (0.02) (0.11) (0.18)
Net realized gains (3.34) (2.36) (2.88) (0.80) (0.17)
Total Distributions (3.34) (2.36) (2.90) (0.91) (0.35)
----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 26.68 $ 26.15 $ 22.71 $ 19.44 $ 15.44
----------------------------------------------------------------------------------
Total Return 15.30% 28.78% 35.75% 33.11% 17.36%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $3,118,107 $3,052,729 $1,510,521 $1,142,864 $745,986
Ratio of expenses to
average net assets 0.94% 0.96% 0.99% 0.99% 0.96%
Ratio of net investment
income to average net
assets (0.12%) 0.07% 0.21% 0.69% 1.20%
Ratio of expenses to
average net assets* 0.94% 0.96% 0.99% 0.99% 0.99%
Portfolio turnover(A) 123.21% 86.34% 117.34% 57.17% 35.51%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
44
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand the Funds'
performance for the last five years or the period of the Funds' operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Funds (assuming
reinvestment of all dividends and distributions). This information for the
Funds has been audited by PricewaterhouseCoopers LLP whose report, along with
the Funds' financial statements, is incorporated by reference in the Statement
of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, MARCH 26,
------------------------------------------ 1996 TO
DIVERSIFIED EQUITY FUND JUNE 30,
CLASS I 2000 1999 1998 1997 1999(A)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 15.19 $ 13.51 $ 11.51 $ 10.39 $ 10.00
-----------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.03 0.05 0.08 0.11 0.03
Net realized and
unrealized gains
(losses) from
investments 0.72 2.52 3.36 2.85 0.39
-----------------------------------------------------------------------------------
Total from Investment
Activities 0.75 2.57 3.44 2.96 0.42
-----------------------------------------------------------------------------------
Distributions:
Net investment income (0.02) (0.05) (0.08) (0.11) (0.03)
Net realized gains (0.87) (0.84) (1.36) (1.73) -
Total Distributions (0.89) (0.89) (1.44) (1.84) (0.03)
-----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 15.05 $ 15.19 $ 13.51 $ 11.51 $ 10.39
-----------------------------------------------------------------------------------
Total Return 5.23% 20.72% 32.26% 31.97% 10.49%(B)(C)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,895,968 $2,089,940 $630,340 $430,837 $191,212
Ratio of expenses to
average net assets 0.95% 0.95% 0.98% 0.98% 0.95%(D)
Ratio of net investment
income to average net
assets 0.20% 0.42% 0.66% 1.06% 1.13%(D)
Ratio of expenses to
average net assets* 0.95% 0.95% 0.98% 1.00% 1.04%(D)
Portfolio turnover(E) 37.98% 50.82% 62.37% 113.17% 65.21%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from date reorganized as a fund of One Group Mutual Funds. (B)
Represents total return for Class A Shares from December 1, 1995 through
March 25, 1996 plus total return for Class I Shares for the period from
March 26, 1996 through June 30, 1996. (C) Not annualized. (D) Annualized.
(E) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
EQUITY INDEX FUND CLASS
I 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 31.79 $ 27.16 $ 21.80 $ 16.66 $ 14.03
------------------------------------------------------------------------------
Investment Activities:
Net investment income
(loss) 0.31 0.31 0.33 0.35 0.33
Net realized and
unrealized gains
(losses) from
investments 1.86 5.54 5.98 5.27 3.16
------------------------------------------------------------------------------
Total from Investment
Activities 2.17 5.85 6.31 5.62 3.49
------------------------------------------------------------------------------
Distributions:
Net investment income (0.30) (0.30) (0.32) (0.33) (0.33)
In excess of net
investment income - - - - (0.01)
Net realized gains (0.45) (0.92) (0.63) (0.15) (0.52)
Total Distributions (0.75) (1.22) (0.95) (0.48) (0.86)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 33.21 $ 31.79 $ 27.16 $ 21.80 $ 16.66
------------------------------------------------------------------------------
Total Return 6.86% 22.50% 29.73% 34.30% 25.47%
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000) $1,987,505 $1,855,947 $671,422 $480,819 $321,058
Ratio of expenses to
average net assets 0.35% 0.35% 0.35% 0.30% 0.30%
Ratio of net investment
income to average net
assets 0.95% 1.14% 1.37% 1.87% 2.18%
Ratio of expenses to
average net assets* 0.57% 0.57% 0.62% 0.61% 0.59%
Portfolio turnover(A) 7.89% 5.37% 4.32% 5.81% 9.08%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
------
45
<PAGE>
ONE GROUP(R)
------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand the Funds'
performance for the last five years or the period of the Funds' operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Funds (assuming
reinvestment of all dividends and distributions). This information for the
Funds has been audited by PricewaterhouseCoopers LLP whose report, along with
the Funds' financial statements, is incorporated by reference in the Statement
of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------- DECEMBER 10,
INVESTOR GROWTH & INCOME FUND 1996 THROUGH
CLASS I 2000 1999 1998 JUNE 30, 1997(A)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 13.29 $ 12.57 $ 10.93 $ 10.00
--------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.43 0.35 0.25 0.15
Net realized and unrealized gains
(losses) from investments 0.63 1.32 1.92 0.93
--------------------------------------------------------------------------------
Total from Investment Activities 1.06 1.67 2.17 1.08
--------------------------------------------------------------------------------
Distributions:
Net investment income (0.42) (0.48) (0.25) (0.15)
Net realized gains (0.09) (0.47) (0.28) -
Total Distributions (0.51) (0.95) (0.53) (0.15)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.84 $ 13.29 $ 12.57 $ 10.93
--------------------------------------------------------------------------------
Total Return 8.10% 14.11% 20.34% 10.87%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $207,040 $209,770 $98,060 $43,660
Ratio of expenses to average net
assets 0.20% 0.20% 0.20% 0.20%(C)
Ratio of net investment income to
average net assets 3.14% 3.70% 2.17% 2.78%(C)
Ratio of expenses to average net
assets* 0.28% 0.27% 0.34% 0.66%(C)
Portfolio turnover(D) 21.50% 17.87% 11.38% 18.07%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, DECEMBER 10,
------------------------- 1996 THROUGH
INVESTOR CONSERVATIVE GROWTH FUND JUNE 30,
CLASS I 2000 1999 1998 1997(A)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.20 $ 11.06 $ 10.33 $ 10.00
-----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.52 0.47 0.46 0.26
Net realized and unrealized gains
(losses) from investments (0.03) 0.28 0.82 0.33
-----------------------------------------------------------------------------
Total from Investment Activities 0.49 0.75 1.28 0.59
-----------------------------------------------------------------------------
Distributions:
Net investment income (0.52) (0.48) (0.45) (0.26)
Net realized gains (0.08) (0.13) (0.10) -
Total Distributions (0.60) (0.61) (0.55) (0.26)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.09 $ 11.20 $ 11.06 $ 10.33
-----------------------------------------------------------------------------
Total Return 4.52% 7.01% 12.70% 6.00%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $52,294 $37,131 $30,352 $15,038
Ratio of expenses to average net
assets 0.20% 0.20% 0.20% 0.20%(C)
Ratio of net investment income to
average net assets 4.66% 4.31% 4.43% 4.92%(C)
Ratio of expenses to average net
assets* 0.30% 0.32% 0.56% 1.46%(C)
Portfolio turnover(D) 23.76% 9.73% 3.22% 28.46%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
------
46
<PAGE>
ONE GROUP(R)
-------------------
Appendix A
--------------------------------------------------------------------------------
Investment Practices
The Funds and Investor Portfolios (as the underlying investments of the
Investor Growth & Income Fund and the Investor Conservative Growth Fund) invest
in a variety of securities and employ a number of investment techniques. Each
security and technique involves certain risks. What follows is a list of some
of the securities and techniques utilized by the Funds and the Investor
Portfolios, as well as the risks inherent in their use. Equity securities are
subject mainly to market risk. Fixed income securities are primarily influenced
by market, credit and prepayment risks, although certain securities may be
subject to additional risks. For a more complete discussion, see the Statement
of Additional Information. Following the table is a more complete discussion of
risk.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
-------------------------------------------
<S> <C>
One Group(R) Prime Money
Market Fund 1
-------------------------------------------
One Group(R) Bond Fund 2
-------------------------------------------
One Group(R) Mid Cap Growth
Fund 3
-------------------------------------------
One Group(R) Large Cap Growth
Fund 4
-------------------------------------------
One Group(R) Diversified
Equity Fund 5
-------------------------------------------
One Group(R) Equity Index Fund 6
-------------------------------------------
One Group(R) Investor Growth &
Income Fund 7
-------------------------------------------
One Group(R) Investor
Conservative Growth Fund 8
</TABLE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-----------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS and 1-8 Market
CUBES.
-----------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs and CATS. 1-8 Market
-----------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by 1-8 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae and Freddie Mac.
-----------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a stated 1-8 Market
maturity. Credit
Liquidity
-----------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in 1-8 Liquidity
exchange for the deposit of funds. Credit
Market
-----------------------------------------------------------------------------
Common Stock: Shares of ownership of a company. 3-8 Market
-----------------------------------------------------------------------------
</TABLE>
------
47
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements: The purchase of a security and the 1-8 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
-------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a security and the 1-8 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Fund.
-------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% of the Fund's 1-8 Credit
total assets. In return the Fund will receive cash, other Market
securities, and/or letters of credit as collateral. Leverage
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: Purchase or 1-8 Market
contract to purchase securities at a fixed price for delivery Leverage
at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other mutual funds, 1-8 Market
including One Group money market funds and shares of other
money market funds for which Banc One Investment Advisors or
its affiliates serve as investment advisor or administrator.
Banc One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment advisor.
-------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock that can 2-8 Market
convert to common stock. Credit
-------------------------------------------------------------------------------
Call and Put Options: A call option gives the buyer the right 2-8 Management
to buy, and obligates the seller of the option to sell, a Liquidity
security at a specified price at a future date. A put option Credit
gives the buyer the right to sell, and obligates the seller of Market
the option to buy, a security at a specified price at a future Leverage
date. The Funds will sell only covered call and secured put
options.
-------------------------------------------------------------------------------
Futures and Related Options: A contract providing for the 2-8 Management
future sale and purchase of a specified amount of a specified Market
security, class of securities, or an index at a specified time Credit
in the future and at a specified price. Liquidity
Leverage
-------------------------------------------------------------------------------
Real Estate Investment Trusts ("REITs"): Pooled investment 2-8 Liquidity
vehicles which invest primarily in income-producing real Management
estate or real estate related loans or interest. Market
Regulatory
Tax
Prepayment
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time drafts drawn 1-8 Credit
on and accepted by a commercial bank. Maturities are generally Liquidity
six months or less. Market
-------------------------------------------------------------------------------
</TABLE>
------
48
<PAGE>
<TABLE>
<CAPTION>
Risk
Instrument Fund Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper: Secured and unsecured short-term 1-8 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few days to Market
nine months.
-------------------------------------------------------------------------------
Extendable Commercial Notes: Variable rate notes which 1, 7, 8 Market
normally mature within a short period of time (e.g., one Credit
month) but which may be extended by the issuer for a Liquidity
maximum maturity of 13 months.
-------------------------------------------------------------------------------
Foreign Securities: Stocks issued by foreign companies, 1-8 Market
as well as commercial paper of foreign issuers and Political
obligations of foreign banks, overseas branches of U.S. Liquidity
banks and supranational entities. Includes American Foreign
Depositary Receipts and Global Depositary Receipts, Investment
American Depositary Securities, and European Depositary
Receipts.
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered under 1-8 Liquidity
the Securities Act of 1933, such as privately placed Market
commercial paper and Rule 144A securities.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations with 1-8 Credit
interest rates which are reset daily, weekly, quarterly Liquidity
or some other period and which may be payable to the Market
Fund on demand.
-------------------------------------------------------------------------------
Rights and Warrants: Securities, typically issued with 4-8 Market
preferred stock or bonds, that give the holder the right Credit
to buy a proportionate amount of common stock at a
specified price.
-------------------------------------------------------------------------------
Preferred Stock: A class of stock that generally pays a 2-8 Market
dividend at a specified rate and has preference over
common stock in the payment of dividends and in
liquidation.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations secured by 1, 2, 7, 8 Prepayment
real estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs"), and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
-------------------------------------------------------------------------------
Corporate Debt Securities: Corporate bonds and non- 2, 4, 7, 8 Market
convertible debt securities. Credit
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to puts and 1, 2, 7, 8 Market
standby commitments to purchase the securities at a Liquidity
fixed price (usually with accrued interest) within a Management
fixed period of time following demand by a Fund.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company 1, 2, 7, 8 Prepayment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities Credit
backed by other types of receivables or other assets. Regulatory
-------------------------------------------------------------------------------
</TABLE>
------
49
<PAGE>
<TABLE>
<CAPTION>
Risk
Instrument Fund Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Mortgage Dollar Rolls: A transaction in which a Fund 2, 7, 8 Prepayment
sells securities for delivery in a current month and Market
simultaneously contracts with the same party to Regulatory
repurchase similar but not identical securities on a
specified future date.
-------------------------------------------------------------------------------
Adjustable Rate Mortgage Loans ("ARMS"): Loans in a 2, 7, 8 Prepayment
mortgage pool which provide for a fixed initial mortgage Market
interest rate for a specified period of time, after Credit
which the rate may be subject to periodic adjustments. Regulatory
-------------------------------------------------------------------------------
Swaps, Caps and Floors: A Fund may enter into these 2-8 Management
transactions to manage its exposure to changing interest Credit
rates and other factors. Swaps involve an exchange of Liquidity
obligations by two parties. Caps and floors entitle a Market
purchaser to a principal amount from the seller of the
cap or floor to the extent that a specified index
exceeds or falls below a predetermined interest rate or
amount.
-------------------------------------------------------------------------------
New Financial Products: New options and futures 2-8 Management
contracts and other financial products continue to be Credit
developed and the Funds may invest in such options, Market
contracts and products. Liquidity
-------------------------------------------------------------------------------
Structured Instruments: Debt securities issued by 2-5, 7-8 Market
agencies and instrumentalities of the U.S. government, Liquidity
banks, municipalities, corporations and other businesses Management
whose interest and/or principal payments are indexed to Credit
foreign currency exchange rates, interest rates, or one Foreign
or more other referenced indices. Investment
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state or 1, 2, 7, 8 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as Tax
General Obligation Notes, Tax Anticipation Notes, Bond Regulatory
Anticipation Notes, Revenue Anticipation Notes, Project
Notes, other short-term tax-exempt obligations,
municipal leases, obligations of municipal housing
authorities and single family revenue bonds.
-------------------------------------------------------------------------------
Obligations of Supranational Agencies: Obligations of 7-8 Credit
supranational agencies which are chartered to promote Foreign
economic development and are supported by various Investment
governments and governmental agencies.
-------------------------------------------------------------------------------
</TABLE>
------
50
<PAGE>
<TABLE>
<CAPTION>
Fund Risk
Instrument Code Type
-------------------------------------------------------------------------------
<S> <C> <C>
Currency Futures and Related Options: The Funds may engage 7-8 Management
in transactions in financial futures and related options, Liquidity
which are generally described above. The Funds will enter Credit
into these transactions in foreign currencies for hedging Market
purposes only. Political
Leverage
Foreign
Investment
-------------------------------------------------------------------------------
Forward Foreign Exchange Transactions: Contractual 7-8 Management
agreement to purchase or sell one specified currency for Liquidity
another currency at a specified future date and price. The Credit
Funds will enter into forward foreign exchange Market
transactions for hedging purposes only. Political
Leverage
Foreign
Investment
-------------------------------------------------------------------------------
Index Shares: Ownership interests in unit investment 3-8 Market
trusts and other pooled investment vehicles that hold a
portfolio of securities or stocks designed to track the
price performance and dividend yield of a particular index
such as Standard & Poor's Depository Receipts ("SPDRs")
and Nasdaq 100's. The Equity Index Fund only invests in
SPDRs.
-------------------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other debt that pay 2, 7, 8 Credit
no interest, but are issued at a discount from their value Market
at maturity. When held to maturity, their entire return Zero Coupon
equals the difference between their issue price and their
maturity value.
-------------------------------------------------------------------------------
Zero-Fixed-Coupon Debt Securities: Zero coupon debt 2, 7, 8 Credit
securities which convert on a specified date to interest Market
bearing debt securities. Zero Coupon
-------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative multi- 2, 7, 8 Prepayment
class mortgage securities usually structured with two Market
classes of shares that receive different proportions of Credit
the interest and principal from a pool of mortgage-backed Regulatory
obligations. These include IOs and POs.
-------------------------------------------------------------------------------
Inverse Floating Rate Instruments: Floating rate debt 2, 7, 8 Market
instruments with interest rates that reset in the opposite Leverage
direction from the market rate of interest to which the Credit
inverse floater is indexed.
-------------------------------------------------------------------------------
Loan Participations and Assignments: Participations in, or 2, 7, 8 Credit
assignments of all or a portion of loans to corporations Political
or to governments, including governments of the less Liquidity
developed countries ("LDCs"). Foreign
Investment
Market
-------------------------------------------------------------------------------
</TABLE>
------
51
<PAGE>
<TABLE>
<CAPTION>
Risk
Instrument Fund Code Type
------------------------------------------------------------------------------
<S> <C> <C>
Fixed Rate Mortgage Loans: Investments in fixed rate 2, 7, 8 Credit
mortgage loans or mortgage pools which bear simple Prepayment
interest at fixed annual rates and have short- to long- Regulatory
term final maturities. Market
------------------------------------------------------------------------------
Short-Term Funding Agreements: Agreements issued by 1, 2, 7, 8 Credit
banks and highly rated U.S. insurance companies such as Liquidity
Guaranteed Investment Contracts ("GICs") and Bank Market
Investment Contracts ("BICs").
------------------------------------------------------------------------------
Participation Interests: Interests in municipal 1 Credit
securities, including municipal leases, from financial Tax
institutions such as commercial and investment banks, Market
savings and loan associations and insurance companies. Investment
These interests may take the form of participations, Risks
beneficial interests in a trust, partnership interests
or any other form of indirect ownership that allows the
Funds to treat the income from the investment as exempt
from federal income tax.
</TABLE>
--------------------------------------------------------------------------------
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
. Credit Risk. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to
actual default as its credit status deteriorates and the probability of
default rises.
. Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also may
be embedded directly in the characteristics of other securities.
Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
Fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching between
the derivative and underlying security, and there can be no assurance that
a Fund's hedging transactions will be effective.
Speculative. To the extent that a derivative is not used as a hedge, the
Fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
. Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller
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may have to lower the price, sell other securities instead or forego an
investment opportunity, any of which could have a negative effect on Fund
management or performance. This includes the risk of missing out on an
investment opportunity because the assets necessary to take advantage of it
are tied up in less-advantageous investments.
. Management Risk. The risk that a strategy used by a Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
. Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. There is
also the risk that the current interest rate may not accurately reflect
existing market rates. For fixed income securities, market risk is largely,
but not exclusively, influenced by changes in interest rates. A rise in
interest rates typically causes a fall in values, while a fall in rates
typically causes a rise in values. Finally, key information about a security
or market may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
. Political Risk. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
. Foreign Investment Risk. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S.
dollar denominated debt, thereby increasing credit risk.
. Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage- or
asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and yield
volatility. Prepayments generally accelerate when interest rates decline.
When mortgage and other obligations are prepaid, a Fund may have to reinvest
in securities with a lower yield. Further, with early prepayment, a Fund may
fail to recover any premium paid, resulting in an unexpected capital loss.
. Tax Risk. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which could cause
adverse tax consequences. Also, the risk that the tax treatment of municipal
or other securities could be changed by Congress thereby affecting the value
of outstanding securities.
. Regulatory Risk. The risk associated with federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses and state usury laws.
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. Zero Coupon Risk. The market prices of securities structured as zero coupon
or pay-in-kind securities are generally affected to a greater extent by
interest rate changes. These securities tend to be more volatile than
securities which pay interest periodically.
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ONE GROUP(R)
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Investment Practices of the Underlying Funds
The following is a brief description of the principal investment policies of
each of the underlying funds.
One Group Prime Money Market Fund
One Group Prime Money Market Fund seeks current income with liquidity and
stability of principal by investing exclusively in high-quality, short-term
money market instruments. These instruments include corporate notes, commercial
paper, funding agreements, certificates of deposit, bank obligations and
deposit notes. The Fund will concentrate in the financial services industry,
including asset-backed commercial paper programs. The Fund intends to comply
with the regulations of the Securities and Exchange Commission applicable to
money market funds using the amortized cost method for calculating net asset
value. These regulations impose certain quality, maturity and diversification
restraints on investments by the Fund. Under these regulations, the Fund will
invest only in U.S. dollar-denominated securities, will maintain an average
maturity on a dollar-weighted basis of 90 days or less, and will acquire only
"eligible securities" that present minimal credit risks and are treated as
having a maturity of 397 days or less.
One Group Short-Term Bond Fund
One Group Short-Term Bond Fund seeks current income consistent with
preservation of capital through investment in high- and medium-grade fixed-
income securities. The Fund normally invests at least 80% of total assets in
debt securities of all types with short to intermediate maturities. Debt
securities include bonds, notes and other obligations. At least 65% of the
Fund's total assets will consist of bonds rated in one of the four highest
investment grade categories at the time of investment, or if unrated,
determined by Banc One Investment Advisors to be of comparable quality, some of
which may be subject to repurchase agreements. Many investments will satisfy
both requirements. Under normal market conditions, it is anticipated that the
Fund's average weighted maturity ordinarily will be three years taking into
account expected amortization and prepayment of principal on certain
investments, although for temporary defensive purposes the effective average
weighted maturity may exceed three years. The Fund may also purchase taxable or
tax-exempt municipal securities. Up to 20% of the Fund's total assets may be
invested in preferred stocks.
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One Group Intermediate Bond Fund
One Group Intermediate Bond Fund seeks current income consistent with the
preservation of capital through investments in high- and medium-grade fixed-
income securities with intermediate maturities. The Fund will normally invest
at least 80% of total assets in debt securities of all types. Debt securities
include bonds, notes and other obligations. At least 65% of the Fund's total
assets will consist of bonds rated in one of the four highest investment grade
categories at the time of investment, or if unrated, determined by Banc One
Investment Advisors to be of comparable quality, and at least 50% of total
assets will consist of obligations issued by the U.S. government or its
agencies and instrumentalities, some of which may be subject to repurchase
agreements. Many investments will satisfy both requirements. The Fund also may
invest in more speculative debt securities if they present attractive
opportunities and are rated in the lowest investment grade category. The Fund
may also purchase taxable or tax-exempt municipal securities. Under normal
market conditions, it is anticipated that the Fund's average weighted maturity
will range between three and ten years. Up to 20% of the Fund's total assets
may be invested in preferred stocks.
One Group Income Bond Fund
One Group Income Bond Fund seeks a high level of current income by investing
primarily in a diversified portfolio of high-, medium- and low-grade debt
securities. The Fund normally will invest at least 70% of its total assets in
debt securities of all types rated as investment grade at the time of
investment or, if unrated, determined by Banc One Investment Advisors to be of
comparable quality. In addition, up to 30% of the Fund's total assets may be
invested in convertible securities, preferred stock, loan participations and
debt securities rated below investment grade or, if unrated, determined by Banc
One Investment Advisors to be of comparable quality. Securities rated below
investment grade are called "high yield bonds," "non-investment grade bonds"
and "junk bonds." These securities are rated in the fifth or lower rating
categories, for example, BB or lower by Standard & Poor's Corporation ("S&P")
and Ba or lower by Moody's Investors Service, Inc. ("Moody's"), and are
considered to have speculative characteristics. Even though it may invest in
debt securities in all rating categories, the Fund will not invest more than
20% of its total assets in securities rated below the fifth rating category. As
a matter of fundamental policy, at least 65% of the Fund's total assets will
consist of bonds. The Fund also may purchase taxable or tax-exempt municipal
securities.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range between five and 20 years. The Fund may shorten
its effective weighted average maturity to as little as two years if deemed
appropriate for temporary defensive purposes.
One Group Bond Fund
One Group Bond Fund seeks to maximize total return by investing primarily in a
diversified portfolio of intermediate- and long-term debt securities. The Fund
invests in all types of debt securities rated as investment grade, as well as
convertible securities, preferred stock and loan participations. The Fund's
average weighted maturity will normally range between four and 12 years,
although the Fund may shorten its weighted average maturity if deemed
appropriate for temporary defensive purposes. The Fund invests at least 65% of
its total assets in debt securities of all types with intermediate to long
maturities. As a matter of fundamental policy, at least 65% of the Fund's total
assets will consist of bonds. The Fund also may purchase taxable or tax-exempt
municipal securities.
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One Group High Yield Bond Fund
The Fund seeks a high level of current income by investing primarily in a
diversified portfolio of debt securities which are rated below investment grade
or unrated. Capital appreciation is a secondary objective. The Fund invests in
all types of high yield, high-risk debt securities. The Fund also may invest in
convertible securities, preferred stock, common stock and loan participations.
The Fund's weighted average maturity will normally range between five and ten
years, although the Fund may shorten its weighted average maturity to as little
as two years if deemed appropriate for temporary defensive purposes. The Fund
normally invests at least 80% of the Fund's total assets in debt securities
which are rated below investment grade or unrated, although the Fund may invest
up to 100% of the Fund's total assets in such securities. Securities rated
below investment grade are called "high yield bonds," "non-investment grade
bonds," "below investment grade bonds" and "junk bonds." These securities are
rated in the fifth or lower rating categories (for example, BB or lower by S &
P and Ba or lower by Moody's), and are considered to be speculative. The Fund
also may invest up to 20% of its total assets in other securities, including
investment grade debt securities. As a matter of fundamental policy, at least
65% of the Fund's total assets will consist of bonds.
One Group Government Bond Fund
One Group Government Bond Fund seeks a high level of current income with
liquidity and safety of principal. The Fund will limit its investments to
securities issued by the U.S. government and its agencies and instrumentalities
or related to securities issued by the U.S. government and its agencies and
instrumentalities. At least 65% of the total assets of the Fund will be
invested in obligations guaranteed as to principal and interest by the U.S.
government or its agencies and instrumentalities, some of which may be subject
to repurchase agreements, and other securities representing an interest in or
collateralized by mortgages that are issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The average weighted maturity of
the Fund is expected to be between three and 15 years, however, the Fund's
average weighted remaining maturity may be outside this range if warranted by
market conditions. The balance of the Fund's assets may be invested in debt
securities and taxable or tax-exempt municipal securities.
One Group Ultra Short-Term Bond Fund
One Group Ultra Short-Term Bond Fund seeks a high level of current income
consistent with low volatility of principal by investing in a diversified
portfolio of short-term investment grade securities. The Fund normally invests
at least 80% of its total assets in debt securities of all types, including
money market instruments. In addition, up to 20% of the Fund's total assets may
be invested in other securities, including preferred stock. The Fund will
invest in adjustable rate mortgage pass-through securities and other securities
representing an interest in or collateralized by mortgages with periodic
interest rate resets, some of which may be subject to repurchase agreements.
These securities often are issued or guaranteed by the U.S. government, its
agencies or instrumentalities. However, the Fund also may purchase mortgage-
backed securities that are issued by non-governmental entities. Such securities
may or may not have private insurer guarantees as to timely payments. The Fund
also may purchase mortgage and interest rate swaps and interest rate floors and
caps. The Fund also may employ other investment techniques to enhance returns,
such as loans of fund securities, mortgage dollar rolls, repurchase agreements,
options contracts and reverse repurchase agreements. The Fund will maintain a
maximum duration of approximately two years.
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Fund.
One Group Mid Cap Value Fund
One Group Mid Cap Value Fund seeks capital appreciation with the secondary goal
of achieving current income by investing primarily in equity securities. The
Fund will invest mainly in equity securities with below-market average price-
to-earnings and price-to-book value ratios. The issuer's soundness and earnings
prospects also will be considered. In seeking to achieve the objective of
capital appreciation, Banc One Investment Advisors looks at anticipated changes
that could positively impact the value of the company such as new products,
deployment of new technologies, cost cutting efforts and changes in management.
As a secondary consideration, Banc One Investment Advisors looks for companies
that have the potential to increase their dividends over time. If Banc One
Investment Advisors determines that a company's fundamentals are declining or
that the company's ability to pay dividends has been impaired, it likely will
eliminate the Fund's holding of the company's stock. The Fund normally invests
at least 80% of the value of its total assets in equity securities consisting
of common stocks and debt securities and preferred stocks that are convertible
into common stocks. The Fund also may enter into options and futures
transactions. The balance of the fund's assets will be held in cash
equivalents. This Fund was formerly called The One Group Disciplined Value
Fund.
One Group International Equity Index Fund
One Group International Equity Index Fund seeks to provide investment results
that correspond to the aggregate price and dividend performance of the
securities in the Gross Domestic Product Weighted Morgan Stanley Capital
International Europe, Australasia and Far East Index ("MSCI EAFE GDP Index" or
"EAFE GDP Index")./1/ The Fund normally will invest at least 65% of the value
of its total assets in foreign equity securities, which are representative of
the Index and secondarily in stock index futures. The Fund's investments will
consist of common stocks (including sponsored and unsponsored American
Depositary Receipts) and preferred stocks, securities convertible into common
stocks (only if they are listed on registered exchanges or actively traded in
the over-the-counter market), warrants and depositary receipts. No more than
10% of the Fund's net assets will be held in cash or cash equivalents. The Fund
may invest up to 10% of its net assets in securities of emerging international
markets. A substantial portion of the Fund's assets will be denominated in
foreign currencies.
One Group Diversified International Fund
One Group Diversified International Fund seeks long-term capital growth by
investing primarily in equity securities of foreign issuers. The Fund invests
primarily in the securities of companies located in Europe, Asia and Latin
America. The Fund also will invest in other regions and countries that present
attractive investment opportunities, including developing countries. In
selecting a country for investment, Banc One Investment Advisors analyzes the
global economic and political situation, as well as the securities markets of
selected countries. In selecting individual securities, Banc One Investment
Advisors selects a representative sampling of the companies comprising the
individual country's stock market index. Banc One Investment Advisors uses its
best judgment, experience and certain quantitative techniques to determine the
countries in which the Fund will invest, as well as the amount invested in each
country. Fund assets will be invested in at least three countries. The Fund
will invest at least 65% of its total assets in foreign equity securities,
consisting of common stocks (including American Depositary Receipts), preferred
stocks, rights, warrants, convertible securities, foreign currencies and
options on foreign currency, and other equity securities. Up to 20% of the
Fund's total assets may be invested in U.S. government securities, other
investment grade fixed income securities, cash and cash equivalents.
/1/"MSCI EAFE GDP Index" is a registered service mark of Morgan Stanley Capital
International, which does not sponsor and is in no way affiliated with the
Fund.
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One Group Large Cap Growth Fund
One Group Large Cap Growth Fund seeks long-term capital appreciation and growth
of income by investing primarily in equity securities. The Fund will normally
invest at least 65%, of the value of its total assets in equity securities
consisting of common stocks, warrants and any rights to purchase common stocks.
To achieve its objective, the Fund will invest primarily in equity securities
of large, well- established companies with weighted average capitalization in
excess of the market median capitalization of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index")./2/ The Fund may invest the
remainder of its assets in nonconvertible fixed income securities, repurchase
agreements, options and futures contracts, securities issued by the U.S.
government and its agencies and instrumentalities, and cash equivalents.
One Group Large Cap Value Fund
One Group Large Cap Value Fund seeks capital appreciation with the incidental
goal of achieving current income by investing primarily in equity securities.
The Fund will invest in equity securities of large-capitalization companies
that are believed to be selling below their long-term investment values. The
average weighted market capitalization of the companies in which the Fund
invests will normally exceed the median market capitalization of the S&P 500
Index. In addition, the Fund may invest in stock of companies which have
"breakup" values well in excess of current market values or which have uniquely
undervalued corporate assets. The Fund normally will invest at least 80% of the
value of its total assets in equity securities consisting of common stocks and
debt securities and preferred stocks which are convertible into common stocks.
The remainder of the Fund's assets will be held in cash equivalents.
One Group Mid Cap Growth Fund
One Group Mid Cap Growth Fund seeks growth of capital and, secondarily, current
income by investing primarily in equity securities. The Fund invests in
securities that have the potential to produce above-average earnings growth per
share over a one- to three-year period. Typically, the Fund acquires shares of
established companies with a history of above-average growth, as well as those
companies expected to enter periods of above-average growth. Not all the
securities purchased by the Fund will pay dividends. The Fund also invests in
smaller companies in emerging growth industries. At least 80% of the value of
its total assets will be invested in equity securities consisting of common
stocks and debt securities and preferred stocks that are convertible into
common stocks. The Fund also may enter into options and futures transactions.
The remainder of the Fund's assets will be held in cash equivalents.
/2/"S&P 500" is a registered trademark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund.
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One Group Diversified Mid Cap Fund
One Group Diversified Mid Cap Fund seeks long-term capital growth by investing
primarily in equity securities of companies with intermediate capitalizations.
The Fund invests primarily in equity securities of companies with market
capitalizations of $500 million to $10 billion. Banc One Investment Advisors
believes that there are many companies of this size with strong growth
potential, stable market share, and an ability to quickly respond to new
business opportunities, all of which increase their likelihood of obtaining
superior levels of profitability and investment returns. The Fund normally
invests at least 65% of its total assets in common and preferred stock, rights,
warrants, convertible securities and other equity securities. While the Fund
invests primarily in securities of U.S. companies, up to 25% of its total
assets may be invested in equity securities of foreign issuers. Up to 20% of
the Fund's total assets may be invested in U.S. government securities, other
investment grade fixed income securities, cash and cash equivalents.
One Group Diversified Equity Fund
One Group Diversified Equity Fund seeks long-term capital growth and growth of
income with a secondary objective of providing a moderate level of current
income. The Fund invests primarily in common stocks of companies that have good
fundamentals and reasonable valuations with the potential for continued
earnings growth over time. The Fund uses a multi-style approach, meaning that
it may invest across varied capitalization levels targeting both value and
growth oriented companies. Because the Fund seeks return over the long term,
Banc One Investment Advisors will not attempt to time the market. The Fund
normally will invest at least 65% of the value of its total assets in
securities with the characteristics described above.
Although the Fund intends to invest all of its assets in such securities, up to
35% of its total assets may be held in cash or invested in U.S. government
securities, other investment grade fixed-income securities, cash and cash
equivalents. This Fund was formerly called The One Group Value Growth Fund.
One Group Small Cap Growth Fund
One Group Small Cap Growth Fund seeks long-term capital growth primarily by
investing in a portfolio of equity securities of small-capitalization and
emerging growth companies. The Fund invests primarily in a portfolio of common
stocks, debt securities, preferred stocks, convertible securities, warrants and
other equity securities of small-capitalization companies. Generally, Banc One
Investment Advisors selects a portfolio of companies with a capitalization
equivalent to the median market capitalization of the S&P Small Cap 600
Index,/3/ although the Fund may occasionally hold securities of companies whose
market capitalizations are considerably larger if doing so contributes to the
Fund's investment objective. At least 65% of the value of the Fund's total
assets normally will be invested in securities with the characteristics
described above. Up to 35% of its total assets may be held in cash or invested
in U.S. government securities, other investment grade fixed-income securities
and cash equivalents.
/3/"S&P Small Cap 600" is a registered trademark of Standard & Poor's
Corporation, which does not sponsor and is in no way affiliated with the
Fund.
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One Group Small Cap Value Fund
One Group Small Cap Value Fund seeks long-term capital growth by investing
primarily in equity securities of small-capitalization companies. The Fund
invests mainly in equity securities of small domestic companies with market
capitalizations of $100 million to $3 billion. In reviewing investment
opportunities, Banc One Investment Advisors uses a value-oriented approach.
Companies are selected based upon such valuation characteristics as price-to-
earnings, price-to-book and price-to-cash flow ratios which are at a discount
to market averages. Banc One Investment Advisors also evaluates companies based
on market value, balance sheet strength, management depth and quality, market
and industry position, normalized return on capital and recent transactions
involving similar businesses. Stocks are sold based on price considerations or
when they are no longer expected to appreciate in value.
While the Fund invests primarily in securities of U.S. companies, up to 25% of
its total assets may be invested in equity securities of foreign issuers. Up to
20% of the Fund's total assets may be invested in U.S. government securities,
other investment grade fixed income securities, cash and cash equivalents.
One Group Equity Income Fund
One Group Equity Income Fund seeks current income through regular payment of
dividends with the secondary goal of achieving capital appreciation by
investing primarily in equity securities. The Fund attempts to keep its
dividend yield above the S&P 500 Index by investing in common stocks of
corporations which regularly pay dividends, although continued payment of
dividends cannot be assured. The Fund will invest primarily in stocks with
favorable, long-term fundamental characteristics, but stocks of companies that
are out of favor in the financial community also may be purchased. The Fund
normally invests at least 80% of the value of its total assets in equity
securities consisting of common stocks, and debt securities and preferred
stocks which are convertible into common stocks. The Fund also may enter into
options and futures transactions. The balance of the Fund's assets will be held
in cash equivalents. This Fund was formerly called The One Group Income Equity
Fund.
One Group Equity Index Fund
One Group Equity Index Fund seeks investment results that correspond to the
aggregate price and dividend performance of the securities in the S&P 500
Index. The Fund normally invests in many of the stocks which comprise the S&P
500 Index and secondarily in stock index futures and other equity derivatives.
Cash reserves will not normally exceed 10% of the Fund's net assets. The
Advisor generally selects stocks for the Fund in the order of their weightings
in the S&P 500 Index beginning with the heaviest-weighted stocks. The
percentage of the Fund's assets to be invested in each stock is approximately
the same as the percentage it represents in the S&P 500 Index.
One Group Technology Fund
One Group Technology Fund mainly invests in equity securities of companies that
have developed, or are expected to develop, products, processes or services
that will provide significant technological advances and improvements. These
companies may include, for example, companies that develop, produce or
distribute products in the computer, electronics and communications sectors. In
selecting investments, the Fund generally will invest in companies (regardless
of size) whose stocks appear to be trading below their true value.
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The prospectus is intended for use in connection with the Bank One Corporation
Savings and Investment Plan. If you want more information about the Funds, the
following documents are free upon request:
Annual/Semi-Annual Reports: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
How can I get more information? You can get a free copy of the semi-
annual/annual reports or the SAI, request other information or discuss your
questions about the Fund by calling 1-888-506-401K or by writing the Bank One
Corporation Savings and Investment Plan at:
BANK ONE CORPORATION SAVINGS AND INVESTMENT PLAN
MAIL CODE IL1-0002
1 BANK ONE PLAZA
CHICAGO, IL 60670-0002
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090.) You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information also
may be obtained, after paying a copying charge, by electronic request at the
following e-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
(Investment Company Act File No. 811-4236)
TOG-F-229
[LOGO OF ONE GROUP MUTUAL FUNDS]
<PAGE>
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) REAL ESTATE FUND PROSPECTUS
NOVEMBER 1, 2000
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or complete.
Anyone who tells you otherwise is committing
a crime.
<PAGE>
Table of Contents
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Real Estate Fund 5
MORE ABOUT THE FUND
Principal Investment Strategies 9
Investment Risks 9
Investment Policies 10
Portfolio Quality 10
Temporary Defensive Positions 10
Portfolio Turnover 11
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 11
Sales Charges 14
Sales Charge Reductions and Waivers 17
Exchanging Fund Shares 19
Redeeming Fund Shares 21
SHAREHOLDER INFORMATION
Voting Rights 25
Dividend Policies 25
Tax Treatment of Shareholders 26
Shareholder Statements and Reports 26
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 27
Advisory Fees 27
The Fund Managers 27
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES 28
2
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ONE GROUP(R) MUTUAL FUNDS
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PRIVACY POLICY
--------------
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
Key Definitions
---------------
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer - an individual who applies for or obtains a financial product or
service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer - a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information - any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds in
connection with providing financial products and services to that consumer
and which is not otherwise publicly available. A telephone directory
listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud, and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website, or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing you a
financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or former
customers with anyone, except as required or permitted by law. This means we may
disclose all of the information we collect, as described above, to companies who
help us maintain and service your account. For instance, we will share
information with the transfer agent for One Group Mutual Funds. The transfer
agent needs this information to process your purchase, redemption and exchange
transactions and to update your account. In addition, we may share nonpublic
personal information to protect against fraud, to respond to subpoenas, or as
described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries that
perform marketing services on our behalf and with which we have joint marketing
agreements. However, we only provide information about you to that broker-dealer
or financial intermediary from whom you purchased your One Group shares. In
addition, our joint marketing agreements prohibit recipients of this information
from disclosing or using the information for any purpose other than the purposes
for which it is provided to them.
3
<PAGE>
Children's Online Privacy Act Disclosure
----------------------------------------
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to respond
directly to that child, seek parental consent or provide parental notice. We are
not responsible for the data collection and use practices of nonaffiliated third
parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic, and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
4
<PAGE>
Fund Summary: Investments, Risk & Performance
ONE GROUP REAL ESTATE FUND
What is the Goal of the Real Estate Fund?
The Fund seeks to provide current income and long-term growth of capital.
What Are the Real Estate Fund's Main Investment Strategies?
The Fund mainly invests in equity securities of companies operating in the real
estate industry. "Real estate companies" are companies that earn at least 50% of
their revenues from owning, constructing, financing, managing, or selling
different types of real estate (i.e., commercial, residential, or industrial).
It also includes companies that have at least 50% of their assets in real
estate. These companies include real estate investment trusts or REITs. For more
information about the Real Estate Fund's investment strategies, please read
"More About the Fund" and "Principal Investment Strategies."
What is a REIT?
A REIT or a real estate investment trust is a pooled investment vehicle which
invests in income producing real estate or real estate loans. REITs are
classified as equity REITs, mortgage REITs, or a combination of equity and
mortgage REITs. Equity REITs mainly invest directly in real estate and obtain
income from the collecting rent. Mortgage REITS invest in mortgages and obtain
income from collecting interest payments on the mortgages. REITs are not taxed
on income distributed to shareholders if they comply with several requirements
of the Internal Revenue Code.
What are the Main Risks of Investing in the Real Estate Fund?
The main risks of investing in the Real Estate Fund and the circumstances likely
to adversely affect your investment are described below. The share price of the
Real Estate Fund will change every day in response to interest rates and other
market conditions. You may lose money if you invest in the Real Estate Fund. For
additional information on risk, please read "Investment Risks."
Real Estate Securities: The Real Estate Fund's investments in real estate
securities are subject to the same risks as direct investments in real
estate. Real estate values rise and fall in response to many factors,
including local, regional and national economic conditions, the demand for
rental property, and interest rates. When economic growth is slowing,
demand for property decreases and prices may fall. Rising interest rates,
which drive up mortgage and financing costs, can inhibit construction,
purchases, and sales of property. Property values could decrease because of
overbuilding, extended vacancies, increase in property taxes and operating
expenses, zoning laws, environmental regulations, clean-up of and liability
for environmental hazards, uninsured casualty or condemnation losses, or a
general decline in neighborhood values. The Fund's investments and your
investment may decline in response to declines in property values or other
adverse changes to the real estate market.
REIT Risk. In addition to the risks facing real estate securities, the Real
Estate Fund's investments in REITs involve unique risks. REITs may have
limited financial resources, may trade less frequently and in limited
volume and may be more volatile than other securities.
Smaller Companies. The Fund's investments in smaller, newer companies may
be riskier than investments in larger, more established companies. Small
companies may be more vulnerable to economic, market, and industry changes.
Because economic events have a greater impact on smaller companies, there
may be greater and more frequent changes in their stock price. This may
cause unexpected and frequent decreases in the value of your investment in
the Fund.
Market Risk. The Fund invests in equity securities (such as stocks) which
are more volatile and carry more risks than some other forms of investment.
The price of equity securities may rise or fall because of economic or
political changes or changes in a company's financial condition. Equity
securities are also subject to "stock
5
<PAGE>
market risk" meaning that stock prices in general (or real estate industry
stock prices in particular) may decline over short or extended periods of
time. When the value of the Fund's securities goes down, your investment in
the Fund decreases in value.
Derivative Risk. The Fund invests in securities that may be considered to
be derivatives. The value of derivative securities is dependent upon the
performance of underlying assets or securities. If the underlying assets do
not perform as expected, the value of the derivative security and your
investment in the Fund may decline. Derivatives are more volatile and are
riskier in terms of both liquidity and value than traditional investments.
Prepayment and Call Risk. As part of its main investment strategy, the Fund
invests in mortgage REITs. The issuers of these securities and other
callable securities may be able to repay principal in advance, especially
when interest rates fall. Changes in prepayment rates can affect return on
investment and yield of mortgage REITs. When mortgage and other obligations
are prepaid and when securities are called, the Fund may have to reinvest
in securities with a lower yield. The Fund may also fail to recover
additional amounts (i.e., premiums) paid for securities with higher
interest rates, premiums paid for the securities, resulting in an
unexpected capital loss.
Not Diversified. The Fund is considered non-diversified and can invest more
of its assets in securities of a single issuer than a "diversified" fund.
In addition, the Fund's investments are concentrated in the real estate
industry. This concentration increases the risk of loss to the Fund by
increasing its exposure to economic, business, political or regulatory
development that may be adverse to the real estate industry.
Not FDIC insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its affiliates and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
This section normally would include a bar chart and average annual total return
table. The Real Estate Fund began operations on ______________________ and does
not have a full calendar year of investment returns at the date of this
prospectus.
6
<PAGE>
Fees and Expenses of the Real Estate Fund
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly
from your investment)(1) Class A Class B Class C Class I
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering 5.25% none none none
price)(2)
Maximum Deferred Sales Charge
(Load)(as a percentage of
original purchase price of none(2) 5.00% 1.00% none
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Investment Advisory Fees .74% .74% .74% .74%
Distribution [and/or Service] .35% 1.00% 1.00% none
(12b-1) Fees
Other Expenses(3) .50% .50% .50% .50%
Total Annual Fund Operating 1.59% 2.24% 2.24% 1.24%
Expenses
Fee Waiver and/or Expense (.24%) (.14%) (.14%) (.14%)
Reimbursement(4)
Net Expenses 1.35% 2.10% 2.10% 1.10%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information is estimated based on amounts for the current fiscal
year.
(4) Banc One Investment Advisors Corporation and the Administrator have agreed
to contractually waive fees and/or reimburse expenses to limit total annual
fund operating expenses to 1.35% for Class A shares, 2.10% for Class B
shares, 2.10% for Class C shares, and 1.10% for Class I shares for the
period beginning November 1, 2000, and ending on October 31, 2001.
7
<PAGE>
EXAMPLES
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or if you continue to hold
them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
Class B(2) Class C Class I
Class A Class B(2) Assuming Class C Assuming
Assuming no redemption Assuming no redemption
redemption at the end of redemption the at end
each period of each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1).......... $ 655 $ 213 $ 713 $ 213 $ 313 $ 112
3 Years............ $ 978 $ 687 $ 987 $ 687 $ 687 $ 380
5 YearS............ $1,324 $1,187 $1,387 $1,187 $1,187 $ 668
10 Years........... $2,296 $2,400 $2,400 $2,564 $2,564 $1,488
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $678
Class B (with redemption) $727
Class B (no redemption) $227
Class C (with redemption) $327
Class C (no redemption) $227
Class I $126
2. Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B Shares
represents a combination of Class A and Class B operating expenses.
8
<PAGE>
More about the Fund
The Fund described in this prospectus is a series of One Group Mutual Funds and
is managed by Banc One Investment Advisors Corporation. For more information
about One Group and Banc One Investment Advisors, please read "Management of One
Group Mutual Funds" and the Statement of Additional Information.
Principal Investment Strategies
This Prospectus describes a mutual fund that seeks to provide current income and
long-term growth of capital. The principal investment strategies that are used
to meet the Fund's investment objective are described in Fund Summary:
Investments, Risk, & Performance in the front of this prospectus. They are also
described below.
- The Fund normally invests at least 65% of its total assets in equity
securities of companies operating in the real estate industry. These
securities include common stocks and debt securities and preferred stocks
that are convertible to common stocks.
- Up to 35% of the Fund's total assets may be invested in U.S. government
securities, other investment grade fixed income securities, cash and cash
equivalents, and equity securities of companies outside the real estate
industry.
- The Fund may also invest up to 25% of its net assets in the securities of
foreign issuers.
Please note that the Fund may also use strategies that are not described below,
but which are described in the Statement of Additional Information. There can be
no assurance that the Fund will achieve its investment objectives.
Investment Risks. The risks associated with investing in the Real Estate Fund
are described below and in Fund Summary: Investments, Risk, & Performance at the
front of this prospectus.
Real Estate Securities. The Fund generally is subject to the same risks that
affect direct investments in real estate and its performance is closely tied to
conditions affecting the real estate industry. Real estate values rise and fall
in response to a variety of factors, including local, regional and national
economic conditions, the strength of specific industries renting properties, and
other factors affecting supply and demand for properties. When economic growth
is slowing, demand for property decreases and prices may decline. Rising
interest rates, which drive up mortgage and financing costs, can restrain
construction and buying and selling activity and make other investments more
attractive. Property values could decrease because of overbuilding, extended
vacancies, increase in property taxes and operating expenses, changes in zoning
laws, environmental regulations, clean-up of and liability for environmental
hazards, uninsured casualty or condemnation losses, or a general decline in
neighborhood values. The value of securities of companies that service the real
estate industry will also be affected by changes affecting the real estate
market.
Derivatives. The Fund invests in securities that may be considered to be
derivatives. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management risks. The Fund's use of derivatives may cause the Fund to
recognize higher amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use such instruments.
What is a Derivative?
---------------------
Derivatives are securities or contracts (like futures and options) that derive
their value from the performance of underlying assets or securities.
For more information about risks associated with the types of investments that
the Real Estate Fund purchases, please read Fund Summary: Investments, Risk, &
Performance, Appendix A and the Statement of Additional Information.
9
<PAGE>
Investment Policies
The Fund's investment objective and the investment policies summarized below are
fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Fund. The full text of the fundamental
policies can be found in the Statement of Additional Information.
The Fund may not:
1. Purchase an issuer's securities if as a result more than 25% of its
total assets would be invested in the securities of that issuer. This
restriction applies with respect to 50% of the Fund's total assets.
With respect to the remaining 50% of the Fund's total assets, it may
not purchase an issuer's securities if as a result more than 5% of its
total assets would be invested in the securities of that issuer. This
does not include securities issued or guaranteed by the United States,
its agencies or instrumentalities, and repurchase agreements involving
these securities.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group
of industries (except the real estate industry). This does not include
obligations issued or guaranteed by the U.S. Government or its agencies
and instrumentalities and repurchase agreements involving such
securities.
3. Make loans, except that the Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies;
(ii) enter into repurchase agreements; and (iii) engage in securities
lending.
Additional investment policies can be found in the Statement of Additional
Information.
Portfolio Quality. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities. Equity
securities, which will make up the bulk of the Fund's investments, are not rated
by rating organizations. Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Fund only purchases securities that meet the rating criteria
described below. Banc One Investment Advisors will look at a security's rating
at the time of investment. If the securities are unrated, Banc One Investment
Advisors must determine that they are of comparable quality to rated securities.
Ratings of the Fund's Securities
- Corporate bonds generally will be rated in one of the three highest
investment grade categories.
- Banc One Investment Advisors reserves the right to invest in corporate
bonds which present attractive opportunities and are rated in the lowest
investment grade category. These corporate bonds may be riskier than higher
rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
Temporary Defensive Positions. To respond to unusual market conditions, the Fund
may invest all or most of its assets in cash and Cash Equivalents for temporary
defensive purposes. These investments may result in a lower yield than
lower-quality or longer term investments and may prevent the Fund from meeting
its investment objectives.
10
<PAGE>
What is a Cash Equivalent?
Cash equivalents are highly liquid, high-quality instruments with maturities of
three months or less on the date they are purchased. They include securities
issued by the U.S. government, its agencies and instrumentalities, repurchase
agreements (other than equity repurchase agreements), certificates of deposit,
bankers' acceptances, commercial paper (rated in one of the two highest rating
categories), variable rate master demand notes, money market mutual funds and
bank money market deposit accounts.
Portfolio Turnover. The Fund may engage in active and frequent trading of
portfolio securities to achieve their principal investment strategies. Portfolio
turnover may vary greatly from year to year, as well as within a particular
year. Higher portfolio turnover rates will likely result in higher transaction
costs to the Fund and may result in additional tax consequences to you. To the
extent portfolio turnover results in short-term capital gains, such gains will
generally be taxed at ordinary income tax rates.
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
PURCHASING FUND SHARES
Where Can I Buy Shares?
You may purchase Fund shares:
- Directly from One Group through The One Group Services Company (the
"Distributor"), and
- From Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this way
will be held for you by the Shareholder Servicing Agent.
When can I Buy Shares?
- Purchases may be made on any business day. This includes any day that the
Fund is open for business, other than weekends and days on which the New
York Stock Exchange ("NYSE") is closed, including the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas
Day.
- Purchase requests received before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close before 4 p.m. ET.
When that happens, purchase requests received after the NYSE closes will
be effective the following business day.
- If a Shareholder Servicing Agent holds your shares, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- The Distributor can reject a purchase order if it does not think that it
is in the best interests of a Fund and/or its shareholders to accept the
order.
- Shares are electronically recorded. Therefore, certificates will not be
issued.
What Kind of Shares Can I Buy?
One Group offers the following classes of shares:
- Class A, Class B and Class C shares are available to the general public.
11
<PAGE>
- Class I shares are available to institutional investors, such as
corporations, pension and profit sharing plans, and foundations; and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
- When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time you intend to hold the shares, and
the sales charges and expenses applicable to each class of shares. If you
intend to hold your shares for six or more years, Class B shares may be
more appropriate for you. If you intend to hold your shares for less than
six years, you may want to consider Class A or Class C shares. Sales
charges are discussed in the section of this prospectus entitled SALES
CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. These
plans allow participants to defer taxes while their retirement savings grow.
Call 1-800-480-4111 for an Adoption Agreement.
How much do Shares Cost?
- Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
- NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
- A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE
will close before 4 p.m. ET. When that happens, NAV will be calculated
as of the time the NYSE closes.
How do I Open an Account?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment for all classes except Class I shares
is $1,000 per Fund ($100 for employees of Bank One Corporation and
its affiliates). The minimum initial investment for an IRA and 403(b)
is $250.
- Subsequent investments must be at least $25 per Fund.
- The minimum initial investment for Class I shares is $200,000 per
Fund.
- You are required to maintain a minimum account balance equal to the
minimum initial investment in each Fund.
- You may purchase no more than $249,999 of Class B shares. This is
because Class A shares offer a reduced sales charge on purchases of
$250,000 or more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY? provides
information that can help you choose the appropriate share class.
- These minimums may be waived.
3. Complete the Account Application Form. Be sure to sign up for all of the
account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
12
<PAGE>
information, or you violate IRS regulations, the IRS can require the Funds
to withhold 31% of your taxable distributions and redemptions.
4. Send the completed application and a personal check (unless you choose to
pay be wire)to:
One Group Mutual Funds
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "One Group
Mutual Funds for the Benefit of (your name)."
If you choose to pay by wire, please call 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual or company and endorsed to
One Group Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds; or
- One Group Real Estate Fund.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. If you redeem shares purchased by check, One Group will delay forwarding
your redemption proceeds until payment has been collected from your bank.
One Group generally receives payment within seven (7) business days of
purchase.
7. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
8. If you have any questions, contact your Shareholder Servicing Agent or call
1-800-480-4111.
Can I Purchase Shares Over the Telephone?
Yes. Simply select this option on your Account Application Form and then:
- Contact your Shareholder Servicing Agent or call 1-800-480-4111 to
relay your purchase instructions.
- Authorize a bank transfer or initiate a wire transfer to the
following wire address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Real Estate Fund
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If
13
<PAGE>
these procedures are followed, One Group will not be responsible
for any loss, liability, cost or expense of acting upon
unauthorized or fraudulent instructions; you bear the risk of loss.
- You may revoke your election to make purchases over the telephone
by sending a letter to:
One Group Mutual Funds
P.O. Box 8528
Boston, MA 02266-8528
Can I Automatically Invest on a Systematic Basis?
Yes. You may purchase additional Class A, Class B and Class C shares by making
automatic monthly investments from your bank account. The Distributor may waive
these minimums. To establish a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on the Account
Application Form.
- Provide the necessary information about the bank account from which
your investments will be made.
- Shares purchased under a Systematic Investment Plan may not be
redeemed for five (5) business days.
- One Group currently does not charge for this service, but may
impose a charge in the future. However, your bank may impose a
charge for debiting your bank account.
- You may revoke your election to make systematic investments by
calling 1-800-480-4111 or by sending a letter to:
One Group Mutual Funds
P.O. Box 8528
Boston, MA 02266-8528
Conversion Feature
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
- After conversion, your shares will be subject to the lower
distribution and shareholder servicing fees charged on Class A
shares.
- You will not be assessed any sales charges or fees for conversion
of shares, nor will you be subject to any federal income tax.
- Because the share price of the Class A shares may be higher than
that of the Class B shares at the time of conversion, you may
receive fewer Class A shares; however, the dollar value will be the
same.
- If you have exchanged Class B shares of one Fund for Class B shares
of another, the time you held the shares in each Fund will be added
together.
14
<PAGE>
Sales Charges
The Distributor compensates Shareholder Servicing Agents who sell shares of One
Group Mutual Funds. Compensation comes from sales charges, 12b-1 fees, and
payments by the Distributor and the Funds' investment advisor from their own
resources. The tables below show the charges for each class of shares and the
percentage of your investment that is paid as a commission to a Shareholder
Servicing Agent.
Class A Shares
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
Sales Charge Sales Charge Commission
Amount of as % of the as a % as a %
Purchases Price Offering price of Your Investment of Offering
--------------- -------------- ------------------- -----------
<S> <C> <C> <C>
Less than $50,000............ 5.25% 5.54% 4.75%
$50,000-$99,999.............. 4.50% 4.71% 4.05%
$100,000-$249,999............ 3.50% 3.63% 3.05%
$250,000-$499,999............ 2.50% 2.56% 2.05%
$500,000-$999,999............ 2.00% 2.04% 1.60%
$1,000,000*.................. NONE NONE NONE
</TABLE>
* If you purchase $1 million or more of Class A shares and are not assessed
a sales charge at the time of purchase, you will be charged the equivalent
of 1% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase and 0.50% of the purchase price if you redeem
within two years of purchase, unless the Distributor receives notice
before you invest indicating that your Shareholder Servicing Agent is
waiving its commission.
Class B Shares
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
CDSC AS A % of Dollar
Years Since Purchase Amount subject to Charge
-------------------- ------------------------
0-1.................................................... 5.00%
1-2.................................................... 4.00%
2-3.................................................... 3.00%
3-4.................................................... 3.00%
4-5.................................................... 2.00%
5-6.................................................... 1.00%
more than 6............................................ NONE
The Distributor pays a commission of 4.00% of the original purchase price to
Shareholder Servicing Agents who sell Class B shares.
Class C Shares
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
15
<PAGE>
CDSC AS A % of Dollar
Years Since Purchase Amount subject to Charge
-------------------- ------------------------
0-1.............................................. 1.00%
After first year................................. NONE
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from the Distributor.
How the CDSC is Calculated
- The Fund assumes that all purchases made in a given month were made on
the first day of the month.
- The CDSC is based on the current market value or the original cost of
the shares, whichever is less.
- No CDSC is imposed on share appreciation, nor is a CDSC assessed on
shares acquired through reinvestment of dividends or capital gains
distributions.
- To keep your CDSC as low as possible, the Fund first will redeem the
shares you have held for the longest time and thus have the lowest
CDSC.
- If you exchange Class B or Class C shares of an unrelated mutual fund
for Class B or Class C shares of One Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including
the period of time you have held those shares) will be applied to One
Group shares you receive in the reorganization.
12B-1 Fees
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12B-1 fees. 12b-1 fees are paid by
One Group to the Distributor as compensation for its services and expenses. The
Distributor in turn pays all or part of the 12b-1 fee to Shareholder Servicing
Agents that sell shares of One Group.
- The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net
assets of the Fund, which is currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the average
daily net assets of the Fund. This will cause expenses for Class B
and Class C shares to be higher and dividends to be lower than for
Class A shares.
3. There are no 12b-1 fees for Class I shares.
- 12b-1 fees, together with the CDSC, help the Distributor sell Class B and
Class C shares without an "up-front" sales charge by defraying the costs
of advancing brokerage commissions and other expenses paid to Shareholder
Servicing Agents.
- The Distributor may use up to .25% of the fees for shareholder
servicing and up to .75% for distribution. During the last fiscal
year, the Distributor received 12b-1 fees totaling .25% and 1.00% of
the average daily net assets of Class A and Class B shares,
respectively.
- The Distributor may pay 12b-1 fees to its affiliates and to Banc One
Investment Advisors and its affiliates (or any sub-advisor) for
brokerage and other agency transactions.
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- Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost
you more than paying other types of sales charges.
SALES CHARGE REDUCTIONS AND WAIVERS
Reducing Your Class A Sales Charges
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the higher of the market value or
original purchase price of any Class A, Class B or Class C shares of a
Fund (except a money market fund) that you (and your spouse and minor
children) already own to the amount of your next Class A purchase for
purposes of calculating the sales charge. An Intermediary also may take
advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more funds over the next 13 months and pay the
same sales charge that you would have paid if all shares were purchased
at once. A percentage of your investment will be held in escrow until the
full amount covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your investment
representative. To determine if you are eligible for the accumulation privilege,
call 1-800-480-4111. These programs may be terminated or amended at any time.
Waiver of the Class A Sales Charge
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge
has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
- One Group.
- Bank One Corporation and its subsidiaries and affiliates.
- The Distributor and its subsidiaries and affiliates.
- State Street Bank and Trust Company and its subsidiaries and
affiliates.
- Broker/dealers who have entered into dealer agreements with One
Group and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of One Group and such sub-
advisor's subsidiaries and affiliates.
4. Bought by:
- Affiliates of Bank One Corporation and certain accounts (other than
IRA Accounts) for which an Intermediary acts in a fiduciary,
advisory, agency, or custodial capacity or Accounts which
participate in select affinity programs with Bank One Corporation
and its affiliates and subsidiaries.
- Accounts as to which a bank or broker-dealer charges an asset
allocation fee, provided the bank or broker-dealer has an agreement
with the Distributor.
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- Certain retirement and deferred compensation plans and trusts used
to fund those plans, including, but not limited to, those defined
in sections 401(a), 403(b) or 457 of the Internal Revenue Code and
"rabbi trusts."
- Shareholder Servicing Agents who have a dealer arrangement with the
Distributor, who place trades for their own accounts or for the
accounts of their clients and who charge a management, consulting
or other fee for their services, as well as clients of such
Shareholder Servicing Agents who place trades for their own
accounts if the accounts are linked to the master account of such
Shareholder Servicing Agent.
5. Bought with proceeds from the sale of Class I shares of a One Group Fund or
acquired in an exchange of Class I shares of a Fund for Class A shares of
the same Fund, but only if the purchase is made within 60 days of the sale
or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund, including a
One Group Fund, for which a sales charge was paid, but only if the purchase
is made within 60 days of the sale or distribution. Appropriate
documentation may be required.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the sale or
distribution and, at the time of the distribution, the employee benefit plan
had plan assets invested in a One Group Fund.
8. Bought with assets of One Group.
9. Bought in connection with plans of reorganization of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
Waiver of the Class B Sales Charge
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver. For information on the Systematic Withdrawal Plan, please see "Can I
Redeem on a Systematic Basis?"
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the Distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability.
3. That represent a minimum required distribution from a One Group IRA Account
or other One Group qualifying retirement plan, but only if you are at least
age 70 1/2. Only your One Group assets are considered when calculating that
portion of your minimum required distribution that qualifies for the waiver.
4. Exchanged in connection with plans of reorganization of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class B shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the exchange.
Please read Do I Pay a Sales Charge on an Exchange?
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account you have, is waiving
its commission.
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Waiver of the Class C Sales Charge
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver. For information on the Systematic Withdrawal Plan, please see "Can I
Redeem on a Systematic Basis?"
2. If you are the shareholder (or a joint shareholder) or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code) after the account
is opened. The redemption must be made within one year of such death or
disability. In order to qualify for this waiver, the distributor must be
notified of such death or disability at the time of the redemption request
and be provided with satisfactory evidence of such death or disability.
3. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2. Only
your One Group assets are considered when calculating that portion of your
minimum required distribution that qualifies for the waiver.
4. Exchanged in connection with plans of reorganization of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
5. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the exchange.
Please read Do I pay a Sales Charge on an Exchange?
6. If the Distributor receives notice before you invest indicating that your
Shareholder Servicing Agent, due to the type of account that you have, is
waiving its commission.
Waiver Qualifications
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, call 1-800-480-4111 or contact
your Shareholder Servicing Agent. These waivers will not continue indefinitely
and may be discontinued at any time without notice.
EXCHANGING FUND SHARES
What are my Exchange Privileges?
You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A shares of that Fund
or for Class A or Class I shares of another One Group Fund.
- Class A shares of a Fund may be exchanged for Class I shares of that Fund
or for Class A or Class I shares - of another One Group Fund, but only if
you are eligible to purchase those shares. Class B shares of a Fund may
be exchanged for Class B shares of another One Group Fund.
- Class C shares of a Fund may be exchanged for Class C shares of another
One Group Fund.
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in this
privilege, please select it on your Account Application. To learn more about it,
please call 1-800-480-4111.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days written
notice.
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One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days written
notice.
When are Exchanges Processed?
Exchanges are processed the same business day they are received, provided:
- State Street Bank and Trust Company receives the request by 4:00 p.m.,
ET.
- You have provided One Group with all of the information necessary to
process the exchange.
- You have received a current prospectus of the Fund or Funds in which you
wish to invest.
- You have contacted your Shareholder Servicing Agent, if necessary.
Do I Pay a Sales Charge on an Exchange?
Generally, you will not pay a sales charge on an exchange. However:
- You will pay a sales charge if you own Class I shares of a Fund and you
want to exchange those shares for Class A shares, unless you qualify for
a sales charge waiver (see above).
- You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them for shares
of a Fund that does, in which case you would pay the sales charge applicable
to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that Fund's
sales charge and all other sales charges you have already paid.
- If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you exchanged,
or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class B or Class C shares is
carried over to your new shares.
Are Exchanges Taxable?
Generally:
- An exchange between classes of shares of the same Fund is not taxable
for federal income tax purposes.
- An exchange between Funds is considered a sale and generally results in
a capital gain or loss for federal income tax purposes.
- You should talk to your tax advisor before making an exchange.
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Are There Limits on Exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
- To prevent disruptions in the management of the Funds, One Group
limits excessive exchange activity. Exchange activity is excessive if
it exceeds two substantive exchange redemptions within 30 days of each
other.
- Excessive exchange activity will result in revocation of your exchange
privilege.
- In addition, One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
- Due to the relatively high cost of maintaining small accounts, One
Group reserves the right to either charge a sub-minimum account fee of
$10 or redeem all shares and close the account if, due to exchanges,
your account value falls below the minimum required balance. For
information on minimum required balances, please read, "How Do I Open
An Account?"
REDEEMING FUND SHARES
When can I Redeem Shares?
You may redeem all or some of your shares on any day that the Funds are open for
business.
- Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes) will be effective that day.
. All required documentation (for example, a death certificate) in the
proper form must accompany a redemption request. One Group may refuse
to honor incomplete redemption requests.
How Do I Redeem Shares?
. You may use any of the following methods to redeem your shares:
1. You may send a written redemption request to your Shareholder
Servicing Agent, if applicable, or to State Street Bank and Trust
Company at the following address:
ONE GROUP MUTUAL FUNDS
P.O. BOX 8528
BOSTON, MA 02266-8528
2. You may use the One Group website at www.onegroup.com; or
3. You may redeem over the telephone. Please see "Can I Redeem By
Telephone?" for more information.
- All requests for redemptions from IRA accounts must be in writing.
- You may request redemption forms by calling 1-800-480-4111 or visiting
www.onegroup.com.
- One Group may require that the signature on your redemption request be
guaranteed by a commercial bank, a member of a domestic stock
exchange, or a member of the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
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1. the redemption is for shares worth $50,000 or less; and
2. the redemption is payable to the shareholder of record; and
3. the redemption check is mailed to the shareholder at the record
address or the redemption is payable by wire or bank transfer
(ACH) to a pre-existing bank account.
- On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder Servicing
Agent.
- One Group may charge you a wire redemption fee. The current charge is
$7.00.
- Your redemption proceeds will be paid within seven days after receipt
of the redemption request.
What will my Shares be Worth?
- If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV.
- If you own Class B or Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
Can I Redeem by Telephone?
Yes, if you selected this option on your Account Application Form.
- Contact your Shareholder Servicing Agent or call 1-800-480-4111 to
relay your redemption request.
- Your redemption proceeds will be mailed or wired to the commercial
bank account you designated on your Account Application Form.
- State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If
these procedures are followed, One Group will not be responsible for
any loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
Can I Redeem on a Systematic Basis?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each. This $10,000
minimum does not apply to minimum required distributions from your One Group IRA
or other qualifying retirement plan.
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- Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
- Specify the amount you wish to receive and the frequency of the
payments.
- You may designate a person other than yourself as the payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan. This
is because Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments. The applicable Class B or
Class C sales charge is waived provided your withdrawals do not
exceed 10% of your account value annually, measured from the date
you begin participation in the Plan. Shares received from
dividend and capital gains reinvestment are included in
calculating the 10%. Withdrawals in excess of 10% will subject
the entire annual withdrawal to the applicable sales load.
3. If you are age 70 1/2, you may elect to receive payments to the
extent that the payment represents a minimum required
distribution from an IRA or other qualifying retirement plan.
Only One Group assets are considered when calculating your
minimum required distribution.
4. If the amount of the systematic payment exceeds the income earned
by your account since the previous payment under the Systematic
Withdrawal Plan, payments will be made by redeeming some of your
shares. This will reduce the amount of your investment.
Additional Information Regarding Redemptions
- Generally, all redemptions will be for cash. However, if you redeem
shares worth $500,000 or more of the Fund's assets, the Fund reserves
the right to pay part or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is made in
securities, the Fund will value the securities selected in the same
manner in which it computes NAV. This process minimizes the effect of
large redemptions on the Fund and its remaining shareholders.
- If you redeem shares for which you paid by check, and One Group has
not yet received payment on the check, One Group will delay forwarding
your redemption proceeds until payment has been collected from your
bank.
- Due to the relatively high cost of maintaining small accounts, One
Group reserves the right to either charge a sub-minimum account fee of
$10 or redeem all shares and close the account if, due to redemptions,
your account value falls below the minimum required balance. The above
provision does not apply to accounts participating in the Systematic
Withdrawal Plan. For information on minimum required balances, please
read, "How Do I Open An Account?"
No CDSC will be charged on such redemptions.
- One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
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3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
- You generally will recognize a gain or loss on a redemption for
federal income tax purposes. You should talk to your tax advisor
before making a redemption.
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SHAREHOLDER INFORMATION
Voting Rights
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
Dividends
The Fund generally declares dividends on the last business day of each quarter.
Dividends for the Fund are distributed on the first business day of the next
month after they are declared. Capital gains, if any, for the Fund are
distributed at least annually.
The Fund pays dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
Dividend Reinvestment
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street. You also may call 1-800-480-4111 to make this
change.
Special Dividend Rules for Class B Shares
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
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TAX TREATMENT OF SHAREHOLDERS
Taxation of Shareholder Transactions
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
Taxation of Distributions
The Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses) and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) on at least an
annual basis. Dividends you receive from a Fund, whether reinvested or received
in cash, will be taxable to you. Dividends from a Fund's net investment income
will be taxable as ordinary income and distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
Taxation of Retirement Plans
Distributions by the Fund to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for
tax-exempt treatment or by an individual who has received shares as a
distribution from a retirement plan, the distributions will be taxable to the
plan or individual as described in "Taxation of Distributions." If you are
considering purchasing shares with qualified retirement plan assets, you should
consult your tax advisor for a more complete explanation of the federal, state,
local and (if applicable) foreign tax consequences of making such an investment.
Tax Information
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Fund provides you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the federal, state,
local or foreign tax treatment of the Fund or its shareholders.
Shareholder Statements and Reports
One Group or your Shareholder Servicing Agent will send you transaction
confirmation statements and quarterly account statements. Please review these
statements carefully. One Group will correct errors if notified within one year
of the date printed on the transaction confirmation or account statement. Your
Shareholder Servicing Agent may have a different cut-off time.
To reduce expenses and conserve natural resources, One Group will deliver a
single copy of prospectuses and financial reports to individual investors who
share a residential address, provided they have the same last name or One Group
reasonably believes they are members of the same family. If you would like to
receive separate mailings, please call 1-800-480-4111 and One Group will begin
individual delivery within 30 days. If you would like to receive these documents
by e-mail, please visit www.onegroup.com and sign up for electronic delivery.
If you are the record owner of your One Group shares (that is, you did not use a
Shareholder Servicing Agent to buy your shares), you may access your account
statements at www.onegroup.com.
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
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If you have any questions or need additional information, please write One Group
Mutual Funds at 1111 Polaris Parkway, Columbus, OH 43271-1235, call
1-800-480-4111 or visit www.onegroup.com.
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Fund and
continuously reviews, supervises and administers the Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group Mutual
Funds. Banc One Investment Advisors has served as investment advisor to the
Trust since its inception. In addition, Banc One Investment Advisors serves as
investment advisor to other mutual funds and individual corporate, charitable,
and retirement accounts. As of June 30, 2000, Banc One Investment Advisors, an
indirect wholly-owned subsidiary of Bank One Corporation, managed over $131
billion in assets.
Advisory Fees
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of the Fund. The Fund began operations on ______, 1999
and does not have a full fiscal year of advisory fees. Under the investment
advisory agreement with the Fund, Banc One Investment Advisors is entitled to a
fee, which is calculated daily and paid monthly. As the assets in the Fund
increase, the investment advisory fees for the Fund are reduced as follows:
First $1.5 billion ................... .74%
Next $500 million .................... .70%
Thereafter ........................... .65%
The Fund Managers
The Fund is managed by a team of fund managers, research analysts, and other
investment management professionals. Each team member makes recommendations
about the securities in the Fund. The research analysts provide in-depth
industry analysis and recommendations, while the portfolio managers determine
strategy, industry weightings, Fund holdings, and cash positions.
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APPENDIX A
Investment Practices
The Fund invests in a variety of securities and employs a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Fund, as well as
the risks inherent in their use. Equity securities are subject mainly to market
risk. Fixed income securities are primarily influenced by market, credit and
prepayment risks, although certain securities may be subject to additional
risks. For a more complete discussion, see the Statement of Additional
Information. Following the table is a more complete discussion of risk.
Instrument Risk Type
---------- ---------
U.S. TREASURY OBLIGATIONS: Bills, notes, Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments Market
with a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by Liquidity
a bank in exchange for the deposit of funds. Credit
Market
COMMON STOCK: Shares of ownership of a company. Market
REPURCHASE AGREEMENTS: The purchase of a security Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price Liquidity
on an agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security Market
and the simultaneous commitment to buy the security Leverage
back at an agreed upon price on an agreed upon
date. This is treated as a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% Credit
of the Fund's total assets. In return, the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Market
Purchase or contract to purchase securities Leverage
at a fixed price for delivery at a future date. Liquidity
Credit
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Instrument Risk Type
---------- ---------
INVESTMENT COMPANY SECURITIES: Shares of other Market
mutual funds, including One Group money market
funds and shares of money market funds for which
Banc One Investment Advisors or its affiliates serve as
investment advisor or administrator. Banc One Investment Advisors
will waive certain fees when investing in funds for
which it serves as investment advisor.
CONVERTIBLE SECURITIES: Bonds or preferred stock Market
that can convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price at a future date. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security Leverage
at a specified price at a future date. The Funds will
sell only covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and Liquidity
at a specified price. Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITs"): Pooled Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Prepayment
BANKERS' ACCEPTANCES: Bills of exchange or time Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
29
<PAGE>
Instrument Risk Type
---------- ---------
FOREIGN SECURITIES: Stocks issued by foreign companies, Market
as well as commercial paper of foreign issuers Political
and obligations of foreign banks, overseas branches Liquidity
of U.S. banks and supranational entities. Includes Foreign Investment
American Depositary Receipts, Global Depositary
Receipts, American Depositary Securities,
and European Depositary Receipts.
RESTRICTED SECURITIES: Securities not registered Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with Market
preferred stock or bonds, that give the holder Credit
the right to buy a proportionate amount of
common stock at a specified price.
PREFERRED STOCK: A class of stock that Market
generally pays a dividend at a specified rate
and has preference over common stock in
the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations Prepayment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs") and Real Estate Mortgage Investment Conduits Regulatory
("REMICs").
CORPORATE DEBT SECURITIES: Corporate bonds and Market
non-convertible debt securities. Credit
ASSET-BACKED SECURITIES: Securities secured by Prepayment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
MORTGAGE DOLLAR ROLLS: A transaction in which Prepayment
a Fund sells securities for delivery in a current Market
month and simultaneously contracts with the same Regulatory
party to repurchase similar but not identical
securities on a specified future date.
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<PAGE>
Instrument Risk Type
---------- ---------
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans Prepayment
in a mortgage pool which provide for a fixed Market
initial mortgage interest rate for a Credit
specified period of time, after which the rate Regulatory
may be subject to periodic adjustments.
SWAPS, CAPS AND FLOORS: The Fund may enter into Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two Market
parties. Caps and floors entitle a purchaser
to a principal amount from the seller of the
cap or floor to the extent that a specified
index exceeds or falls below a predetermined
interest rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures Management
contracts and other financial products continue Credit
to be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
- Credit Risk. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to
actual default as its credit status deteriorates and the probability of
default rises.
- Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also may
be embedded directly in the characteristics of other securities.
- Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position
that the Fund also holds, any loss generated by the derivative should
be substantially offset by gains on the hedged investment, and vice
versa. While hedging can reduce or eliminate losses, it can also
reduce or eliminate gains. Hedges are sometimes subject to imperfect
matching between the derivative and underlying security, and there can
be no assurance that a Fund's hedging transactions will be effective.
- Speculative. To the extent that a derivative is not used as a hedge,
the Fund is directly exposed to the risks of that derivative. Gains or
losses from speculative positions in a derivative may be substantially
greater than the derivative's original cost.
- Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally
prevail in the market. The seller may have to lower the price, sell
other securities instead or forego an investment opportunity, any of
which could have a negative effect on Fund management or performance.
This includes the risk of missing out on an investment opportunity
because the assets necessary to take advantage of it are tied up in
less advantageous investments.
31
<PAGE>
- Management Risk. The risk that a strategy used by the Fund's
management may fail to produce the intended result. This includes the
risk that changes in the value of a hedging instrument will not match
those of the asset being hedged. Incomplete matching can result in
unanticipated risks.
- Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. There is also the risk that the current interest rate may
not accurately reflect existing market rates. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in
values. Finally, key information about a security or market may be
inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
- Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits,
changes in tax or trade statutes, and governmental collapse and war.
- Foreign Investment Risk. The risk associated with higher transaction
costs, delayed settlements, currency controls and adverse economic
developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may
erode or reverse any gains produced by foreign currency denominated
investments and may widen any losses. Exchange rate volatility also my
affect the ability of an issuer to repay U.S. dollar denominated debt,
thereby increasing credit risk.
- Prepayment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage- or asset-backed security occurs either significantly sooner
or later than expected. Changes in prepayment rates can result in
greater price and yield volatility. Prepayments generally accelerate
when interest rates decline. When mortgage and other obligations are
prepaid, the Fund may have to reinvest in securities with a lower
yield. Further, with early prepayment, the Fund may fail to recover
any premium paid, resulting in an unexpected capital loss.
- Tax Risk. The risk that the issuer of the securities will fail to
comply with certain requirements of the Internal Revenue Code, which
would cause adverse tax consequences. Also, the risk that the tax
treatment of municipal or other securities could be changed by
Congress thereby affecting the value of outstanding securities.
- Regulatory Risk. The risk associated with federal and state laws which
may restrict the remedies that a lender has when a borrower defaults
on loans. These laws include restrictions on foreclosures, redemption
rights after foreclosure, federal and state bankruptcy and debtor
relief laws, restrictions on "due on sale" clauses, and state usury
laws.
- Zero Coupon Risk. The market prices of securities structured as zero
coupon or pay-in-kind securities are generally affected to a greater
extent by interest rate changes. These securities tend to be more
volatile than securities which pay interest periodically.
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<PAGE>
If you want more information about the Fund, the following documents are free
upon request:
Annual/semi-annual Reports: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus by
reference.
How can I Get More Information? You can get a free copy of the
semi-annual/annual reports or the SAI, request other information or discuss your
questions about the Fund by calling 1 800-480-4111 or by writing the Fund at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
or visiting
www.onegroup.com
You can also review and copy the Fund's reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090). You can
also get reports and other information about the Fund from the EDGAR Database on
the SEC's web site at http://www.sec.gov. Copies of this information also may be
obtained, after paying a copying charge, by electronic request at the following
e-mail address: [email protected] or by writing the Public Reference Section of
the SEC, Washington, D.C. 20549-6009.
(Investment Company Act File No. 811-4236)_
<PAGE>
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) TAX-EXEMPT MONEY MARKET FUND
NOVEMBER 1, 2000
The Securities and Exchange Commission has not approved or disapproved the
shares of any of the Funds as an investment or determined whether this
prospectus is accurate or complete. Anyone who tells you otherwise is committing
a crime.
<PAGE>
Table of Contents
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Tax-Exempt Money Market Fund 5
MORE ABOUT THE FUND
Principal Investment Strategies 9
Investment Risks 9
Investment Policies 10
Portfolio Quality and Maturity 11
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares --
Exchanging Fund Shares 14
Redeeming Fund Shares 15
SHAREHOLDER INFORMATION
Shareholder Information 17
Dividend Policies 18
Tax Treatment of Shareholders 19
Shareholder Statements and Reports 19
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 19
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES 21
2
<PAGE>
ONE GROUP (R) MUTUAL FUNDS
PRIVACY POLICY
One Group Mutual Funds understands that protecting your financial privacy is
just as important as protecting your financial assets. We are committed to the
responsible use of information in order to provide you with the products and
services you want, when and where you want them. This statement of our privacy
policy is intended to help you understand the ways in which we gather, use and
protect your financial information.
KEY DEFINITIONS
This Privacy Policy describes the way we treat nonpublic personal information
that we may obtain from our customers or from consumers generally. Key terms
used throughout this policy are:
. Consumer - an individual who applies for or obtains a financial product or
service from One Group Mutual Funds for personal, family or household
purposes, including individuals who don't have a continuing relationship
with One Group Mutual Funds. Consumers include individuals who provide
nonpublic personal information to our shareholder servicing
representatives, but do not invest in One Group Mutual Funds.
. Customer - a consumer who has a continuing relationship with One Group
Mutual Funds through record ownership of fund shares.
. Nonpublic personal information - any personally identifiable financial
information about a consumer that is obtained by One Group Mutual Funds
in connection with providing financial products and services to that
consumer and which is not otherwise publicly available. A telephone
directory listing is an example of public information.
Collection of Nonpublic Personal Information
We collect information to service your account, to protect you from fraud, and
to make available products and services that may be of interest to you. We
collect nonpublic personal information about you from the following sources:
. Information we receive from you on applications or other forms, on our
website, or through other means;
. Information we receive from you through transactions, correspondence and
other communications with us; and
. Information we otherwise obtain from you in connection with providing
you a financial product or service.
Information Sharing with Non-Affiliated Third Parties
We do not share any nonpublic personal information about our customers or former
customers with anyone, except as required or permitted by law. This means we may
disclose all of the information we collect, as described above, to companies who
help us maintain and service your account. For instance, we will share
information with the transfer agent for One Group Mutual Funds. The transfer
agent needs this information to process your purchase, redemption and exchange
transactions and to update your account. In addition, we may share nonpublic
personal information to protect against fraud, to respond to subpoenas, or as
described in the following section.
Information Sharing with Joint Marketers
We also may share the information described above in Collection of Nonpublic
Personal Information with broker-dealers and other financial intermediaries that
perform marketing services on our behalf and with which we have joint marketing
agreements. However, we only provide information about you to that broker-dealer
or financial intermediary from whom you purchased your One Group shares. In
addition, our joint marketing agreements prohibit recipients of this information
from disclosing or using the information for any purpose other than the purposes
for which it is provided to them.
3
<PAGE>
Children's Online Privacy Act Disclosure
From our website, One Group Mutual Funds does not knowingly collect or use
personal information from children under the age of 13 without obtaining
verifiable consent from their parents. Should a child whom we know to be under
13 send personal information to us, we will only use that information to respond
directly to that child, seek parental consent or provide parental notice. We are
not responsible for the data collection and use practices of nonaffiliated third
parties to which our website may link.
Security
For your protection, One Group Mutual Funds maintains security standards and
procedures that we continually update to safeguard against unauthorized
disclosure of information or access to information about you.
We restrict access to nonpublic personal information about you to those
individuals who need to know that information to provide products and services
to you. We maintain physical, electronic, and procedural safeguards that comply
with federal regulations to guard your nonpublic personal information.
One Group Mutual Funds' Privacy Commitment
One Group Mutual Funds is committed to protecting the privacy of our customers
but we understand that the best protection requires a partnership with you. We
encourage you to find out how you can take steps to further protect your own
privacy by visiting us online at www.onegroup.com.
4
<PAGE>
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Tax-exempt Money Market Fund
What is the Goal of the Tax-exempt Money Market Fund?
The Fund seeks as high a level of current interest income free of federal income
tax as is consistent with the preservation of capital, maintenance of liquidity
and relative stability of principal.
What are the Tax-exempt Money Market Fund's Main Investment Strategies?
The Fund invests exclusively in high-quality, short-term money market
instruments. These instruments consist primarily of municipal securities,
certificates of deposit and commercial paper. The Fund will comply with
Securities and Exchange ("SEC") rules applicable to all money market funds,
including Rule 2a-7 under the Investment Company Act of 1940. The Fund will
concentrate its investments in the financial services industry. For more
information about the Tax-exempt Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
What Are Municipal Securities?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax. The securities are
issued to raise funds for various public and private purposes.
How Will My Investment Be Taxed?
Up to 20% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the federal alternative minimum tax for
individuals. Shareholders who are subject to the federal alternative minimum tax
may have all or a portion of their income from the Fund subject to federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income.
What are the Main Risks of Investing in the Tax-exempt Money Market Fund?
The main risks of investing in the Tax-exempt Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About One Group Mutual Funds" and
"Investment Risks."
Credit Risk. Because the Fund only invests in high-quality obligations and
limits its average maturity to 90 days or less, credit risk is minimized.
Nonetheless, if an issuer fails to pay interest or principal, the value of
your investment in the Fund could decline. Because the Fund invests in
securities that are backed by "credit enhancements" such as letters of
credit, the value of your investment in the Fund also could decrease if the
value of the securities in the portfolio decreases in response to the
declining credit quality of a credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or decrease
with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per share on
a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
5
<PAGE>
How Has The Tax-exempt Money Market Fund Performed?
The Tax-exempt Money Market Fund was not in operation as of June 30, 2000.
Therefore, the performance that normally would be provided in this section is
unavailable. However, to obtain the Fund's current yield information, please
call toll-free 1-877-691-1118.
6
<PAGE>
FEES AND EXPENSES OF THE TAX-EXEMPT MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
Shareholder Fees (fees paid directly from your Class I Class S
investment)(1) ------- -------
Maximum Sales Charge none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none
Exchange Fee none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)
Investment Advisory Fees .10% .10%
Distribution [and/or none none
Service] (12b-1) Fees
Other Expenses(2) .18% .40%
Total Annual Fund Operating .28% .50%
Expenses
Fee Waiver and/or Expense (.10%) (.15%)
Reimbursement (3)
.18% .35%
Net Expenses
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
(2) Banc One Investment Advisors Corporation and the Administrator have agreed
to contractually waive fees and/or reimburse expenses to limit total annual
fund operating expenses to .18% for Class I shares and .35% for Class S
shares for the period beginning November 1, 2000, and ending on October 31,
2001.
(3) Expense information is estimated based on amounts for the current fiscal
year.
7
<PAGE>
EXAMPLES
The examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or continued to hold them at
the end of the periods shown. The examples also assume that your investment has
a 5% return each year and that the Fund's operating expenses remain the same.
Your actual costs may be higher or lower than those shown below. There is no
sales charge (load) on reinvested dividends.
Class I Class S
1 Year(1) $ 18 $ 36
3 Years $ 80 $ 145
5 Years $ 147 $ 264
10 Years $ 346 $ 613
(1) Without contractual fee waivers, 1 Year expenses for Class I shares would be
$26 and for Class S shares would be $51.
8
<PAGE>
More About the Fund
The fund described in this prospectus is a series of One Group Mutual Funds
("One Group") and is managed by Banc One Investment Advisors Corporation ("Banc
One Investment Advisors"). For more information about One Group and Banc One
Investment Advisors, please read "Management of the Funds" and the Statement of
Additional Information.
Principal Investment Strategies
The mutual fund described in this Prospectus is designed to produce high current
interest income free of federal tax consistent with the preservation of capital,
maintenance of liquidity and stability of principal. The principal investment
strategies that are used to meet the Fund's investment objective are described
in Fund Summaries: Investments, Risk & Performance in the front of this
Prospectus. They are also described below.
There can be no assurance that the Fund will achieve its investment objective.
Please note that the Fund also may use strategies that are not described below,
but which are described in the Statement of Additional Information.
One Group Tax-Exempt Money Market Fund. The Fund invests only in U.S. dollar
denominated securities.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days or less.
- The Fund will acquire only those securities that present
minimal credit risks.
- The Fund invests exclusively in money market instruments.
These include, but are not limited to:
1. U.S. Treasury obligations and obligations issued or
guaranteed by U.S. agencies or instrumentalities.
2. mortgage backed securities.
3. commercial paper.
4. bank obligations and deposit notes.
5. notes/bonds.
6. medium term notes.
7. funding agreements.
8. domestic or Yankee or Euro certificates of deposit.
- The Fund will purchase municipal securities only if the issuer
receives assurances from its legal counsel that the interest
payable on the securities is exempt from federal personal income
tax.
- The Fund invests at least 80% of its net assets in municipal
securities.
What is Average Weighted Maturity?
Average weighted maturity is the average of all the current maturities (that is,
the term of the securities) of the individual securities in a fund calculated so
as to count most heavily those securities with the highest dollar value. Average
weighted maturity is important to investors as an indication of a fund's
sensitivity to changes in interest rates. The longer the average weighted
maturity, the more fluctuation in yield you can expect.
Investment Risks
The main risks associated with investing in the Tax-Exempt Money Market Fund are
described in the Fund Summaries: Investments, Risk & Performance in the front of
this Prospectus. Additional risks are described below.
Net Asset Value: There is no assurance that the Fund will meet its investment
objectives or be able to maintain a net asset value of $1.00 per share on a
continuous basis.
9
<PAGE>
Fixed Income Securities: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Prepayment and Call Risk: As part of its investment strategy, the Tax-exempt
Money Market Fund invests in mortgage-backed and asset-backed securities. These
securities are subject to prepayment and call risks. The issuers of these
securities may be able to repay principal early, especially when interest rates
fall. Changes in prepayment rates can affect the return on investment and yield
of mortgage-backed and asset-backed securities. When obligations are prepaid,
the Fund may have to reinvest in securities with lower yields. The Fund may fail
to recover premiums paid for the securities, resulting in an unexpected capital
loss.
Derivatives. The Fund invests in securities that may be considered to be
derivatives. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management risks.
What is a Derivative?
Derivatives are securities or contracts (like futures and options) that derive
their value from the performance of underlying assets or securities.
For more information about risks associated with the types of investments that
the Institutional Money Market Funds purchase, please read the Fund Summaries:
Investments, Risk & Performance, Appendix A and the Statement of Additional
Information.
Investment Policies
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
The Fund:
1. Will use its best efforts to maintain a constant net asset value of
$1.00 per share, although there is no guarantee that the Funds will be
able to do so.
2. Will not purchase the securities of an issuer if as a result more than
5% of its total assets would be invested in the securities of that
issuer or the Fund would own more than 10% of the outstanding voting
securities of that issuer. This does not include securities issued or
guaranteed by the United States, its agencies or instrumentalities, and
repurchase agreements involving these securities. This restriction
applies with respect to 75% of a Fund's total assets. The Fund may
invest the remaining 25% of their total assets without regard to this
restriction as permitted by applicable law.
3. Will not purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of the Fund's net assets.
4. Will not borrow money or issue senior securities, except that the Fund
may borrow from banks for temporary purposes in amounts not exceeding
10% of their total assets at the time of the borrowing.
10
<PAGE>
5. Will not mortgage, pledge or hypothecate any assets, except in connection
with borrowing specified in 4 above and in amounts not in excess of the
lesser of the dollar amount borrowed or 10% of the value of the Fund's
total assets at the time of its borrowing.
6. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries. This does not include obligations issued or guaranteed
by the US government or its agencies or instrumentalities, domestic bank
certificates of deposit or banker's acceptances, and repurchase agreements
involving such securities, municipal securities or governmental guarantees
of municipal securities. In addition, private activity bonds backed only by
the revenues and assets of a non-governmental user will not be deemed to be
municipal securities
Additional investment policies can be found in the Statement of Additional
Information.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid investments. A security is illiquid if it cannot be sold at
approximately the value assessed by the Fund within seven (7) days. Banc One
Investment Advisors will follow guidelines adopted by the Board of Trustees of
One Group Mutual Funds in determining whether an investment is illiquid.
Portfolio Quality and Maturity. The quality and maturity of money market funds
are subject to SEC rules. Quality is generally restricted to the two highest
short term ratings or their equivalent. Maturity is limited both as to total
portfolio average and as to each individual security. With respect to portfolio
average, the rules limit the Fund's average weighted maturity to 90 days. With
respect to each individual security, remaining maturity is restricted to 397
days at acquisition. Moreover, the SEC rules limit exposure to a single issuer
to 5% of a money market fund's assets (although there is no limit on government
securities).
11
<PAGE>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
PURCHASING FUND SHARES
Where Can I Buy Shares?
You may purchase Fund shares:
- Directly from One Group through The One Group Services Company (the
"Distributor"), and
- From Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or 401(k)
plan sponsors, or other intermediaries. Shares purchased this way will be
held for you by the Shareholder Servicing Agent.
Who May Purchase Fund Shares?
Fund shares may be purchased by:
- Institutional investors and other accredited investors, including affiliates
of Bank One Corporation, that have opened accounts with the Fund's transfer
agent, State Street Bank and Trust Company, either directly or through a
Shareholder Servicing Agent.
- If you have questions about eligibility, please call 1-877-691-1118.
When Can I Buy Shares?
- Purchases may be made on any business day. This includes any day that the
Funds are open for business. The Funds will be closed on weekends and days on
which the New York Stock Exchange ("NYSE") or the Federal Reserve are closed,
including the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving, and Christmas Day.
- Purchase requests will be effective on the day received and you will be
eligible to receive dividends declared the same day, if such purchase orders
are received before 5:00 p.m. ET.
- In addition, the Fund's custodian, State Street Bank and Trust Company, must
receive "federal funds" before the Fund's cut-off time. If State Street Bank
and Trust Company does not receive federal funds by the cutoff time, the
purchase order will not be effective until the next business day on which
federal funds are timely received by State Street Bank and Trust Company.
- If a Shareholder Servicing Agent holds your shares, it is the responsibility
of the Shareholder Servicing Agent to send your purchase or redemption order
to the Fund. Your Shareholder Servicing Agent may have an earlier cutoff time
for purchase and redemption requests.
- The Distributor can reject a purchase order if it does not think that it is
in the best interests of a Fund and/or shareholders to accept the order.
- Shares are electronically recorded. Therefore, certificates will not be
issued.
What Kind of Shares Can I Buy?
One Group offers the following classes of shares:
12
<PAGE>
- Class I shares are available to institutional investors, such as
corporations, pension and profit sharing plans, and foundations; and any
organization authorized to act in a fiduciary, advisory, custodial or agency
capacity. We refer to these entities as "Intermediaries."
- Class S shares are available to Intermediaries purchasing shares on behalf of
investors requiring additional services.
How Much Do Shares Cost?
- Shares are sold at net asset value ("NAV").
- NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets (minus expenses) by the number of outstanding
shares. The Fund uses its best efforts to maintain its NAV at $1.00, although
there is no guarantee that it will be able to do so.
- NAV is calculated each business day as of 5:00 p.m. ET.
How Do I Open An Account?
1. Read the prospectus carefully.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000,000. You are required to maintain
a minimum account balance of $1,000,000.
- Subsequent investments must be at least $5,000.
- These minimums may be waived.
3. Complete the Account Application Form. Be sure to sign up for all of the
account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
You must provide the Fund with your social security or tax identification
number and certify that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you fail to furnish the requested
information, or you violate IRS regulations, the IRS can require the Funds to
withhold 31% of your taxable distributions and redemptions.
4. Send the completed application to:
One Group Mutual Funds
P.O. Box 8528
Boston, MA 02266-8528
- And authorize a wire to:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Tax-Exempt Money Market Fund
Your Account Number (ex: 123456789)
Your Account Registration (ex: ABC Corporation)
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<PAGE>
5. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
6. If you have any questions, contact your Shareholder Servicing Agent or call
1-877-691-1118.
Can I Purchase Shares Over the Telephone?
Yes. Simply select this option on your Account Application Form and then:
- Contact your Shareholder Servicing Agent or call 1-877-691-1118 to relay your
purchase instructions.
- Authorize a bank transfer or initiate a wire transfer payable to "One Group"
to State Street Bank and Trust Company to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Tax-Exempt Money Market Fund
Your Account Number (ex: 123456789)
Your Account Registration (ex: ABC Corporation)
- One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
- You may revoke your right to make purchases over the telephone by sending a
letter to:
One Group Mutual Funds
P.O. Box 8528
Boston, MA 02266-8528
Exchanging Fund Shares
What are My Exchange Privileges?
You may exchange your shares for shares of any other One Group institutional
money market fund.
- One Group may change the terms and conditions of your exchange privileges
upon 60 days written notice.
- One Group Funds offers a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or
quarterly basis. This privilege is useful in Dollar Cost Averaging. To
participate in the Systematic Exchange Privilege, please select it on your
Account Application. To learn more about it, please call 1-877-691-1118.
- One Group does not charge a fee for this privilege.
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<PAGE>
When are Exchanges Processed?
Exchanges are processed the same business day they are received, provided:
- State Street Bank and Trust Company receives the request by 3:00 p.m. ET.
- You have provided One Group with all of the information necessary to process
the exchange.
- You have received a current prospectus of the Fund or Funds in which you
wish to invest.
- You have contacted your Shareholder Servicing Agent, if necessary.
Are Exchanges Taxable?
Generally:
- An exchange between Funds is considered a sale and may result in a capital
gain or loss for federal income tax purposes.
- You should talk to your tax advisor before making an exchange.
Are There Limits on Exchanges?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
- To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity. Exchange activity is excessive if it exceeds two
substantive exchange redemptions within 30 days of each other.
- Excessive exchange activity will result in revocation of your exchange
privilege.
- In addition, One Group reserves the right to reject any exchange request
(even those that are not excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or otherwise adversely
affect other shareholders.
- Your shares may be automatically redeemed and your account closed if, due to
exchanges, you no longer meet the Fund's minimum balance requirement. For
information on the minimum required balance, please read, "How Do I Open An
Account?"
Redeeming Fund Shares
When Can I Redeem Shares?
You may redeem all or some of your shares on any day that the Fund is open for
business.
- Redemption requests received before 5:00 p.m. ET will be effective that day.
- All required documentation (for example, a death certificate) in the proper
form must accompany a redemption request. One Group may refuse to honor
incomplete redemption requests.
How Do I Redeem Shares?
- You may use any of the following methods to redeem your shares:
15
<PAGE>
1. You may send a written redemption request to your Shareholder Servicing
Agent, if applicable, or to State Street Bank and Trust Company at the
following address:
ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
2. You may use the One Group website at www.onegroup.com; or
3. You may redeem over the telephone. Please see "Can I Redeem By Telephone?"
for more information.
- You may request redemption forms by calling 1-877-691-1118 or visiting
www.onegroup.com
- One Group may require that the signature on your redemption request be
guaranteed by a participant in the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less; and
2. the redemption is payable to the shareholder of record; and
3. the redemption check is mailed to the shareholder at the record address;
or the redemption is payable by wire or bank transfer (ACH) to a pre-
existing bank account.
- On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
- Your redemption proceeds will be paid within seven days after receipt of the
redemption request. However, the Fund will attempt to honor requests for same
day payment if the request is received before 5:00 p.m. ET. If redemption
requests are received after those times, the Fund will attempt to wire
payment the next business day.
What Will My Shares Be Worth?
- The NAV of shares of the Fund is expected to remain constant at $1.00 per
share, although there is no assurance that this will always be the case.
- You will receive the NAV calculated after your redemption request is
received. Please read "How Much Do Shares Cost?"
Can I Redeem By Telephone?
Yes, if you selected this option on your Account Application Form.
- Contact your Shareholder Servicing Agent or call 1-877-691-1118 to relay your
redemption request.
- Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
- One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures are
followed, One Group will not be responsible for any loss, liability, cost or
expense of acting upon unauthorized or fraudulent instructions; you bear the
risk of loss.
16
<PAGE>
Additional Information Regarding Redemptions
- Generally, all redemptions will be for cash. However, if you redeem shares
worth 3% or more of the Fund's assets, the Fund reserves the right to pay
part or all of your redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the Fund will value the
securities selected in the same manner in which it computes its NAV. This
process minimizes the effect of large redemptions on the Fund and its
remaining shareholders.
- If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
- Your shares may be automatically redeemed if, due to redemptions, you no
longer meet the Fund's minimum balance requirements. For information on the
minimum required balance, please read, "How Do I Open An Account?".
- One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
- You generally will recognize a gain or loss on a redemption for federal
income tax purposes. You should talk to your tax adviser before making a
redemption.
SHAREHOLDER INFORMATION
Voting Rights
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
17
<PAGE>
DIVIDEND POLICIES
Dividends
Dividends payable on Class I shares will be more than those payable on Class S
shares. This is because Class S shares have higher expenses.
The Fund generally declares dividends each business day. Dividends are
distributed on the first business day of the next month after they are declared.
Capital gains, if any, for the Fund are distributed at least annually.
Dividend Reinvestment
You automatically will receive all income dividends and capital gains
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street. You may change the way you receive dividends and
distributions by calling 1-877-691-1118.
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<PAGE>
TAX TREATMENT OF SHAREHOLDERS
Taxation of Shareholder Transactions
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
Taxation of Distributions
The Fund will distribute substantially all of its net investment income. The
Fund may pay "exempt-interest dividends" if at least 50% of the value of Fund
assets at the end of each quarter of the Fund's taxable year consist of
obligations the interest on which is excludable from gross income. Exempt-
interest dividends are generally excludable from an investor's gross income for
regular federal income tax purposes. However, the receipt of exempt-interest
dividends may cause recipients of Social Security or Railroad Retirement
benefits to be taxed on a portion of such benefits. In addition, the receipt of
exempt-interest dividends may result in liability for federal alternative
minimum tax and for (including state alternative minimum tax) state and local
taxes, both for individuals and corporate shareholders. Corporate shareholders
will be required to take the interest on municipal securities into account in
determining their alternative minimum taxable income Dividends paid in January,
but declared in October, November or December of the previous year, will be
considered to have been paid the previous December.
Tax Information
The Form 1099 that is mailed to eligible taxpayers in January details dividends
and their federal tax category. Even though the Fund provides this information,
you are responsible for verifying your tax liability with your tax professional.
For additional tax information see the Statement of Additional Information.
Please note that this tax discussion is general in nature; no attempt has been
made to present a complete explanation of the federal, state, local or foreign
tax treatment of the Fund or its shareholders.
Shareholder Statements and Reports
One Group or your Shareholder Servicing Agent will send you transaction
confirmation statements and quarterly account statements. Please review these
statements carefully. One Group will correct errors if notified within one year
of the date printed on the transaction confirmation or account statement. Your
Shareholder Servicing Agent may have a different cut-off time.
To reduce expenses and conserve natural resources, One Group will deliver a
single copy of prospectuses and financial reports to individual investors who
share a residential address, provided they have the same last name or One Group
reasonably believes they are members of the same family. If you would like to
receive separate mailings, please call 1-877-691-1118 and One Group will begin
individual delivery within 30 days. If you would like to receive these documents
by e-mail, please visit www.onegroup.com and sign up for electronic delivery.
If you are the record owner of your One Group shares (that is, you did not use a
Shareholder Servicing Agent to buy your shares), you may access your account
statements at www.onegroup.com.
In March and September, you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
If you have any questions or need additional information, please write to One
Group Mutual Funds at 1111 Polaris Parkway, Columbus, OH 43271-1235, call
1-877-691-1118 or visit www.onegroup.com.
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
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<PAGE>
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 710211, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group Mutual
Funds. Banc One Investment Advisors has served as investment advisor to One
Group Mutual Funds since its inception. In addition, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual
corporate, charitable, and retirement accounts. As of June 30, 2000, Banc One
Investment Advisors, an indirect wholly-owned subsidiary of Bank One
Corporation, managed over $131 billion in assets.
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<PAGE>
APPENDIX A
Investment Practices
The Fund invests in a variety of securities and employs a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of some of the securities and techniques utilized by the Fund, as well as
the risks inherent in their use. Fixed income securities are primarily
influenced by market, credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete discussion, please see
the Statement of Additional Information. Following the table is a more complete
discussion of risk.
<TABLE>
<CAPTION>
Instrument Risk Type
---------- ---------
<S> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, and bonds. Market
TREASURY RECEIPTS: TRs, TIGRS, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by agencies and Market
instrumentalities of the U.S. government. These include Ginnie Mae, Credit
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated maturity. Market
Credit
Liquidity
TIME DEPOSITS: Non-nogotiable receipts issued by a bank in exchange Liquidity
for the deposit of funds. Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and the simultaneous Credit
commitment to return the security to the seller at an agreed upon price Market
on an agreed upon date. This is treated as a loan. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other money market mutual funds, Market
including One Group money market funds and shares of other money market
mutual funds for which Banc One Investment Advisors or its affiliates serve as investment
advisor or administrator. Banc One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment advisor.
EXTENDABLE COMMERCIAL NOTES: Variable rate notes which normally mature Market
within a short period of time (e.g., 1 month) but which may be extended Credit
by the issuer for a maximum maturity of thirteen months. Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn on and accepted Credit
by a commercial bank. Maturities are generally six months or less. Liquidity
Market
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Instrument Risk Type
---------- ---------
<S> <C>
COMMERCIAL PAPER: Secured and unsecured short-term promissory notes Credit
issued by corporations and other entities. Maturities generally vary Liquidity
from a few days to nine months. Market
FOREIGN SECURITIES: Commercial paper of foreign issuers and obligations Market
of foreign banks, overseas branches of U.S. banks and Political
supranational entities. Liquidity
Foreign Investment
RESTRICTED SECURITIES: Securities not registered under the Securities Act Liquidity
of 1933, such as privately placed commercial paper and Rule 144A securities. Market
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with interest rates Market
which are reset daily, weekly, quarterly or some other period and Credit
which may be payable to the Fund on demand. Liquidity
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real estate loans Prepayment
and pools of loans. These include collateralized mortgage obligations ("CMOs") Market
and Real Estate Mortgage Investment Conduits ("REMICs"). Credit
Regulatory
DEMAND FEATURES: Securities that are subject to puts and standby commitments Market
to purchase the securities at a fixed price (usually with accrued interest) Liquidity
within a fixed period of time following demand by a Fund. Management
MUNICIPAL SECURITIES: Securities issued by a state or political subdivision Market
to obtain funds for various public purposes. Municipal securities include Credit
private activity bonds and industrial development bonds, as well as General Political
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Tax
Anticipation Notes, other short-term tax-exempt obligations, municipal leases, Regulatory
and obligations of municipal housing authorities and single family
revenue bonds.
PARTICIPATION INTERESTS: Interests in municipal securities, including municipal Credit
leases, from financial institutions such as commercial and investment Tax
banks, savings and loan associations and insurance companies. These Market
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Funds to treat the income from the investment as exempt from
federal income tax.
ASSET-BACKED SECURITIES: Securities secured by company receivables, Prepayment
home equity loans, truck and auto loans, leases, credit card receivables Market
and other securities backed by other types of receivables Credit
or other assets. Regulatory
</TABLE>
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<PAGE>
Investment Risks
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities in the Funds may fluctuate, as will the value of your
investment in the Funds. Certain investments are more susceptible to these risks
than others.
- Credit Risk. The risk that the issuer of a security, or the counterparty
to a contract, will default or otherwise become unable to honor a
financial obligation. Credit risk is generally higher for non-investment
grade securities. The price and liquidity of a security can be adversely
affected prior to actual default as its credit status deteriorates and
the probability of default rises.
- Foreign Investment Risk. Risks associated with higher transaction costs,
delayed settlements, currency controls, and adverse economic
developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may
erode or reverse any gains produced by foreign currency denominated
investments and may widen any losses. Exchange rate volatility also may
affect the ability of an issuer to repay U.S. dollar denominated debt,
thereby increasing credit risk.
- Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
- Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on fund management or performance. This includes the risk
of missing out on an investment opportunity because the assets necessary
to take advantage of it are tied up in less advantageous investments.
- Management Risk. The risk that a strategy used by a fund's management may
fail to produce the intended result. This includes the risk that changes
in the value of a hedging instrument will not match those of the asset
being hedged. Incomplete matching can result in unanticipated risks.
- Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. There
also is the risk that the current interest rate may not accurately
reflect existing market rates. For fixed income securities, market risk
is largely, but not exclusively, influenced by changes in interest rates.
A rise in interest rates typically causes a fall in values, while a fall
in rates typically causes a rise in values. Finally, key information
about a security or market may be inaccurate or unavailable.
- Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits, changes
in tax or trade statutes, and governmental collapse and war.
- Prepayment Risk. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage-
or asset-backed security occurs either significantly sooner or later than
expected. Changes in prepayment rates can result in greater price and
yield volatility. Prepayments generally accelerate when interest rates
decline. When mortgage and other obligations are prepaid, a Fund may have
to reinvest in securities with a lower yield. Further, with early
repayment, a Fund may fail to recover any additional amounts (i.e.,
premiums)paid for securities with higher interest rates, resulting in an
unexpected capital loss.
- Regulatory Risk. The risk associated with federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
loans. These laws include restrictions on foreclosures, redemption rights
after foreclosure, federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses, and state usury laws.
23
<PAGE>
- Tax Risk. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences. Also, the risk that the tax treatment of
municipal or other securities will be changed by Congress thereby
affecting the value of outstanding securities.
24
<PAGE>
If you want more information about the Funds, the following documents are free
upon request:
Annual/Semi-Annual Reports: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
How Can I Get More Information? You can get a free copy of the
semi-annual/annual reports or the SAI, request other information or discuss your
questions about the Fund by calling 1-800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
1111 POLARIS PARKWAY
COLUMBUS, OHIO 43271-1235
OR VISITING
www.onegroup.com
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-202-942-8090). You can
also get reports and other information about the Funds from the EDGAR Database
on the SEC's web site at http://www.sec.gov. Copies of this information also may
be obtained, after paying a copying charge, by electronic request at the
following e-mail address: [email protected] or by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
(Investment Company Act File No. 811-4236)
<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").
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<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
-6-
<PAGE>
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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<PAGE>
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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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
-61-
<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.
-62-
<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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<PAGE>
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.
-64-
<PAGE>
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>
-65-
<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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<PAGE>
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.
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<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>
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<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>
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<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.
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<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.
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<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
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<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.
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<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.
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<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
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<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:
-82-
<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.
-89-
<PAGE>
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
-90-
<PAGE>
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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<PAGE>
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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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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<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>
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<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(20)................. 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>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified International(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(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.................. 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)............... 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(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(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(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(17).............. 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(18)................. 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(19)............. 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 (20)...... 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(21).......... 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.
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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
------------------------------------------------- ------------------------------ ------------------- -----------------
Record
Strafe & Co. Diversified Mid Cap Fund 79.58%
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
-------------------------------------------------------------------------------------------------------------------
NPF X11, Inc. Purchase Account Cash Management Money Market 27.04% Beneficial
1111 Polaris Pkwy Fund
Columbus, OH 43240 Class I
-------------------------------------------------------------------------------------------------------------------
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 Class I
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 Class I
1111 Polaris Parkway
Columbus, OH 43240-2050
---------------------------------------------------------------------------------------------------------------------
Crossroads Constitution Partnership Institutional Prime Money 7.40% Beneficial
1111 Polaris Pkwy Market Fund
Columbus, OH 43240 Class I
---------------------------------------------------------------------------------------------------------------------
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
---------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Prime Money Market Fund 6.21% Record
Attn: SEI Corporate Trust Class A
Database OH1-0211
1111 Polaris Pkwy
Columbus, OH 43240-2050
---------------------------------------------------------------------------------------------------------------------
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 26.62% Record
FBO Bank One Texas Sweep Market Fund
Attn: Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
---------------------------------------------------------------------------------------------------------------------
BISYS Fund Services Inc US Treasury Securities Money 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 25.51% 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
------------------------------------------------------------------------------------------------------------------
First Commonwealth Insurance Treasury Prime Cash 11.18% Record &
1111 Polaris Pkwy Management Money Market Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
Aurellia Pucinski Clerk of Circuit Ct Treasury Prime Cash 59.53% Record &
1111 Polaris Pkwy Management Money Market Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
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>
Beckman / Coulter Escrow due 10/2000 US Government Securities Cash 6.79% Record &
1111 Polaris Pkwy Management Money Market Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
Household International Inc. US Government Securities Cash 9.19% Record &
1111 Polaris Pkwy Management Money Market Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------------
Wallick Properties Inc. Ohio Municipal Money Market 5.01% Record &
1111 Polaris Pkwy Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
Akron stadium Corp Reserve Acct Ohio Municipal Money Market 6.14% Record &
1111 Polaris Pkwy Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
Goldberg, Harriet J Custody Ohio Municipal Money Market 9.79% Record &
1111 Polaris Pkwy Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
Henny Penny Corp Money Mkt Ohio Municipal Money Market 14.76% Record &
1111 Polaris Pkwy Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------------
BWC-Miller Anderson Government Money Market 7.79% Record &
1111 Polaris Pkwy Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
</TABLE>
-151-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
USA Group Foundation Government Money Market 6.09% Record &
1111 Polaris Pkwy Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
Cust, Keeneland Sales Government Money Market 5.85% Record &
1111 Polaris Pkwy Fund Beneficial
Columbus, OH 432040 Class I
------------------------------------------------------------------------------------------------------------------
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>
Terrence Adderly Rev Tr Michigan Municipal Money 6.56% Record &
1111 Polaris Pkwy Market Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
Charles Becker Inv Adv Acct Michigan Municipal Money 33.22% Record &
1111 Polaris Pkwy Market Fund Beneficial
Columbus, OH 43240 Class I
------------------------------------------------------------------------------------------------------------------
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>
-155-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
Registration Statement
of One Group(R) Mutual Funds
on Form N-1A
PART C
Item 23. Exhibits
(a) Amended and Restated Declaration of Trust dated as of February 18, 1999 is
incorporated by reference to Exhibit (1) to the Registrant's Registration
Statement on Form N-1A (filed March 12, 1999).
(b) Code of Regulations as amended and restated as of October 25, 1990 is
incorporated by reference to Exhibit (2) to Post-Effective Amendment No. 39
(filed August 16, 1996) to Registrant's Registration Statement on Form
N-1A.
(c) Rights of Shareholders.
The following portions of Registrant's Declaration of Trust incorporated as
Exhibit (1) hereto, define the rights of shareholders:
5.1 Shares in the Series or Classes of the Trust.
A. The Trustees shall have full power and authority, in their sole
discretion, without obtaining the prior approval of the Shareholders
(either with respect to the Trust as a whole or with respect to any
series or classes of the Trust) by vote or otherwise, to establish one
or more series of Shares of the Trust. The establishment of any such
series shall be effective upon the adoption by a majority of the
Trustees then in office of a resolution establishing such series and
setting the voting rights, preferences, designations, conversion or
other rights, restrictions, limitations as to distributions,
conditions of redemption, qualifications, or other terms of the Shares
of such series. The beneficial interest in each series of the Trust
shall at all times be divided into an unlimited number of full and
fractional transferable Shares without par value. The investment
objective, policies, and restrictions governing the management and
operations of each series of the Trust, including the management of
assets belonging to any particular series, may from time to time be
changed or supplemented by the Trustees, subject to the requirements
of the Act. The Trustees may from time to time divide or combine the
outstanding Shares of any one or more series of the Trust into a
greater or lesser number without thereby changing their proportionate
beneficial interests in the Trust assets allocated or belonging to
such series.
Subject to the respective voting rights, preferences, designations,
conversion or other rights, restrictions, limitations as to
distributions, conditions of redemption, qualifications, or other
terms of the Shares of each series of the Trust, the Trustees may,
without Shareholder approval, divide the Shares of any series into two
or more classes, Shares of each such class having such voting rights,
preferences, designations, conversion or other
<PAGE>
rights, restrictions, limitations as to distributions, conditions of
redemption, qualifications, or other terms applicable to Shares of
such class as the Trustees may determine.
B. The holder of each Share shall be entitled to one vote for each full
Share, and a proportionate fractional vote for each fractional Share,
irrespective of the series or class, then recorded in his name on the
books of the Trust. On any matter submitted to a vote of Shareholders,
all Shares then issued and outstanding and entitled to vote,
irrespective of the series or class, shall be voted in the aggregate
and not by series or class except: (1) as otherwise required by the
Act; or (2) when the matter, as conclusively determined by the
Trustees, affects only the interests of the Shareholders of a
particular series or class of the Trust (in which case only
Shareholders of the affected series or class shall be entitled to vote
thereon).
C. Shares of each series or class of the Trust shall have the following
preferences, participating or other special rights, qualifications,
restrictions and limitations:
(1) Assets Belonging To a Series or Class. All consideration received
by the Trust for the issue or sale of Shares of any series or
class, together with all assets in which such consideration is
invested or reinvested, including any proceeds derived from the
sale, exchange, or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall be referred to as "assets
belonging to" that series or class. In addition, any assets,
income, earnings, profits or proceeds thereof, or funds or
payments which are not readily identifiable as belonging to a
particular series or class shall be allocated by the Trustees to
one or more series or class (such allocation to be conclusive and
binding upon the Shareholders of all series or class for all
purposes) in such manner as they, in their sole discretion, deem
fair and equitable, and shall also be referred to as "assets
belonging to" such series or class. Such assets belonging to a
particular series or class shall irrevocably belong for all
purposes to the Shares of the series or class, and shall be so
handled upon the books of account of the Trust. Such assets and
the income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange, or liquidation
thereof, and any funds or payments derived from any reinvestment
of such proceeds in whatever form, are herein referred to as
"assets belonging to" such a series or class. Shareholders of any
series or class shall have no right, title or interest in or to
the assets belonging to any other series or class.
(2) Liabilities Belonging To a Series or Class. The assets belonging
to any series or class of the Trust shall be charged with the
direct liabilities in respect of such series or class and with
all expenses, costs, charges, and reserves attributable to such
series or class, and shall also be charged with the share of such
series or class of the general liabilities, expenses, costs,
charges, and reserves of the Trust which are not readily
identifiable as belonging to a particular series or class in
proportion to the relative net assets of the respective series or
class, as determined at such time or times as may be authorized
by the Trustees. Any such determination by the Trustees shall be
conclusive and binding upon the Shareholders of all series or
class
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for all purposes; PROVIDED, HOWEVER, that under no circumstances
shall the assets allocated or belonging to any series or class of
the Trust be charged with liabilities directly attributable to
any other series or class. The liabilities so charged to a series
or class are herein referred to as "liabilities belonging to"
such series or class. All persons who may have extended credit to
a particular series or class or who have contracts or claims with
respect to a particular series or class shall look only to the
assets of that particular series or class for payment of such
contracts or claims.
(3) Liquidating Distributions. In the event of the termination of the
Trust or a particular series or class thereof and the winding up
of its affairs, the Shareholders of the Trust or such particular
series or class shall be entitled to receive out of the assets of
the Trust or belonging to the particular series or class, as the
case may be, available for distribution to Shareholders, but
other than general assets not belonging to any particular series
or class of the Trust, the assets belonging to such series or
class; and the assets so distributable to the Shareholders of any
series or class shall be distributed among such Shareholders in
proportion to the number of Shares of such series or class held
by them and recorded in their names on the books of the Trust. In
the event that there are any general assets not belonging to any
particular series or class of the Trust available for
distribution, such distribution shall be made to the Shareholders
of all series or class subject to such termination and winding up
in proportion to the relative net assets of the respective series
or class determined as hereinafter provided and the number of
Shares of such series or class held by them and recorded in their
names on the books of the Trust.
(4) Dividends and Distributions. Shares of each series or class shall
be entitled to such dividends and distributions in Shares or in
cash or both, as may be declared from time to time by the
Trustees, acting in their sole discretion, with respect to such
series or class, PROVIDED, HOWEVER, that dividends and
distributions on Shares of a particular series or class shall be
paid only out of the lawfully available "assets belonging to"
such series or class as such term is defined in this Declaration
of Trust.
5.2 Purchase of Shares. The Trustees may accept investments in each series
or class of the Trust from such Persons for such consideration and on
such other terms as they may from time to time authorize. The Trust
may reject any order for, or refuse to give effect on the books of the
Trust to the transfer of, any Shares as permitted under the Act. Each
such investment shall be credited to the Shareholder's account in the
form of full and fractional Shares of the appropriate series or class
of the Trust, at the net asset value per Share next computed after
receipt of the investment.
5.3 Net Asset Value Per Share. The net asset value per Share of each
series or class of the Trust shall be computed at such time or times
as the Trustees may specify pursuant to the Act. Assets shall be
valued and net asset value per Share shall be determined by such
Person or Persons as the Trustees may appoint under the supervision of
the Trustees in such manner
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not inconsistent with the Act and any orders of the Securities and
Exchange Commission received by the Trust, as the Trustees may
determine.
5.4 Ownership of Shares. The ownership of Shares shall be recorded
separately with respect to each series or class on the record books of
the Trust. Certificates for Shares shall be issued to holders of such
Shares only upon the authorization of the Trustees, in their
discretion, to issue such Shares, and shall be issued, if at all,
subject to such rules and regulations as the Trustees may determine.
The Trustees may make such rules as they consider appropriate for the
transfer of Shares and similar matters. The record books of the Trust
shall be conclusive as to the identity of holders of Shares and as to
the number of Shares of each series or class held by each Shareholder.
5.5 Preemptive Rights. Shareholders shall have no preemptive or other
rights to subscribe to any additional Shares or other securities
issued by the Trust or by the Trustees.
5.6 Redemption of Shares. To the extent of the assets of the Trust legally
available for such redemptions, a Shareholder of any series or class
of the Trust shall have the right, subject to the provisions of
Section 5.7 hereof, to require the Trust to redeem his full and
fractional Shares of any series or class out of assets belonging to
such series or class at a redemption price equal to the net asset
value per Share next determined after receipt of a request to redeem
in proper form as determined by the Trustees. The Trustees shall
establish such rules and procedures as they deem appropriate for
redemption of Shares; PROVIDED, HOWEVER, that all redemptions shall be
in accordance with the Act. Without limiting the generality of the
foregoing, the Trust shall, to the extent permitted by applicable law,
have the right at any time to redeem the Shares owned by any holder
thereof (i) if the value of such Shares in an account maintained by
the Trust or its transfer agent for any Shareholder with respect to
any series or class of the Trust is $1,000 or less; PROVIDED, HOWEVER,
that any such Shareholder shall be notified that the value of his
account is $1,000 or less, and shall be allowed sixty days to make
additional purchases of Shares of the appropriate series or class so
that the value of his account will exceed $1,000 before any such
involuntary redemption is processed by the Trust; or (ii) if the net
income with respect to any particular series or class of the Trust
should be negative or it should otherwise be appropriate to carry out
the Trust's responsibilities under the Act, in each case subject to
such further terms and conditions as the Board of Trustees of the
Trust may from time to time adopt. The redemption price of Shares of
any series or class of the Trust shall, except as otherwise provided
in this section, be the net asset value thereof as determined by the
Board of Trustees of the Trust from time to time in accordance with
the provisions of applicable law, less such redemption fee or other
charge, if any, as may be fixed by resolution of the Board of Trustees
of the Trust. When the net income with respect to any particular
series or class of the Trust is negative or whenever deemed
appropriate by the Board of Trustees of the Trust in order to carry
out the Trust's responsibilities under the Act, any series or class of
the Trust may, without payment of compensation but in consideration of
the interests of the Trust or a particular series or class thereof and
of the Shareholders of the Trust or of such series or class in
maintaining a constant net asset value per Share with respect to such
series or class, redeem pro rata from each holder of record on such
day such number of full and fractional Shares of such series or class
as may be
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necessary to reduce the aggregate number of outstanding Shares of such
series or class in order to permit the net asset value thereof to
remain constant. Payment of the redemption price, if any, shall be
made in cash by the appropriate series or class of the Trust at such
time and in such manner as may be determined from time to time by the
Board of Trustees of the Trust unless, in the opinion of the Board of
Trustees, which shall be conclusive and binding upon the Shareholders
for all purposes, conditions exist which make payment wholly in cash
unwise or undesirable; in such event the appropriate series or class
of the Trust may make payment in the assets belonging or allocable to
such series or class, the value of which shall be determined as
provided herein.
5.7 Suspension of Right of Redemption. The Trustees may suspend the right
of redemption by Shareholders or postpone the date of payment or the
recordation of transfer of Shares of any series or class, as permitted
under the Act or applicable law. Such suspension or postponement shall
take effect at such time as the Trustees shall specify but not later
than the close of business on the business day following the
declaration of suspension or postponement, and thereafter there shall
be no right of redemption or payment or transfer until the Trustees
shall declare the suspension at an end. In case of suspension of the
right of redemption, a Shareholder may either withdraw his request for
redemption or receive payment based on the net asset value existing
after the termination of the suspension.
5.8 Conversion Rights. The Trustees shall have the authority to provide
from time to time that the holders of Shares of any series or class
shall have the right to convert or exchange said Shares for or into
Shares of one or more other series or class in accordance with such
requirements and procedures as may be established from time to time by
the Trustees.
8.1 Voting Powers. The Shareholders shall have power to vote (a) for the
election or removal of Trustees; (b) with respect to the amendment of
this Declaration of Trust as provided in Section 10.8 hereof; (c) with
respect to the approval of investment advisory and distribution
agreements entered into on behalf of the Trust or one or more series
or class thereof, and with respect to such other matters relating to
the Trust as may be required by law, by this Declaration of Trust, the
Regulations of the Trust, by any requirements applicable to or
agreement of the Trust, and as the Trustees may consider desirable;
and (d) to the same extent as the shareholders of a Massachusetts
business corporation, when considering whether a court action,
proceeding, or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the
Shareholders; PROVIDED, HOWEVER, that no Shareholder of a particular
series or class shall be entitled to bring, or to vote in respect of,
any class or derivative action not on behalf of the series or class of
the Trust in respect of which the Shareholder owns Shares. Every
Shareholder of record shall have the right to one vote for every whole
Share (other than Shares held in the treasury of the Trust) standing
in his name on the books of the Trust, and to have a proportional
fractional vote for any fractional Share, as to any matter on which
the Shareholder is entitled to vote. There shall be no cumulative
voting. Shares may be voted in person or by proxy. On any matter
submitted to a vote of the Shareholders, all Shares shall be voted in
the aggregate and not by individual series or class, except (i) where
required by the Act, Shares shall be voted by individual series or
class, and (ii) if the Trustees shall have determined that a matter
affects the interests only of one or more series or class, then only
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the Shareholders of such affected series or class shall be entitled to
vote thereon. Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required or permitted
to be taken by Shareholders by law, this Declaration of Trust, or the
Regulations.
8.2 Meetings. Meetings of Shareholders may be called by the Trustees as
provided in the Regulations, and shall be called by the Trustees upon
the written request of Shareholders owning at least twenty percent of
the outstanding Shares entitled to vote.
8.3 Quorum and Required Vote. At any meeting of the Shareholders, a quorum
for the transaction of business shall consist of a majority of the
Shares of each series or class outstanding and entitled to vote with
respect to a matter appearing in person or by proxy; PROVIDED,
HOWEVER, that at any meeting at which the only actions to be taken are
actions required by the Act to be taken by vote of all outstanding
Shares of all series or class entitled to vote thereon, irrespective
of series or class, a quorum shall consist of a majority of Shares
(without regard to series or class) entitled to vote thereon, and that
at any meeting at which the only actions to be taken shall have been
determined by the Board of Trustees to affect the rights and interests
of one or more but not all series or classes of the Trust, a quorum
shall consist of a majority of the outstanding Shares of the series or
class so affected; and PROVIDED, FURTHER, that reasonable adjournments
of such meeting until a quorum is obtained may be made by vote of the
Shares present in person or by proxy. A majority of the Shares voted
shall decide any question and a plurality shall elect a Trustee,
subject to any applicable requirements of law or of this Declaration
of Trust or the Regulations; PROVIDED, HOWEVER, that when any
provision of law or of this Declaration of Trust requires the holders
of Shares of any particular series or class to vote by series or class
and not in the aggregate with respect to a matter, then the vote of
the majority of the outstanding Shares of that series or class shall
decide such matter insofar as that particular series or class shall be
concerned.
8.4 Shareholder Action By Written Consent. Any action which may be taken
by Shareholders may be taken without a meeting if the holders of not
less than two-thirds of the Shares entitled to be voted with respect
to the matter consent to the action in writing and the written consent
is filed with the records of the meetings of Shareholders. Such
consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
8.5 Code of Regulations. The Regulations may include further provisions
not inconsistent with this Declaration of Trust for Shareholders'
meetings, votes, record dates, notices of meetings, and related
matters.
9.4 Limitation of Shareholder Liability. Shareholders shall not be subject
to any personal liability in connection with the assets of the Trust
for the acts or obligations of the Trust. The Trustees shall have no
power to bind any Shareholder personally or to call upon any
Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription to any Share or
otherwise. Every obligation, contract, instrument, certificate, Share,
other security or undertaking of the Trust, and every other act
whatsoever executed in connection
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with the Trust shall be conclusively presumed to have been executed or
done by the executors thereof only in their capacities as Trustees
under this Declaration of Trust or in their capacity as officers,
employees, or agents of the Trust, and not individually. Every note,
bond, contract, order, or other undertaking issued by or on behalf of
the Trust or the Trustees relating to the Trust or to any series or
class of the Trust, and the stationery used by the Trust, shall
include a recitation limiting the obligation represented thereby to
the Trust and its assets (but the omission of such a recitation shall
not operate to bind any Shareholder), as follows:
"The names 'One Group(R) Mutual Funds' and 'Trustees of One
Group(R) Mutual Funds' refer respectively to the Trust created
and the Trustees, as trustees but not individually or personally,
acting from time to time under a Declaration of Trust dated May
23, 1985 to which reference is hereby made and a copy of which is
on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The
obligations of 'One Group(R) Mutual Funds' entered into in the
name or on behalf thereof by any of the Trustees, representatives
or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets
of the Trust, and all persons dealing with any series of Shares
of the Trust must look solely to the assets of the Trust
belonging to such series for the enforcement of any claims
against the Trust."
The rights accruing to a Shareholder under this Section 9.4 shall not
exclude any other right to which such Shareholder may be lawfully
entitled, nor shall anything herein contained restrict the right of
the Trust to indemnify or reimburse a Shareholder in any appropriate
situation even though not specifically provided for herein, PROVIDED,
HOWEVER, that a Shareholder of any series or class of the Trust shall
be indemnified only from assets belonging to that series or class.
9.5 Indemnification of Shareholders. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by reason of
his being or having been a Shareholder and not because of his acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his heirs, executors, administrators, or other legal
representatives, or, in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the
Trust estate to be held harmless from and indemnified against all loss
and expense arising from such liability. The Trust shall, upon request
by the Shareholder, assume the defense of any claim made against any
Shareholder for any act or obligations of the Trust, and shall satisfy
any judgment thereon.
9.6 Liabilities of a Series or Class. Liabilities belonging to any series
or class of the Trust, including, without limitation, expenses, fees,
charges, taxes, and liabilities incurred or arising in connection with
a particular series or class, or in connection with the management
thereof, shall be paid only from the assets belonging to that series
or class.
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10.3 Termination of Trust. This Trust shall continue without limitation of
time; PROVIDED, HOWEVER, that:
A. The Trustees, with the vote of a majority of the outstanding Shares of
any series or class of the Trust, may sell and convey the assets
belonging to such series or class to another trust or corporation
organized under the laws of any state of the United States, which is a
management investment company as defined in the Act, for an adequate
consideration which may include the assumption of all outstanding
obligations, taxes, and other liabilities, accrued or contingent, of
the series or class and which may include beneficial interests of such
trust or stock of such corporation. Upon making provision for the
payment of all such liabilities, by such assumption or otherwise, the
Trustees shall distribute the remaining proceeds ratably among the
holders of the Shares of the series or class then outstanding.
B. The Trustees, with the vote of a majority of the outstanding Shares of
any series or class of the Trust, may sell and convert into money all
the assets belonging to such series or class. Upon making provision
for the payment of all outstanding obligations, taxes, and other
liabilities, accrued or contingent, of the series or class, the
Trustees shall distribute the remaining assets belonging to such
series or class ratably among the holders of the outstanding Shares of
the series or class.
C. Without the vote of a majority of outstanding Shares of any series or
class of the Trust (unless Shareholder approval is otherwise required
by applicable law), the Trustees may combine the assets belonging to
any two or more series or classes into a single series or class if the
Trustees reasonably determine that such combination will not have a
material adverse effect on the Shareholders of each series or class
affected thereby.
D. After the effective date of the determination of the Trustees under
paragraph A or B above,
(1) The Trust shall carry on no business relating to the assets of
such series or class except for the purpose of winding up the
affairs of such series or class.
(2) The Trustees shall proceed to wind up the affairs of such series
or class and all of the powers of the Trustees under this
Declaration of Trust shall continue until the affairs of such
series or class shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust relating to such
series or class, to collect assets of such series or class, to
sell, convey, assign, exchange, transfer, or otherwise dispose of
all or any part of the remaining assets of such series or class
to one or more Persons at public or private sale for
consideration that may consist in whole or in part of cash,
securities, or other property of any kind, to discharge or pay
its liabilities, and to do all other acts appropriate to
liquidate the business of such series or class.
Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in paragraphs A and B of this section,
the Trustees may authorize the termination of that series or class of
the Trust. Such termination shall be effective upon filing with the
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State Secretary of the Commonwealth of Massachusetts of an instrument
setting forth such termination, at which time the Trustees shall be
discharged of any and all further liabilities and duties hereunder
relating to such series or class and the right, title and interest of
all parties shall be cancelled and discharged with respect to such
series or class. Such instrument shall constitute an amendment to this
Declaration of Trust when filed with the State Secretary of the
Commonwealth of Massachusetts as provided in this Title X.
10.8 Amendment Procedure.
A. This Declaration of Trust may be amended by the affirmative vote of
the holders of not less than a majority of the outstanding Shares of
each series affected thereby (as the Trustees shall determine) or by
any larger vote as may be required by any provisions of applicable
law.
B. Notwithstanding any other provisions hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended,
covering the first public offering of securities of the Trust shall
have become effective, this Declaration of Trust may be terminated or
amended in any respect by the affirmative vote of a majority of the
Trustees.
C. The Trustees may also amend this Declaration without the vote of
Shareholders to cure any error or ambiguity or to change the name of
the Trust or, if they deem it necessary, to conform this Declaration
of Trust to the requirements of applicable state or federal laws or
regulations or the requirements of the regulated investment company
provisions of the Internal Revenue Code, but the Trustees shall not be
liable for failing to do so.
The following portions of Registrant's Code of Regulations incorporated as
Exhibit (2) hereto, define the rights of shareholders:
1.1 Place. An Annual Meeting of Shareholders may be held for a calendar
year if called by the Trustees acting in their sole discretion, and
any such annual or Special Meetings of Shareholders shall be held at
such place, date, and time as the Trustees may designate.
1.2 Special Meeting. Special Meetings of Shareholders may be called by the
Trustees, and shall be called by the Trustees upon the written request
of holders of at least twenty percent of the outstanding units of
beneficial interest in the Trust ("Shares") entitled to vote.
1.3 Notice. Written notice, stating the place, day and hour of each
meeting of Shareholders and, in the case of Special Meetings, the
general nature of the business to be transacted, shall be given by, or
at the direction of, the person calling the meeting to each
Shareholder of record entitled to vote at the meeting at least ten
days prior to the day named for the meeting, unless in a particular
case a longer period of notice is required by law.
1.4 Shareholder's List. The officer or agent having charge of the transfer
books for shares of the Trust shall make, at least five days before
each meeting of Shareholders, a complete list of the Shareholders
entitled to vote at the meeting, arranged in alphabetical order with
the address of and the number of Shares held by each such Shareholder.
The list shall be kept
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on file at the office of the Trust and shall be subject to inspection
by any Shareholders at any time during usual business hours, and shall
also be produced and kept open at the time and place of each meeting
of Shareholders and shall be subject to the inspection of any
Shareholder during each meeting of Shareholders.
1.5 Record Date. The Trustees may fix a time (during which they may close
the Share transfer books of the Trust) not more than ninety (90) days
prior to the date of any meeting of Shareholders, or the date fixed
for the payment of any dividend, or the date of the allotment of
rights or the date when any change or conversion or exchange of Shares
shall go into effect, as a record date for the determination of the
Shareholders entitled to notice of, or to vote at, any such meeting,
or entitled to receive payment of any such dividend, or to receive any
such allotment of rights, or to exercise such rights, as the case may
be. In such case, only such Shareholders as shall be shareholders of
record at the close of business on the date so fixed shall be entitled
to notice of, or to vote at, such meeting or to receive payment of
such dividend, or to receive such allotment of rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of any
Shares on the books of the Trust after any record date, as aforesaid.
3.1 Form. Notices to Shareholders shall be in writing and delivered
personally or mailed to the Shareholders at their addresses appearing
on the books of the Trust.
3.2 Waiver. Whenever any notice of the time, place, or purpose of any
meeting of Shareholders, Trustees, or committee is required to be
given under the provisions of Massachusetts law or under the
provisions of the Declaration of Trust or these Regulations, a waiver
thereof in writing, signed by the person or persons entitled to such
notice and filed with the record of the meeting, whether before or
after the holding thereof, or actual attendance at the meeting of
Shareholders in person or by proxy, or at the meeting of Trustees or
committee in person, shall be deemed equivalent to the giving of such
notice to such persons.
(d)(1) Investment Advisory Agreement dated January 11, 1993 between
Registrant and Banc One Investment Advisors Corporation is
incorporated by reference to Exhibit 5(a) to Post-Effective
Amendment No. 27 (filed March 17, 1993) to Registrant's
Registration Statement on Form N-1A.
(d)(2) Amended and Restated Schedule A to the Investment Advisory
Agreement between Registrant and Banc One Investment Advisors
Corporation dated August 16, 2000 is filed herewith.
(d)(3) Sub-Investment Advisory Agreement, dated as of August 20, 1998
between Banc One Investment Advisors Corporation and Banc One
High Yield Partners, LLC is incorporated by reference to Exhibit
(5)(d) to Post-Effective Amendment No. 45 (filed August 26, 1998)
to Registrant's Registration Statement on Form N-1A.
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(d)(4) Sub-Investment Advisory Agreement, dated as of November 9, 1999
between Banc One Investment Advisors Corporation and Banc One
High Yield Partners, LLC is filed herewith.
(e)(1) Re-executed Distribution Agreement dated December 13, 1995
between Registrant and The One Group Services Company is
incorporated by reference to Exhibit (7)(c) to Registrant's
Registration Statement on Form N-14 (filed January 19, 1996).
(e)(2) Revised Schedules A-E to the Distribution Agreement between One
Group Mutual Funds and The One Group Services Company dated May
18, 2000 are incorporated by reference to Exhibit (e)(2) to
Post-Effective Amendment No. 52 (filed June 2, 2000) to
Registrant's Registration Statement on Form N-1A.
(e)(3) Dealer's Agreement for Registrant dated November 11, 1995 between
The One Group Services Company and Banc One Securities
Corporation is incorporated by reference to Exhibit (7)(d) to
Registrant's Registration Statement on Form N-14 (filed January
19, 1996).
(f) Deferred Compensation Plan for Trustees of The One Group is
incorporated by reference to Exhibit (7) to Post-Effective
Amendment No. 47 (filed December 23, 1998) to Registrant's
Registration Statement on Form N-1A.
(g)(1) Custodian Contract dated as of July 29, 1988 between Registrant
and State Street Bank and Trust Company is incorporated by
reference to Exhibit (8)(a) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement on
Form N-1A.
(g)(2) Amendment to Custodian Contract dated as of July 29, 1988 between
Registrant and State Street Bank and Trust Company is
incorporated by reference to Exhibit (8)(b) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(g)(3) Sub-Custodian Agreement between State Street Bank and Trust
Company, Bank One Trust Company, N.A. and One Group Mutual Funds
is incorporated by reference to Exhibit (8)(b) to Post-Effective
Amendment No. 37 (filed June 13, 1996) to the Registrant's
Registration Statement on Form N-1A.
(g)(4) First Amendment to the Subcustodian Agreement dated as of
December, 1996 between State Street Bank and Trust Company, Bank
One Trust Company, N.A. and One Group Mutual Funds is
incorporated by reference to Exhibit (8)(d) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(g)(5) International Securities Lending Subcustodian and Services
Agreement, dated December 29, 1997 between State Street Bank and
Trust Company, Bank One
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Trust Company, N.A. and One Group Mutual Funds is incorporated by
reference to Exhibit (8)(c) to Post-Effective Amendment No. 44
(filed June 5, 1998) to the Registrant's Registration Statement
on Form N-1A.
(g)(6) Sub-Custodian Agreement dated as of March 19, 1999, between State
Street Bank and Trust Company, Bank One Trust Company, N.A. (as
successor to NBD Bank) and One Group Mutual Funds is incorporated
by reference to Exhibit (8)(f) to Post-Effective Amendment No.49
(filed April 27, 1999) to the Registrant's Registration Statement
on Form N-1A.
(h)(1) Management and Administration Agreement dated November 1, 2000
between One Group Mutual Funds and One Group Administrative
Services, Inc. is filed herewith.
(h)(2) Fund Accounting and Related Services Agreement dated November 1,
2000 between the One Group Administrative Services, Inc. and
BISYS Fund Services, Inc. is filed herewith.
(h)(3) Transfer Agency and Service Agreement dated as of April 1, 2000
One Group Mutual Funds and State Street Bank and Trust Company is
incorporated by reference to Exhibit h(3) to Post-Effective
Amendment No. 52 (filed June 2, 2000) to Registrant's
Registration Statement on Form N-1A.
(h)(4) Form of Sub-Transfer Agency Agreement is incorporated by
reference to Exhibit (9)(dd) to Post-Effective Amendment No. 49
(filed April 27, 1999) to Registrant's Registration Statement on
Form N-1A.
(h)(5) Agency Services and Delegation Agreement between INVESCO Trust
Company and Registrant dated January 1, 1998 is incorporated by
reference to Exhibit (10)(j) to Registrant's Registration
Statement on Form N-14 (filed on May 29, 1998).
(h)(6) Amendment to Agency and Services Delegation Agreement between
INVESCO Trust Company and Registrant is incorporated by reference
to Exhibit (e)(6) to Post-Effective Amendment No. 50 (filed
August 26, 1999) to Registrant's Registration Statement on Form
N-1A.
(h)(7) Administrative Services Agreement (Cash Sweep) dated August 1,
1996 between Bank One Corporation and The One Group Services
Company is filed herewith.
(h)(8) Operating Agreement dated as of June 6, 1997 between One Group
Mutual Funds and Charles Schwab & Company, is incorporated by
reference to Exhibit (9)(m) to Post-Effective Amendment No. 44
(filed June 5, 1998) to Registrant's Registration Statement on
Form N-1A.
(h)(9) Retirement Services Order Processing Agreement dated as of June
6, 1997 between One Group Mutual Funds and Charles Schwab &
Company, is incorporated by
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reference to Exhibit (9)(n) to Post-Effective Amendment No. 44
(filed June 5, 1998) to Registrant's Registration Statement on
Form N-1A.
(h)(10) Sub-Transfer Agency Agreement (Wingspan) between One Group Mutual
Funds and the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corporation, is incorporated by reference to Exhibit
(h)(29) to Post-Effective Amendment No. 50 (filed August 26,
1999) to Registrant's Registration Statement on Form N-1A.
(h)(11) Services Agreement between One Group Mutual Funds, Bank One Trust
Company, NA, Kemper Services Company, Kemper Distributors, Inc.
and The One Group Services Company is incorporated by reference
to Exhibit (h)(32) to Post-Effective Amendment No. 50 (filed
August 26, 1999) to Registrant's Registration Statement on Form
N-1A.
(h)(12) Sub-Transfer Agency Agreement between Nationwide Investment
Services and One Group Mutual Funds is incorporated by reference
to Exhibit (h)(33) to Post-Effective Amendment No. 50 (filed
August 26, 1999) to Registrant's Registration Statement on Form
N-1A.
(h)(13) FundVest Institutional No Transaction Fee Agreement between
Pershing Division of Donaldson Lufkin & Jenrette Securities
Corporation, The One Group Services Company, and One Group Mutual
Funds is incorporated by reference to Exhibit (h)(34) to
Post-Effective Amendment No. 51 (filed October 22, 1999) to
Registrant's Registration Statement on Form N-1A.
(h)(14) Sub-Transfer Agency Agreement dated March 1, 2000 between
Ceridian Retirement Plan Services and One Group Mutual Funds is
incorporated by reference to Exhibit h(35) to Post-Effective
Amendment No. 52 (filed June 2, 2000) to Registrant's
Registration Statement on Form N-1A.
(h)(15) Sub-Transfer Agency Agreement dated March 30, 2000 between
National Deferred Compensation, Inc. and One Group Mutual Funds
is incorporated by reference to Exhibit h(36) to Post-Effective
Amendment No. 52 (filed June 2, 2000) to Registrant's
Registration Statement on Form N-1A.
(h)(16) Processing Agreement by and between Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation and The One
Group dated as of February, 1999 is incorporated by reference to
Exhibit (6)(f) to Registrant's Registration Statement on Form
N-1A (filed March 12, 1999).
(h)(17) Agency Services and Delegation Agreement dated January 1, 1996
between One Group Mutual Funds and BISYS Qualified Plan Services
is incorporated by reference to Exhibit (9)(g) to Post-Effective
Amendment No. 37 (filed June 13, 1996) to the Registrant's
Registration Statement on Form N-1A.
13
<PAGE>
(h)(18) Amendment to Agency Services and Delegation Agreement between
Registrant and BISYS Qualified Plan Services is incorporated by
reference to Exhibit (h)(10) to Post-Effective Amendment No. 50
(filed August 26, 1999) to Registrant's Registration Statement on
Form N-1A.
(h)(19) Sub-Transfer Agency Agreement dated September 1, 2000 between
American Century and One Group Mutual Funds is filed herewith.
(h)(20) Form of Order Processing Agreement is incorporated by reference
to Exhibit (9)(ee) to Post-Effective Amendment No. 49 (filed
April 27, 1999) to Registrant's Registration Statement on Form
N-1A.
(h)(21) Late Order Processing Agreement between American General (VALIC)
Retirement Services Co. and One Group Mutual Funds is
incorporated by reference to Exhibit h(37) to Post-Effective
Amendment No. 52 (filed June 2, 2000) to Registrant's
Registration Statement on Form N-1A.
(h)(22) Late Order Processing Agreement dated April 6,2000 between
Security Trust Company and One Group Mutual Funds is incorporated
by reference to Exhibit (h)(38) to Post-Effective Amendment No.
52 (filed June 2, 2000) to Registrant's Registration Statement on
Form N-1A.
(h)(23) Recordkeeping and Late Trading Agreement between Registrant and
Bank One Trust Company, NA is incorporated by reference to
Exhibit (h)(11) to Post-Effective Amendment No. 51 (filed October
22, 1999) to Registrant's Registration Statement on Form N-1A.
(h)(24) Late Order Processing Agreement dated July 26, 2000, between
Exeter Trust Company and One Group Mutual Funds is filed
herewith.
(h)(25) Late Order Processing Agreement dated September 1, 2000, between
American Century and One Group Mutual Funds is filed herewith.
(h)(26) Services Agreement dated August 1, 2000 between Mellon Bank, NA,
The One Group Services Company and One Group Mutual Funds is
filed herewith.
(h)(27) Form of Shareholder Services Agreement (Class S shares) between
One Group Mutual Funds and various service organizations is filed
herewith.
(h)(28) Shareholder Services Agreement (Class S Shares) dated March 21,
2000 between One Group Mutual Funds and Bank One Corporation is
incorporated by reference to Exhibit e(9) to Post-Effective
Amendment No. 52 (filed June 2, 2000) to Registrant's
Registration Statement on Form N-1A.
(h)(29) Shareholder Services Agreement (Class S Shares) dated May 26,
2000 between One Group Mutual Funds and Bank One Trust Company,
N.A. is incorporated by
14
<PAGE>
reference to Exhibit e(8) to Post-Effective Amendment No. 52
(filed June 2, 2000) to Registrant's Registration Statement on
Form N-1A.
(h)(30) Shareholder Services Agreement (Class S Shares) dated June 22,
2000 between One Group Mutual Funds and Advanced Asset Management
Advisors is filed herewith.
(h)(31) Securities Lending Agreement for Non-ERISA Accounts dated as of
August 1995 between One Group Mutual Funds, Banc One Investment
Advisors Corporation, and Bank One Trust Company, N.A. is
incorporated by reference to Exhibit (9)(p) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(h)(32) Amendment to Securities Lending Agreement for Non-ERISA Accounts
dated as of January 21, 1997 between One Group Mutual Funds, Banc
One Investment Advisors Corporation, and Bank One Trust Company,
N.A. is incorporated by reference to Exhibit (9)(q) to Post
Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(h)(33) Securities Lending Agreement for Non-ERISA Accounts (Foreign
Securities) dated as of January 8, 1998 between One Group Mutual
Funds, Banc One Investment Advisors, and Bank One Trust Company,
N.A. is incorporated by reference to Exhibit (9)(s) to Post
Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(h)(34) Amendment to the Securities Lending Agreement (Foreign
Securities) effective May 21, 1998 is incorporated by reference
to Exhibit (9)(t) to Post Effective Amendment No. 45 (filed
August 26, 1998) to Registrant's Registration Statement on Form
N-1A.
(h)(35) Second Amendment to the Securities Lending Agreement (Domestic
Securities), effective May 21, 1998, between One Group Mutual
Funds, Banc One Investment Advisors, and Bank One Trust Company,
N.A. is incorporated by reference to Exhibit (9)(r) to Post
Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(i) Opinion and consent of counsel is filed herewith.
(j)(1) Consent of PricewaterhouseCoopers LLP is filed herewith.
(j)(2) Consent of Ropes & Gray is filed herewith.
(k) None
(l) Purchase Agreement dated July 18, 1985, between Registrant and
Physicians Insurance Company of Ohio is incorporated by reference
to Exhibit (13) to Post
15
<PAGE>
Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(m)(1) Re-Executed Distribution and Shareholder Services Plan - Class A
and Service Class shares dated November 1, 1995, as amended
August 20, 1997, between One Group Mutual Funds and The One Group
Services Company is incorporated by reference to Exhibit (15)(a)
to Post-Effective Amendment No. 43 (filed August 29, 1997) to
Registrant's Registration Statement on Form N-1A.
(m)(2) Revised Schedule A to the Distribution and Shareholder Services
Plan - Class A and Service Class Shares is incorporated by
reference to Exhibit m(2) to Post-Effective Amendment No. 52
(filed June 2, 2000) to Registrant's Registration Statement on
Form N-1A.
(m)(3) Distribution and Shareholder Services Plan - Class B and Class C
Shares dated January 1, 1994, as amended August 20, 1997, between
One Group Mutual Funds and The One Group Services Company is
incorporated by reference to Exhibit (15)(b) to Post-Effective
Amendment No. 43 (filed August 29, 1997) to Registrant's
Registration Statement on Form N-1A.
(m)(4) Revised Schedules A and B to the Distribution and Shareholder
Services Plan - Class B and Class C Shares is incorporated by
reference to Exhibit (m)(4) to Post-Effective Amendment No. 50
(filed August 26, 1999) to Registrant's Registration Statement on
Form N-1A.
(m)(5) Form of Shareholder Servicing Agreement (Non-NASD) between One
Group Mutual Funds and Participating Service Organizations is
incorporated by reference to Exhibit (7)(f) to Registrant's
Registration Statement on Form N-14 (filed on May 29, 1998).
(m)(6) Form of Agency Agreement between The One Group Services Company
and various shareholder servicing agents is incorporated by
reference to Exhibit (9)(bb) to Post-Effective Amendment No. 49
(filed April 27, 1999) to Registrant's Registration Statement on
Form N-1A.
(m)(7) Agency Agreement between American General Retirement Services Co.
(VALIC), One Group Mutual Funds and The One Group Services
Company is incorporated by reference to Exhibit e(10) to
Post-Effective Amendment No. 52 (filed June 2, 2000) to
Registrant's Registration Statement on Form N-1A.
(m)(8) Agency Agreement dated November 25, 1999 between Capstone
Financial Group, Inc., One Group Mutual Funds and The One Group
Services Company is incorporated by reference to Exhibit e(11) to
Post-Effective Amendment No. 52 (filed June 2, 2000) to
Registrant's Registration Statement on Form N-1A.
16
<PAGE>
(m)(9) Agency Agreement dated April 6, 2000 between Security Trust
Company, One Group Mutual Funds and The One Group Services
Company is incorporated by reference to Exhibit e(12) to
Post-Effective Amendment No. 52 (filed June 2, 2000) to
Registrant's Registration Statement on Form N-1A.
(m)(10) FundCircuit Program Services Agreement between Bear Sterns
Securities Corporation, The One Group Services Company, and One
Group Mutual Funds is incorporated by reference to Exhibit d(13)
to Post-Effective Amendment No. 52 (filed June 2, 2000) to
Registrant's Registration Statement on Form N-1A.
(m)(11) Services Agreement dated December 28, 1999 between Fidelity
Brokerage Services, Inc., National Financial Services
Corporation, One Group Mutual Funds, and The One Group Services
Company is incorporated by reference to Exhibit e(14) to
Post-Effective Amendment No. 52 (filed June 2, 2000) to
Registrant's Registration Statement on Form N-1A.
(m)(12) Shareholder Services Agreement (Cash Sweep) dated June 1, 1996
between The One Group Services Company and Bank One Corporation
is incorporated by reference to Exhibit 9(h) to Post-Effective
Amendment No. 37 (filed June 13, 1996) to the Registrant's
Registration Statement on Form N-1A.
(m)(13) Services Agreement dated as of June 6, 1997 between One Group
Mutual Funds and Charles Schwab & Company, is incorporated by
reference to Exhibit (9)(l) to Post-Effective Amendment No. 44
(filed June 5, 1998) to Registrant's Registration Statement on
Form N-1A.
(m)(14) Fund Alliance Agreement by and between The One Group, The One
Group Services Company, and Putnam Fiduciary Trust Company is
incorporated by reference to Exhibit (9)(u) to Post-Effective
Amendment No. 49 (filed April 27, 1999) to Registrant's
Registration Statement on Form N-1A.
(m)(15) Agency Agreement dated as of March 18, 1997 between Pegasus Funds
and BISYS Fund Services, Inc. is incorporated by reference to
Exhibit (9)(v) to Post-Effective Amendment No. 49 (filed April
27, 1999) to Registrant's Registration Statement on Form N-1A.
(m)(16) Amendment dated April 1, 1999, to the Agency Agreement dated as
of March 18, 1997 between Pegasus Funds and BISYS Fund Services,
Inc. is incorporated by reference to Exhibit (9)(w) to
Post-Effective Amendment No. 49 (filed April 27, 1999) to
Registrant's Registration Statement on Form N-1A.
(m)(17) Agency Agreement dated as of March 11, 1997 between Pegasus Funds
and Bank One Trust Company, N.A. (as successor to NBD Bank) is
incorporated by reference to Exhibit (9)(x) to Post-Effective
Amendment No. 49 (filed April 27, 1999) to Registrant's
Registration Statement on Form N-1A.
17
<PAGE>
(m)(18) Amendment to the Agency Agreement dated as of March 11, 1997
between Pegasus Funds and NBD Bank is incorporated by reference
to Exhibit (9)(y) to Post-Effective Amendment No. 49 (filed April
27, 1999) to Registrant's Registration Statement on Form N-1A.
(m)(19) Agency Agreement dated as of November 1, 1996 between Pegasus
Funds and Putnam Fiduciary Trust Company is incorporated by
reference to Exhibit (9)(z) to Post-Effective Amendment No. 49
(filed April 27, 1999) to Registrant's Registration Statement on
Form N-1A.
(m)(20) Fifth Amendment dated March 19, 1999, to the Agency Agreement
dated as of November 1, 1996 between Pegasus Funds and Putnam
Fiduciary Trust Company is incorporated by reference to Exhibit
(9)(aa) to Post-Effective Amendment No. 49 (filed April 27, 1999)
to Registrant's Registration Statement on Form N-1A.
(m)(21) Services (Agency) Agreement dated September 20, 1999 between
SunGard Investment Products, Inc., The One Group Services Company
and One Group Mutual Funds is filed herewith.
(m)(22) Financial Services (Agency) Agreement dated August 6, 1999
between Merrill Lynch, Pierce, Fenner & Smith, Inc. and The One
Group Services Company is filed herewith.
(m)(23) Supplemental No-Load Agreement (Agency) dated December 3, 1999
between Merrill Lynch, Pierce, Fenner & Smith, Inc., The One
Group Services Company and One Group Mutual Funds is filed
herewith.
(m)(24) Shareholder Services Agreement (Agency) Agreement dated December
12, 1997 between Bank One Trust Company, N.A. and The One Group
Services Company is filed herewith.
(m)(25) Participation Agreement (Agency) Agreement dated August 26, 1999
between Edgewood Services, Inc., The One Group Services Company,
and One Group Mutual Funds is filed herewith.
(m)(26) Shareholder Services (Agency) Agreement dated May 11, 1999
between First Trust Corporation, The One Group Services Company,
and One Group Mutual Funds is filed herewith.
(m)(27) Agency Agreement dated July 26, 2000 between Exeter Trust
Company, The One Group Services Company and One Group Mutual
Funds is filed herewith.
(m)(28) Agency Agreement dated June 28, 2000 between Expert Plan.Com, The
One Group Services Company and One Group Mutual Funds is filed
herewith.
18
<PAGE>
(n) Multiple Class Plan for One Group Mutual Funds adopted by the
Board of Trustees on May 22, 1995, as amended August 16, 2000 is
filed herewith
(p)(1) One Group Mutual Funds and One Group Investment Trust Code of
Ethics is filed herewith, incorporated by reference to Exhibit
(p)(1) to Post-Effective Amendment No. 52 (filed June 2, 2000) to
Registrant's Registration Statement on Form N-1A.
(p)(2) Policy 4.05 Personal Trading as revised August 18, 2000 from Banc
One Investment Advisors Corporation's Compliance Manual is filed
herewith.
(p)(3) Policy 4.02 Employee Brokerage Accounts as amended October 11,
1999 from Banc One Investment Advisors Corporation's Compliance
Manual is incorporated by reference to Exhibit (p)(32) to
Post-Effective Amendment No. 52 (filed June 2, 2000) to
Registrant's Registration Statement on Form N-1A.
(p)(4) BISYS Code of Ethics is incorporated by reference to Exhibit p(4)
to Post-Effective Amendment No. 52 (filed June 2, 2000) to
Registrant's Registration Statement on Form N-1A.
(p)(5) Banc One High Yield Partners, LLC, Pacholder & Company, LLC and
Pacholder Associates, LLC Code of Ethics dated as of October 2000
is filed herewith.
Item 24. Persons Controlled by or under Common Control with Registrant
As of the effective date of this Registration Statement there are no persons
controlled or under common control with the Registrant.
19
<PAGE>
Item 25. Indemnification.
Article IX, Section 9.2 of the Registrant's Declaration of Trust,
incorporated as Exhibit (1) hereto, provides for the
indemnification of Registrant's trustees and officers.
Indemnification of the Registrant's principal underwriter,
custodians, investment advisers, administrator, and transfer
agents is provided for in the Registrant's respective Agreements
with those service providers as filed or incorporated by
reference as Exhibits hereto. As of the effective date of this
Registration Statement, the Registrant has obtained from a major
insurance carrier a trustees and officers' liability policy
covering certain types of errors and omissions. In no event will
Registrant indemnify any of its trustees, officers, employees, or
agents against any liability to which such person would otherwise
be subject by reason of his willful misfeasance, bad faith, or
gross negligence in the performance of his duties, or by reason
of his reckless disregard of the duties involved in the conduct
of his office or under his agreement with Registrant. Registrant
will comply with Rule 484 under the Securities Act of 1933 and
Release 11330 under the Investment Company Act of 1940 in
connection with any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer
or controlling person of Registrant in the successful defense of
any action, suit or proceeding) is asserted by such trustee,
officer, or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
20
<PAGE>
Item 26. Business and Other Connections of Investment Advisers
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors") performs investment advisory services for all of the
Funds of The One Group. Banc One High Yield Partners, LLC
provides investment advisory services for the High Yield Bond
Fund and Income Bond Fund.
Banc One Investment Advisors is an indirect wholly owned
subsidiary of Bank One Corporation, a bank holding company
incorporated in the state of Delaware. Bank One Corporation now
operates affiliate banking organizations in Arizona, Colorado,
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.
To the knowledge of Registrant, none of the directors or officers
of Banc One Investment Advisors, or Banc One High Yield Partners,
LLC, except as set forth or incorporated herein, is or has been,
at any time during the past two calendar years, engaged in any
other business, profession, vocation or employment of a
substantial nature. Set forth below are the names and principal
businesses of the directors of Banc One Investment Advisors who
are engaged in any other business, profession, vocation or
employment of a substantial nature.
Banc One Investment Advisors
<TABLE>
<CAPTION>
Position with Banc Other
One Investment Advisors Substantial Occupation Type of Business
----------------------- ---------------------- ----------------
<S> <C> <C>
David J. Kundert, Chairman, Executive Vice President, Investment
President, and CEO Bank One Corporation
1111 Polaris Parkway
Columbus, Ohio 43271
Peter W. Atwater, Director President and Chief Investment
Executive Officer,
Private Client Services
1111 Polaris Parkway
Columbus, Ohio 43271
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Position with Banc Other
One Investment Advisors Substantial Occupation Type of Business
----------------------- ---------------------- ----------------
<S> <C> <C>
Mark A. Beeson, Director President, One Group Investment
Administrative Services, Inc.
1111 Polaris Parkway
Columbus, Ohio 43271
Gary Madich, Director Senior Managing Director Investment
Banc One Investment Advisors
Corporation,
1111 Polaris Parkway,
Columbus, Ohio 43271
Richard Jandrain, Director Senior Managing Director Investment
Banc One Investment Advisors
Corporation,
1111 Polaris Parkway,
Columbus, Ohio 43271
</TABLE>
The principal business address of the principal executive officer and directors
of Banc One Investment Advisors is 1111 Polaris Parkway, P.O. Box 710211,
Columbus, Ohio 43271-0211.
22
<PAGE>
Banc One High Yield Partners, LLC
Banc One High Yield Partners, LLC is the Sub-Investment Advisor to the High
Yield Bond Fund ("Banc One Partners"). Banc One Partners, a limited liability
company organized under the laws of Ohio, provides investment advice to the High
Yield Bond Fund. Set forth below are the names and principal businesses of the
managers and investment officers of Banc One Partners who are engaged in any
other business, profession, vocation or employment of a substantial nature.
<TABLE>
<CAPTION>
Position with Other Substantial Type of
Banc One Partners Occupation Business
----------------- ---------- --------
<S> <C> <C>
James P. Shanahan, Manager Pacholder Associates, Investment
Inc., Managing Director
& General Counsel, 8044
Montgomery Road, Suite
#382, Cincinnati, Ohio
45236
William J. Morgan, Manager Pacholder Associates, Investment
Inc., President, 8044
Montgomery Road, Suite
#382, Cincinnati, Ohio
45236
Mark A. Beeson, President One Group Administrative Investment
Services, Inc., Chief
Executive Officer and
President,1111Polaris
Parkway, Columbus,
Ohio 43271
Peter W. Atwater Private Client Services Investment
Chief Executive Officer
and President,1111 Polaris
Parkway, Columbus,
OH 43271
Gary Madich, Manager Banc One Investment Investment
Advisors, Senior
Managing Director, 1111
Polaris Parkway,
Yvonne M. Goetz, Pacholder Associates, Inc. Investments
Vice President, 8044
Montgomery Road, Suite
#382, Cincinnati, Ohio
45236
</TABLE>
23
<PAGE>
Item 27. Principal Underwriters
(a) The One Group Services Company acts as distributor for the shares
of the Registrant.
(b) The directors and officers of The One Group Services Company are
set forth below. The business address of each director or officer is
3435 Stelzer Road, Columbus, Ohio 43219.
<TABLE>
<CAPTION>
Positions and Offices
With The One Group
Name Services Company Positions With Registrant
---- ---------------- -------------------------
<S> <C> <C>
Lynn J. Mangum Chairman and Chief None
Executive Officer
Dennis Sheehan Director None
Kevin J. Dell Vice President/Secretary/ None
Michael D. Burns Vice President None
Steven Ludwig Compliance Officer None
Robert Tuch Assistant Secretary None
David P. Blackmore Vice President/ None
Chief Financial Officer
Mark S. Redman President President
Mark J. Ryberczyk Senior Vice President None
</TABLE>
(c) Not applicable.
Item 28. Location of Accounts and Records
(1) Banc One Investment Advisors Corporation, 1111 Polaris Parkway, P.O.
Box 710211, Columbus, Ohio 43271-0211 (records relating to its
functions as Investment Adviser).
(2) Independence International Associates, Inc., 75 State Street, Boston,
MA 02109 (records relating to its functions as Sub-Investment Adviser
to the International Equity Index Fund).
(3) Banc One High Yield Partners, LLC, 1111 Polaris Parkway, P.O. Box
710211, Columbus, Ohio 43271-0211 and 8044 Montgomery Road, Suite
#382, Cincinnati,
24
<PAGE>
Ohio 45236 (records relating to its functions as Sub-Investment
Advisor to the High Yield Bond Fund).
(4) The One Group Services Company, 3435 Stelzer Road, Columbus, OH 43219
(records relating to its functions as Distributor for all Funds).
(5) One Group Administrative Services, Inc. Company, 1111 Polaris Parkway,
Columbus, OH 43271-1235(records relating to its functions as
Administrator for all Funds).
(6) State Street Bank and Trust Company, 470 Atlantic Avenue, Fifth Floor,
Boston, MA 02205-9087 (records relating to its functions as custodian
and transfer agent to all Funds).
(7) Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800
East, Washington, D.C. 20005 (Declaration of Trust, Code of
Regulations, and Minute Books).
Item 29. Management Services
N/A
Item 30. Undertakings
The Registrant undertakes to call a meeting of Shareholders, at the
request of at least 10% of the Registrant's outstanding shares, for
the purpose of voting upon the question of removal of a trustee or
trustees and to assist in communications with other shareholders as
required by Section 16(c) of the Investment Company Act of 1940.
The Registrant undertakes to furnish to each person to whom a
prospectus for a particular fund is delivered a copy of the
Registrant's latest annual report to shareholders relating to that
fund upon request and without charge.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness to this Post-Effective Amendment pursuant to Rule 485(b) under
the 1933 Act and has duly caused this Post-Effective Amendment No. 52 to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Washington, D.C. on the 30 day of October, 2000.
One Group(R) Mutual Funds
(Registrant)
By: /s/ Mark A. Beeson
--------------------------------
*Mark A. Beeson
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ MARK A. BEESON President October 30, 2000
--------------------------------------------
* Mark A. Beeson
/s/ PETER C. MARSHALL Trustee October 30, 2000
--------------------------------------------
*Peter C. Marshall
/s/ CHARLES I. POST Trustee October 30, 2000
--------------------------------------------
*Charles I. Post
/s/ FREDERICK W. RUEBECK Trustee October 30, 2000
--------------------------------------------
*Frederick W. Ruebeck
/s/ ROBERT A. ODEN Trustee October 30, 2000
--------------------------------------------
*Robert A. Oden
/s/ JOHN F. FINN Trustee October 30, 2000
--------------------------------------------
*John F. Finn
/s/ MARILYN MCCOY Trustee October 30, 2000
--------------------------------------------
*Marilyn McCoy
/s/ DONALD L. TUTTLE Trustee October 30, 2000
--------------------------------------------
*Donald L. Tuttle
/s/ JULIUS L. PALLONE Trustee October 30, 2000
--------------------------------------------
*Julius L. Pallone
*By: /s/ ALAN G. PRIEST
--------------------------------------------
Alan G. Priest
Attorney-in-Fact, pursuant to powers of attorney filed herewith.
</TABLE>
26
<PAGE>
POWER OF ATTORNEY
Mark A. Beeson, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: October 3, 2000
/s/ Mark A. Beeson
-----------------------------------
Mark A. Beeson
27
<PAGE>
POWER OF ATTORNEY
Peter C. Marshall, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 21, 1998
/s/ Peter C. Marshall
-----------------------------------
Peter C. Marshall
28
<PAGE>
POWER OF ATTORNEY
Charles I. Post, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 21, 1998
/s/ CHARLES I. POST
-----------------------------------
Charles I. Post
29
<PAGE>
POWER OF ATTORNEY
Frederick W. Ruebeck, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 21, 1998
/s/ FREDERICK W. RUEBECK
-----------------------------------
Frederick W. Ruebeck
30
<PAGE>
POWER OF ATTORNEY
Robert A. Oden, Jr., whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 21, 1998
/s/ ROBERT A. ODEN, JR.
-----------------------------------
Robert A. Oden, Jr.
31
<PAGE>
POWER OF ATTORNEY
John F. Finn, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 21, 1998
/s/ JOHN F. FINN
-----------------------------------
John F. Finn
32
<PAGE>
POWER OF ATTORNEY
Marilyn McCoy, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 19, 1999
/s/ MARILYN MCCOY
-----------------------------------
Marilyn McCoy
33
<PAGE>
POWER OF ATTORNEY
Donald L. Tuttle, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 19, 1999
/s/ DONALD L. TUTTLE
-----------------------------------
Donald L. Tuttle
34
<PAGE>
POWER OF ATTORNEY
Julius L. Pallone, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 19, 1999
/s/ JULIUS L. PALLONE
-----------------------------------
Julius L. Pallone
35
<PAGE>
Exhibits
(d)(2) Amended and Restated Schedule A to the Investment Advisory Agreement
between Registrant and Banc One Investment Advisors Corporation dated
August 16, 2000.
(d)(4) Sub-Investment Advisory Agreement, dated as of November 9, 1999 between
Banc One Investment Advisors Corporation and Banc One High Yield
Partners, LLC.
(h)(1) Management and Administration Agreement dated November 1, 2000 between
One Group Mutual Funds and One Group Administrative Services, Inc.
(h)(2) Fund Accounting and Related Services Agreement dated November 1, 2000
between the One Group Administrative Services, Inc. and BISYS Fund
Services, Inc.
(h)(7) Administrative Services Agreement (Cash Sweep) dated August 1, 1996
between Bank One Corporation and The One Group Services Company.
(h)(19) Sub-Transfer Agency Agreement dated September 1, 2000 between American
Century and One Group Mutual Funds.
(h)(24) Late Order Processing Agreement dated July 26, 2000, between Exeter
Trust Company and One Group Mutual Funds.
(h)(25) Late Order Processing Agreement dated September 1, 2000, between
American Century and One Group Mutual Funds.
(h)(26) Services Agreement dated August 1, 2000 between Mellon Bank, NA, The
One Group Services Company and One Group Mutual Funds.
(h)(27) Form of Shareholder Services Agreement (Class S shares) between One
Group Mutual Funds and various service organizations.
(h)(30) Shareholder Services Agreement (Class S Shares) dated June 22, 2000
between One Group Mutual Funds and Advanced Asset Management Advisors.
(i) Opinion and Consent of Ropes & Gray.
(j)(1) Consent of PricewaterhouseCoopers LLP.
(j)(2) Consent of Ropes & Gray.
(m)(21) Services (Agency) Agreement dated September 20, 1999 between SunGard
Investment Products, Inc., The One Group Services Company and One Group
Mutual Funds.
<PAGE>
(m)(22) Financial Services (Agency) Agreement dated August 6, 1999 between
Merrill Lynch, Pierce, Fenner & Smith, Inc. and The One Group Services
Company.
(m)(23) Supplemental No-Load Agreement (Agency) dated December 3, 1999 between
Merrill Lynch, Pierce, Fenner & Smith, Inc., The One Group Services
Company and One Group Mutual Funds.
(m)(24) Shareholder Services Agreement (Agency) Agreement dated December 12,
1997 between Bank One Trust Company, N.A. and The One Group Services
Company.
(m)(25) Participation Agreement (Agency) Agreement dated August 26, 1999
between Edgewood Services, Inc., The One Group Services Company, and
One Group Mutual Funds.
(m)(26) Shareholder Services (Agency) Agreement dated May 11, 1999 between
First Trust Corporation, The One Group Services Company, and One Group
Mutual Funds.
(m)(27) Agency Agreement dated July 26, 2000 between Exeter Trust Company, The
One Group Services Company and One Group Mutual Funds.
(m)(28) Agency Agreement dated June 28, 2000 between Expert Plan.Com, The One
Group Services Company and One Group Mutual Funds.
(n) Multiple Class Plan for One Group Mutual Funds adopted by the Board of
Trustees on May 22, 1995, as amended August 16, 2000.
(p)(2) Policy 4.05 Personal Trading as revised August 18, 2000 from Banc One
Investment Advisors Corporation's Compliance Manual.
(p)(5) Banc One High Yield Partners, LLC, Pacholder & Company, LLC and
Pacholder Associates LLC Code of Ethics.
