<PAGE> 1
ONE FUND, INC.
SUPPLEMENT DATED MAY 1, 1996 TO THE PROSPECTUS DATED NOVEMBER 1, 1995
Effective May 1, 1996, the prospectus is amended in the following particulars:
Any reference in the prospectus to the Statement of Additional Information
dated November 1, 1995, refers to the Statement of Additional Information as
revised May 1, 1996.
INVESTMENT ADVISER: As of May 1, 1996, Ohio National Investments, Inc. (the
"Adviser") replaced O.N. Investment Management Company ("ONIMCO") as ONE Fund's
investment adviser. Like ONIMCO before it, the Adviser makes use of the
investment personnel and administrative systems of The Ohio National Life
Insurance Company ("ONLI"). The replacement of ONIMCO by the Adviser did not
result in any change in any of ONE Fund's portfolio managers or investment
advisory fees.
PRINCIPAL UNDERWRITER: Pending receipt of necessary regulatory approvals, Ohio
National Equities, Inc. ("ONE, Inc.") will replace The O.N. Equity Sales
Company ("ONESCO") as ONE Fund's principal underwriter. ONE Fund shares will
continue to be offered through the registered representatives of ONESCO and of
other broker-dealers that enter into distribution agreements with ONE, Inc.
Both the Adviser and ONE, Inc. are wholly-owned subsidiaries of ONLI and are
located at 237 William Howard Taft Road, Cincinnati, Ohio 45219.
<PAGE> 2
PROSPECTUS 237 William Howard Taft Road
NOVEMBER 1, 1995 Cincinnati, Ohio 45219
ONE FUND, INC. Telephone 1-800-578-8078
<TABLE>
<CAPTION>
CONTENTS
- --------
<S> <C>
2 Key Features One Fund Inc. ("ONE Fund") is an open-end management investment company with 8 diversified
portfolios, Through the different portfolios, ONE Fund's objectives are to provide:
3 Summary of Expenses MONEY MARKET PORTFOLIO - current income consistent with preservation of capital and liquidity
4 Financial Highlights TAX FREE INCOME PORTFOLIO - high current income exempt from federal income taxes.
9 About ONE Fund INCOME PORTFOLIO - high current income. Preservation of capital is a secondary objective.
19 Dividends, Distributions
and Taxes INCOME & GROWTH PORTFOLIO - moderate income with the potential for increasing income over time.
Growth of capital is also a primary objective.
19 ONE Fund
Management GROWTH PORTFOLIO - long-term capital growth.
23 Buying Shares SMALL CAP PORTFOLIO - maximum capital growth by investing primarily in common stocks of small
and medium sized companies
24 Reducing the Sales Charge INTERNATIONAL PORTFOLIO - long-term capital growth by investing primarily in common stocks of
foreign companies.
26 Flexibility Features GLOBAL CONTRARIAN PORTFOLIO - long-term growth of capital by investing in foreign and domestic
securities believed to be undervalued or presently out of favor.
28 Redeeming shares This prospectus sets forth concisely the information about ONE Fund
29 Fund Performance that you should know before investing. This prospectus should be retained for future reference.
Additional information about ONE Fund has been filed with the Securities and Exchange Commission
in a Statement of Additional Information, dated November 1, 1995, which is incorporated herein
by reference. The Statement of Additional Information is available upon request and without
charge by calling or writing ONE Fund at the toll-free telephone number or the address shown
above.
</TABLE>
INVESTMENTS IN THE MONEY MARKET PORTFOLIO ARE NEITHER INSURED NOR GUARANTEED BY
THE UNITED STATES GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
<PAGE> 3
KEY FEATURES OF ONE FUND
ONE FUND WITH
8 PORTFOLIOS ONE Fund is a series mutual fund offering you
a selection of 8 investment options
(portfolios). See "About ONE Fund" on page
9. ONE Fund shares are subject to the risks
that the securities in which each portfolio
is invested might decrease in value (market
risk) or that issuers of income-producing
securities might not be able to pay the
interest or principal when due (credit risk).
Changes in interest rates, securities markets
in general or the overall economy can affect
the value of ONE Fund shares or the level of
dividends.
PROFESSIONAL MANAGEMENT ONE Fund's assets are managed by O.N.
Investment Management Company ("ONIMCO").
ONIMCO has been an investment adviser to
mutual funds since 1970. It receives annual
compensation, based on each portfolio's net
assets, at maximum rates of 0.30% for the
Money Market Portfolio, 0.50% for the Income,
Income & Growth and Growth Portfolios, 0.60%
for the Tax-Free Income Portfolio, 0.65% for
the Small Cap Portfolio, and 0.90% for the
International and Global Contrarian
Portfolios. See "ONIMCO"on page 20 and
"ONIMCO's Compensation" on page 22.
DIVERSIFICATION ONE Fund's portfolios are fully diversified.
Your investments are pooled with those of
other investors to purchase a greater variety
of securities than you might purchase by
yourself. See "Diversification" on page 17,
and "About ONE Fund" on page 9.
LIQUIDITY ONE Fund shares may be redeemed, in whole or
in part, at their net asset value upon
request. See "Redeeming Shares" on page 28.
FLEXIBILITY ONE Fund offers a number of privileges
designed to increase your flexibility. Some
of these features include the open account
plan, dividend payment options, exchange
privileges and the automatic withdrawal plan.
See "Dividends, Distributions and Taxes" on
page 19, and "Flexibility Features" on page
26.
SERVICE ONE Fund's principal underwriter is The O.N.
Equity Sales Company ("ONESCO"). You may
purchase ONE Fund shares at any time by
contacting your registered representative.
The purchase of ONE Fund shares includes a
maximum sales charge of 5% of the offering
price (3% for the Tax-Free Income and Income
Portfolios). A number of methods are
available for reducing or eliminating the
sales charge. There is no sales charge for
the Money Market Portfolio. See "Sales
Charges" on page 23, and "Reducing the Sales
Charge" on page 24.
ONE Fund investors may direct service
requests to their registered representative
or directly to ONE Fund at the toll-free
telephone number and address shown on page 1.
A shareholder service fee, not to exceed an
annual rate of 0.30% (0.17% maximum for the
Money Market Portfolio) is paid to ONESCO and
other qualified dealers. See "Sales Charges"
on page 23.
2
<PAGE> 4
SUMMARY OF ONE FUND EXPENSES
This table and example are provided to help you understand the expenses of
investing in ONE Fund and your share of ONE Fund's operating expenses. A
variety of ways to reduce the sales charge are available. See "Sales Charges"
on page 23, and "Reducing the Sales Charge" on page 24.
The Example enables you to compare the long-term cost of owning ONE Fund versus
other funds. Funds with higher recurring operating expenses might, over time,
be more expensive than a fund with a higher sales charge but lower recurring
operating expenses. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
MONEY TAX FREE INCOME INTER- GLOBAL
MARKET INCOME INCOME GROWTH GROWTH SMALL CAP NATIONAL CONTRARIAN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) (1) None 3.00% 3.00% 5.00% 5.00% 5.00 % 5.00% 5.00%
ANNUAL OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees (after waiver)(2) None 0.30% 0.25% 0.25% 0.25% 0.325% 0.90% 0.90%
12b-1 Fees (3) 0.15% 0.25% 0.25% 0.25% 0.25% 0.25 % 0.25% 0.25%
Other Expenses 0.36% 0.36% 0.35% 0.31% 0.33% 0.425% 0.35% 0.90%
----- ----- ----- ----- ----- ------ ----- -----
Total Operating Expenses
(after waiver) 0.51% 0.91% 0.85% 0.81% 0.83% 1.00 % 1.50% 2.05%
===== ===== ===== ===== ===== ====== ===== =====
EXAMPLE
- -------------------------------
A hypothetical investment of
$1,000 would incur the
following expenses,
assuming a 5% annual
return:
1 year $ 5 $ 39 $ 38 $ 58 $ 58 $ 60 $ 65 $ 70
3 year 16 58 56 78 $ 75 80 95 112
5 year 29 79 76 93 $ 94 103 128 156
10 year 64 139 132 145 $ 148 167 221 278
If the maximum Management fees and
12b-1 fees were assessed, the expenses
in this hypothetical example would be:
1 year $ 9 $ 43 $ 41 $ 61 $ 61 63 $ 65 $ 70
3 year 27 70 66 84 $ 84 92 97 113
5 year 46 97 92 108 $ 109 122 131 158
10 year 103 178 166 179 $ 181 208 226 283
</TABLE>
(1) The Maximum Sales Charge scales down for purchases of $25,000 or more
and becomes a contingent deferred sales charge of 0.5%, for 2 years
following purchase, for accounts of at least $1 million.
(2) The Management Fee of 0.30% for the Money Market Portfolio is
presently being waived entirely by ONIMCO, and ONIMCO is voluntarily
receiving only half of its 0.50% Management Fee for the Income, Income
& Growth, and Growth Portfolios, half its 0.60% Management Fee for the
Tax-Free Income Portfolio, and half of its 0.65% Management Fee for
the Small Cap Portfolio. Without these waivers, the Total Operating
Expenses would have been 0.81% for the Money Market Portfolio, 1.21%
for the Tax-Free Income Portfolio, 1.10% for the Income Portfolio,
1.06% for the Income & Growth Portfolio, 1.08% for the Growth
Portfolio and 1.325% for the Small Cap Portfolio.
(3) The 12b-1 Fees shown are based on an estimate that no individual sales
representative will reach critical production levels this year. In
later years, these fees could be slightly higher, but no higher than
0.17% for the Money Market Portfolio and 0.30% for the other
portfolios.
3
<PAGE> 5
ONE FUND, INC.
FINANCIAL HIGHLIGHTS
The following information has been audited by KPMG Peat Marwick LLP,
independent certified public accountants, and is an integral part of ONE Fund's
audited financial statements which appear in the Statement of Additional
Information (which may be obtained by shareholders), incorporated by reference
herein, and should be read in conjunction with the financial statements.
<TABLE>
<CAPTION>
PORTFOLIO
-------------------------------------------------------------------------
MONEY MARKET TAX-FREE INCOME
---------------------------- -------- ----------------------------
8-18-92 11-1-94 8-18-92
YEAR ENDED JUNE 30, TO TO YEAR ENDED JUNE 30, TO
1995 1994 6-30-93 6-30-95 1995 1994 6-30-93
------- ------- ------- --------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1 .00 $10.00 $ 9.39 $10.43 $10.00
------- ------ ------- ------ ------ ------ ------
Income from investment operations:
Net investment income .05 .03 .02 .35 .65 .62 .45
Net realized and unrealized gain
loss on investments and
foreign currency transactions -- -- -- .66 .39 .98 .45
------- ------ ------- ------ ------ ------ ------
Total from investment operations .05 .03 .02 1.01 1.04 (.36) .90
------- ------ ------- ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (.05) (.03) ( .02) (.35) (.65) (.62) (.45)
Distributions from net realized capital
gains and foreign
currency transactions -- -- -- -- -- (.06) (.02)
------- ------ ------- ------ ------ ------ ------
Total distributions (.05) (.03) ( .02) (.35) (.65) (.68) (.47)
------- ------ ------- ------ ------ ------ ------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $10.66 $ 9.78 $ 9.39 $10.43
======= ====== ======= ====== ====== ====== ======
Total return 5.06% 3.06% 2 .67%(b) 10.26%(b) 11.58% 3.79% 9.56%
======= ====== ======= ====== ====== ====== ======
Ratio (to average net assets)/
supplemental data:
Ratios net of fees waived by advisor (c,d):
Expenses .51% .44% .43%(a) .91%(a) .85% 1.02% 1.11%(a)
Net investment income 4.99% 2.97% 2 .70%(a) 5.04%(a) 6.80% 6.10% 5.07%(a)
Ratios assuming no waiver of management
fees by advisor (c,d):
Expenses .81% .74% .73%(a) 1.21%(a) 1.10% 1.27% 1.36%(a)
Net investment income 4.69% 2.67% 2 .40%(a) 4.74%(a) 6.55% 5.85% 4.82%(a)
Portfolio turnover rate -- -- - 0% 4% 6% 6%
Net assets at end of period (millions) $ 14.1 $ 12.3 $ 21 .3 $ 5.7 $ 7.1 $ 4.6 $ 5.7
</TABLE>
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(c) The advisor has elected to waive the entire management fee for the
Money Market Portfolio and one-half of the management fees for the
Tax-Free Income, Income, Income & Growth, Growth and Small Cap
Portfolios, but it may cease those waivers, in whole or in part,
without prior notice.
(d) The advisor has reimbursed certain operating expenses of the
International and Global Contrarian Portfolios. Had the adviser not
reimbursed such expenses, the annualized ratio of expenses to net
assets would have been 1.51%, 2.22% and 4.13% for the International
Portfolio for the periods ended June 30, 1995, June 30, 1994 and June
30, 1993 respectively, and 2.59% for the Global Contrarian Portfolio
for the period ended June 30, 1995. The annualized ratio of net
investment income to net assets would have been (1.10%), (.26%) and
.12% for the International Portfolio for the periods ended June 30,
1995, June 30, 1994 and June 30, 1993 respectively, and (2.31%) for
the Global Contrarian Portfolio for the period ended June 30, 1995.
4
<PAGE> 6
<TABLE>
<CAPTION>
PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
INCOME AND GROWTH GROWTH SMALL CAP INTERNATIONAL GLOB. CONTR.
- --------------------------------------------------------------------------------------------------------------------------------
8-18-92 8-18-92 11-1-94 4-30-93 11-1-94
YEAR ENDED JUNE 30, TO YEAR ENDED JUNE 30, TO TO YEAR ENDED JUNE 30, TO TO
1995 1994 6-30-93 1995 1994 6-30-93 6-30-95 1995 1994 6-30-93 6-30-95
- ------ ------ ------- ------ ------ ------- ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$10.65 $10.96 $10.00 $11.67 $11.63 $10.00 $10.00 $13.32 $ 9.90 $10.00 $10.00
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
.41 .33 .27 .16 .12 .12 .22 .14 .05 .03 .17
1.54 (.11) .96 2.17 .22 1.69 .67 .63 4.01 (.10) .13
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
1.95 .22 1.23 2.33 .34 1.81 .89 .77 4.06 (.07) .30
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(.41) (.33) (.27) (.16) (.12) (.12) (.22) (.14) (.05) (.03) (.17)
(.62) (.20) -- (.81) (.18) (.06) (.04) (1.06) (.59) - (.12)
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(1.03) .53 (.27) (.97) (.30) (.18) (.26) (1.20) (.64) (.03) (.29)
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$11.57 $10.65 $10.96 $13.03 $11.67 $11.63 $10.63 $12.89 $13.32 $ 9.90 $10.01
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
19.41% 1.96% 12.49%(b) 20.54% 2.85% 18.26%(b) 8.91%(b) 6.44% 40.65% (.68)%(b) 2.99%(b)
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
.81 .94 1.07%(a) .83% 1.04% 1.30%(a) 1.00%(a) 1.50% 1.50% 2.32%(a) 2.05%(a)
3.69% 3.08% 3.09%(a) 1.35% 1.04% 1.31%(a) 3.19%(a) 1.11% .46% 1.93%(a) 2.85%(a)
1.06% 1.19% 1.32%(a) 1.08% 1.30% 1.55%(a) 1.31%(a) 1.50% 1.50% 2.32%(a) 2.05%(a)
3.44% 2.83% 2.84%(a) 1.10% .79% 1.06%(a) 2.88%(a) 1.11% .46% 1.93%(a) 2.85%(a)
25% 14% 24% 24% 26% 8% 39% 27 - 8%
$ 7.7 $ 7.5 $ 6.7 $ 7.0 $ 5.3 $ 4.3 $ 2.9 $ 12.0 $10.4 $3.2 $3.9
</TABLE>
5
<PAGE> 7
COMPARISONS OF CHANGE IN VALUE OF $10,000 INVESTMENTS
In ONE Fund Portfolios and Various Indexes
<TABLE>
<CAPTION>
Tax-Free Income &
Income Income Growth Growth
-------- ------ -------- ------
<S> <C> <C> <C> <C>
8/18/92 ---- $9,700 $9,500 $9,500
12/31/92 ---- 9,758 9,487 10,178
4/30/93 ---- ---- ---- ----
6/30/93 ---- 10,628 10,687 11,234
12/31/93 ---- 10,850 11,048 11,917
6/30/94 ---- 10,224 10,896 11,554
11/1/94 $9,700 ---- ---- ----
12/31/94 9,863 10,263 11,073 11,989
6/30/95 10,694 11,407 12,865 13,928
</TABLE>
<TABLE>
<CAPTION>
Lehman Lehman
Municipal Intermediate S&P 500
--------- ------------ -------
<S> <C> <C> <C>
8/16/92 ---- $10,000 $10,000
12/31/92 ---- 10,200 10,452
4/30/93 ---- ---- ----
6/30/93 ---- 10,842 10,966
12/31/93 ---- 11,105 11,353
6/30/94 ---- 10,814 10,814
11/1/94 $10,000 ---- ----
12/31/94 10,035 10,891 11,290
6/30/95 11,003 11,937 13,571
</TABLE>
6
<PAGE> 8
COMPARISONS CONT.
<TABLE>
<CAPTION>
Small Global
Cap International Countrarian
----- ------------- -----------
<S> <C> <C> <C>
8/18/92 ---- ---- ----
12/31/92 ---- ---- ----
4/30/93 ---- $9,500 ----
6/30/93 ---- 9,435 ----
12/31/93 ---- 12,271 ----
6/30/94 ---- 13,270 ----
11/1/94 $9,500 ---- $9,500
12/31/94 9,537 13,443 9,145
6/30/95 10,343 14,086 9,781
</TABLE>
<TABLE>
<CAPTION>
Russell Morgan Morgan
2,000 EAFE World
------- ------ ------
<S> <C> <C> <C>
8/18/92 ---- ---- ----
12/31/92 ---- ---- ----
4/30/93 ---- $10,000 ----
6/30/93 ---- 10,052 ----
12/31/93 ---- 10,724 ----
6/30/94 ---- 11,695 ----
11/1/94 $10,000 ---- $10,000
12/31/94 9,877 11,481 9,667
6/30/95 11,190 11,683 10,460
</TABLE>
7
<PAGE> 9
MANAGEMENT'S DISCUSSION OF ONE FUND PERFORMANCE
(FISCAL YEAR JULY 1994 THROUGH JUNE 1995)
Economic activity hit a peak during the second half of 1994 and appeared to be
bottoming near the end of the first half of 1995. U.S. interest rates peaked
during the fourth quarter of 1994 and first quarter of 1995 as investors
anticipated the economic slowdown and a potential recession. U.S. stocks
bottomed during November and December of 1994 and rallied strongly through the
first half of 1995. Initially, the stock rally was narrow with the blue chip
stocks leading the way. Later, the rally broadened to mid- and
small-capitalization stocks. Foreign markets were fairly weak in the second
half of 1994, but improved somewhat during the first half of 1995.
TAX FREE INCOME PORTFOLIO
After its inception in November 1994, this portfolio was fully invested by the
end of 1994. The emphasis has been on high quality municipal bonds with a mix
of intermediate and longer maturities. At the end of the fiscal year, the
average maturity was 19 years and investments in cash items and short-term debt
securities (short-term balances) were approximately 10%.
INCOME PORTFOLIO
During the fiscal year, purchase activity centered on corporate bonds with 5 to
10 year maturities. After a strong bond rally in the first quarter of 1995,
short-term balances were increased from about 5% to 10%. The average maturity
was about 7 years at the end of the fiscal year.
INCOME & GROWTH PORTFOLIO
During the fiscal year, most purchases were in dividend-paying common stocks
with moderate growth potential. At the end of the fiscal year, the portfolio
was 65% common stocks, 23% bonds and 12% money market securities.
GROWTH PORTFOLIO
During the fiscal year, most purchases were in common stocks with above average
growth potential. The portfolio's short-term balances were reduced and at the
end of June 1995, the portfolio was 94% invested in common stocks.
SMALL CAP PORTFOLIO
Since its inception in November 1994, the portfolio has purchased stocks of
small to medium sized companies with moderate to above average growth
potential. At the end of the fiscal year, the portfolio was 68% common stock
and 32% money market instruments. The portfolio under-performed the market
averages during its start-up period largely due to maintaining relatively high
short-term balances.
8
<PAGE> 10
INTERNATIONAL PORTFOLIO
During the fiscal year, purchases were made of common stocks of undervalued
companies in Europe, Asia and other areas. The portfolio's cash position was
reduced to approximately 5% of assets as of the end of the fiscal year.
Foreign common stocks represented 87% of assets. The balance included U.S.
dollar denominated and foreign convertible bonds.
GLOBAL CONTRARIAN PORTFOLIO
Since inception in November 1994, purchases were made in U.S. and foreign
common stocks, commodity-related companies or undervalued companies. At the
end of the fiscal year, the portfolio was invested 16% in convertible and
non-convertible bonds, 36% in U.S. stocks and 47% in foreign stocks.
ABOUT ONE FUND
ONE Fund was incorporated in Maryland on April 24, 1992. It is an open-end
management investment company, commonly called a "mutual fund". ONE Fund has 8
fully diversified portfolios as described below. Equity interests in each
portfolio are represented by a separate class of ONE Fund's capital shares
having a par value of one tenth of one cent per share.
Shares of each portfolio participate equally in its assets and dividends.
All shares of all portfolios have one vote per share and are freely
transferable, except that only shares of a particular portfolio are entitled to
vote on matters affecting only that portfolio. Approval of certain matters by
a vote of all ONE Fund shareholders may not be binding on a portfolio whose
shareholders have not approved that matter. Each share of each portfolio is
entitled to participate equally in its dividends, distributions and net assets.
ONIMCO, the investment adviser, is a wholly-owned subsidiary of ONESCO, the
principal underwriter, which is a wholly-owned subsidiary of The Ohio National
Life Insurance Company ("ONLI"). These and other Ohio National companies are
located at 237 William Howard Taft Road, Cincinnati, Ohio 45219.
Each portfolio has its own investment objectives and policies.
Each portfolio of ONE Fund has a different investment objective and pursues
that objective through its own investment policies. These differences mean
that the total returns and risks for each portfolio will be different. Of
course, the achievement of investment objectives cannot be assured because of
the risks of fluctuating prices of the underlying securities.
9
<PAGE> 11
The investment objectives and the fundamental investment restrictions (which
are described in the Statement of Additional Information) for each portfolio
can only be changed if approved by a vote of the shareholders of the affected
portfolio. All other investment practices may be changed by ONE Fund's Board
of Directors.
MONEY MARKET PORTFOLIO
Current income, preservation of capital and liquidity.
The objective of the Money Market Portfolio is to provide current income
consistent with preservation of capital and liquidity. Essentially all the
assets of this portfolio will be invested in high quality cash equivalent
securities maturing in 13 months or less, including securities issued by (or
guaranteed by) the U.S. Government or its agencies or instrumentalities,
commercial paper, corporate bonds and notes, certificates of deposit, bankers'
acceptances and repurchase agreements. Commercial paper consists of unsecured
promissory notes issued by corporations to finance short-term credit needs.
The dollar-weighted average maturity of all securities in this portfolio will
never be more than 90 days. The Statement of Additional Information provides a
more complete description of the types of financial instruments in which this
portfolio may invest.
Money Market Portfolio risk factors.
The Money Market Portfolio offers a high degree of safety (although not
guaranteed), but little opportunity for above-average long-term return. Income
will fluctuate with changes in the level of short-term interest rates.
ONE Fund intends to maintain the net asset value of the Money Market Portfolio
at a constant $1 per share by paying out all income in the form of daily share
dividends. To avoid fluctuations in the prices of portfolio securities, ONE
Fund intends to hold all securities in this portfolio to maturity and to value
securities based on the amortized-cost method. That is, securities are valued
at their cost on the date acquired, and a daily adjustment is made to accrue
income and to reflect the amortization of premium or accretion of discount to
the maturity date of such securities. If, at any time, the amortized-cost of
portfolio securities results in a deviation of more than 1/2 of 1% from the
value based on available market quotations, the Board of Directors will
promptly determine the appropriate action. Such action could include selling
portfolio securities before maturity, withholding daily dividends,
recapitalizing outstanding shares, requiring shareholders to contribute shares
to capital (reverse dividends), or pricing based on available market
quotations.
10
<PAGE> 12
At least 95% of the assets of the Money Market Portfolio will be invested in
"first-tier" short-term debt instruments. Purchases of other short-term debt
instruments of a single issuer will be limited to the greater of 1% of its
total assets or $1 million. In addition to U.S. Government securities, the
first tier includes commercial paper, certificates of deposit and bankers'
acceptances that have received the highest rating by any two nationally
recognized statistical rating organizations ("NRSROs"), or the highest rating
by one NRSRO if that is the only NRSRO having rated the security, or whose
issuer has received such a rating or ratings with respect to a class of short
term debt obligations that is now comparable in priority and security to those
to be purchased.
TAX-FREE INCOME PORTFOLIO
High current income exempt from federal income taxes.
The objective of the Tax-Free Income Portfolio is to provide high current
income exempt from federal income taxes. Preservation of capital is a
secondary objective.
Normally, substantially all (at least 85% of the assets of this portfolio will
be invested in investment grade municipal securities. As a temporary defensive
measure, during times of adverse market conditions, up to 50% of the
portfolio's assets may be invested in short-term securities, including those
which are not municipal securities. Interest income from investments other
than municipal securities will be taxable to you as ordinary income.
Municipal securities are debt obligations issued by or on behalf of states,
cities, municipalities and other public authorities. The two principal
classifications of municipal securities that may be held by the Portfolio are
"general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source such as the user of a facility being financed.
Revenue securities may include private activity bonds. Such bonds may be
issued by or on behalf of public authorities to finance various privately
operated facilities and are not payable from the unrestricted revenues of the
issuer. As a result, the credit quality of private activity bonds is
frequently related directly to the credit standing of private corporations or
other entities. In addition, the interest on private activity bonds issued
after August 7, 1986 is subject to the federal alternative minimum tax. The
Portfolio will not be restricted with respect to the proportion of its assets
that may be invested in such obligations. Accordingly, the Portfolio may not
be a suitable investment vehicle for individuals or corporations that are
subject to the federal alternative minimum tax.
11
<PAGE> 13
Investment grade Municipal securities.
This portfolio will only purchase investment grade securities. Generally,
bonds rated in one of the top four rating categories are considered investment
grade. No more than 25% of its assets may be invested in securities having, at
the time of purchase, the fourth highest rating (Baa by Moody's and BBB by
Standard & Poor's).
Tax-Free Income Portfolio risk factors.
The financial risk for this portfolio is kept fairly low by restricting
purchases to investment grade securities and further restricting the purchase
of securities in the fourth highest rating category to a maximum of 25% of
assets. Securities in the fourth highest category, while considered investment
grade, may have some speculative characteristics and the issuer's ability to
pay interest or repay principal may be weaker under adverse economic conditions
or changing circumstances.
The degree of market risk for debt securities increases with the length of time
remaining to their maturity. During periods of rising interest rates, the
market prices of all income producing securities tend to decline. Conversely,
when interest rates fall, the market prices of such securities tend to rise.
The values of such securities will also vary as a result of changing economic
conditions or changing evaluations by investors and rating organizations of the
ability of the issuers to meet interest and principal payments. Thus, there is
always a risk of principal loss or gain associated with the portfolio.
However, changes in the values of municipal securities held by the portfolio
will not affect income derived from those securities unless the issuer defaults
on its interest payments.
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 municipal securities
INCOME PORTFOLIO
High current income and preservation of capital.
The objective of the Income Portfolio is to provide high current income.
Preservation of capital is a secondary objective. ONIMCO will seek to preserve
capital by shortening the average maturity of this portfolio during times of
volatile interest rates. Shorter maturities reduce exposure to interest risk
and correspondingly reduce the risk of loss of capital.
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<PAGE> 14
Normally, at least 85% of the assets of this portfolio will be invested in
investment-grade fixed income securities and the equivalent, including
corporate bonds, securities issued by (or guaranteed by) the U.S. Government
or its agencies or instrumentalities, mortgage-backed securities, and cash
equivalents. The remainder may be invested in below-investment-grade corporate
bonds. Generally, bonds rated in one of the top four rating categories are
considered investment grade. However, those in the fourth highest category
(Moody's Baa or Standard & Poor's BBB) may have speculative characteristics and
the issuer's ability to pay interest or repay principal under adverse economic
conditions or changing circumstances may be weaker.
While this portfolio may invest in high-yield, or "junk" bonds, at no time will
any such bond be purchased if it would result in more than 15% of the assets of
this portfolio being represented by such securities. Bonds rated below the
second highest below-investment-grade category (B) by Moody's or Standard &
Poor's will not be purchased.
Income Portfolio risk factors.
The Income Portfolio is primarily invested in securities that ONIMCO believes
present relatively low risk. To the extent deemed prudent, ONIMCO will also
seek to increase the income to this portfolio by positioning no more than 15%
of its assets in junk bonds, provided that the differences in yield appear to
be sufficient to justify the higher risks involved. The market value of such a
security is likely to fluctuate more than that of an investment grade bond,
especially during periods of economic uncertainty or when the issuer's ability
to pay the interest or principal might be in doubt. At times when an issuer's
credit-worthiness is not perceived to be sound, the portfolio's ability to sell
the security or to obtain current pricing information might also be impaired.
With debt securities, the degree of financial risk generally increases the
lower the security is rated, and the degree of market risk increases with the
length of time remaining to maturity. During periods of rising interest rates,
the market prices of all income producing securities will tend to decline.
Conversely, when interest rates fall, the market prices of such securities will
tend to rise. Thus, there is always a risk of principal loss or gain
associated with this portfolio. In addition, changes in economic conditions in
general, or changes in an issuer's financial condition, might impair the
ability of an issuer to timely pay interest and principal, thus adversely
affecting the market price of such securities.
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<PAGE> 15
INCOME & GROWTH PORTFOLIO
Moderate income with the potential for increasing income and growing capital.
The objective of the Income & Growth Portfolio is to provide moderate income
with the potential for increasing income over time. Growth of capital is also
a primary objective.
At least 90% of the assets of this portfolio will be invested in
income-producing securities. Normally, at least 50% of the assets will be
invested in dividend-paying common stocks. The remaining assets will be
invested in preferred stocks, corporate bonds, convertible bonds, securities
issued by (or guaranteed by) the U.S. Government or its agencies or
instrumentalities, mortgage-backed securities, or cash and cash equivalents.
See the discussion of investment grade bonds under "Income Portfolio," above.
Income & Growth Portfolio risk factors.
The risk factors related to the Income Portfolio will also apply to the debt
security portion of this portfolio, and the risk factors related to the Growth
Portfolio will apply to the stock portion of this portfolio. However, market
risk factors for debt securities and stocks often (but not always) tend to
offset each other.
GROWTH PORTFOLIO
Long-term growth.
The objective of the Growth Portfolio is to provide long-term capital growth.
Current income is incidental to the objective of capital growth.
Normally, at least 90% of the assets of this portfolio will be invested in
common stocks and securities convertible into common stocks. Selection of
stocks is not limited with regard to whether the stocks are exchange-listed or
dividend-paying or whether they are issued by companies of any particular size.
The remaining assets will be held in preferred stocks, investment grade
corporate bonds, U.S. Government securities, or short term obligations and
cash equivalents.
There may be circumstances where ONIMCO deems it prudent to temporarily invest
a larger portion of the assets in cash or cash equivalents for defensive
purposes or to meet anticipated redemption requests.
Growth Portfolio risk factors.
Stocks are selected for this portfolio based on their equity characteristics.
Securities ratings are generally not a factor in stock selection. While common
stocks offer greater opportunities than other securities for long-term total
return, their prices are subject to substantial fluctuation. Among factors
affecting stock prices in general are economic and financial trends,
expectations about business activity, and anticipation of changes in corporate
earnings.
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<PAGE> 16
SMALL CAP PORTFOLIO
Capital growth through stocks of small and medium sized companies.
The objective of the Small Cap Portfolio is to provide maximum capital growth
by investing primarily in common stocks of small and medium sized companies.
Ordinarily, these companies are not listed on a national securities exchange
but will be traded over the counter.
Under normal market conditions, at least 65% of this portfolio's assets will be
invested in common stocks of companies with market capitalizations of less than
$1 billion. However, under unusual market conditions, it may invest more than
35% of its assets in larger companies if they appear to present better
prospects for capital appreciation.
Small Cap Portfolio risk factors.
Investments in this portfolio generally involve a high degree of market and
financial risk. Small and medium sized companies selected for this portfolio
are generally those that are still in the developing stages of their life
cycles and are able to achieve rapid growth in sales, earnings and share
prices. Investments in these companies involve greater risk than is
customarily associated with more established companies because smaller or newer
companies often (a) are dependent on one-person management, (b) have limited
product lines, markets or financial resources, (c) their securities may have
limited marketability, and (d) the price of their common stock may be subject
to more abrupt or erratic movements than securities of larger, more established
companies or the market averages.
INTERNATIONAL PORTFOLIO
Long-term growth through foreign stocks.
The objective of the International Portfolio is to provide long-term capital
growth by investing primarily in common stocks (and securities convertible into
common stocks) of foreign companies. This portfolio may also invest in
fixed-income securities of foreign issuers. When deemed appropriate for
temporary defensive purposes, it may invest in short-term debt instruments of
U.S. or foreign issuers, in U.S. Government obligations, or in U.S. common
stocks.
As a nonfundamental policy, this portfolio will not invest more than 20% of its
assets in securities of issuers located in any one foreign country, except that
up to an additional 5% of its assets may be invested in securities of issuers
located in each of any three of Australia, Canada, France, Germany, Japan or
the United Kingdom. While there is no restriction limiting the countries in
which the portfolio may invest, it normally will invest only in countries with
developed securities markets and developed or developing economies, and for
which the Board of Directors has specifically approved custody arrangements.
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<PAGE> 17
International Portfolio risk factors.
This portfolio provides a means for you to diversify your investments by
participating in companies and economies outside the U.S. However, as
described below, investing in foreign securities may involve a greater degree
of risk than investing in domestic securities. See the discussion of risk
factors under "Foreign Securities" on page 18.
GLOBAL CONTRARIAN PORTFOLIO
Long-term growth. Foreign and domestic undervalued or out-of-favor securities.
The objective of the Global Contrarian Portfolio is to provide long-term growth
of capital by investing in foreign and domestic securities that, in the
judgment of the portfolio manager, are undervalued or presently out of favor
with other investors, including securities that are presently trading below
their historic prices, but have positive prospects for eventual recovery.
While this portfolio will primarily invest in common stocks (and securities
convertible into common stocks), it may also invest in fixed income securities
that appear to be undervalued or out of favor. Not more than 20% of the
Portfolio's assets may be invested in fixed income securities rated below
investment grade. Under normal market conditions, at least 65% of the
Portfolio's assets will be invested in conformity with its investment
objectives.
As a nonfundamental policy, this portfolio will not invest more than 20% of its
assets in securities of issuers located in any one foreign country, except that
up to an additional 5% of its assets may be invested in securities of issuers
located in each of any three of Australia, Canada, France, Germany, Japan or
the United Kingdom. There is no other restriction limiting the countries in
which the portfolio may invest, but it will only invest in countries for which
the Board of Directors has specifically approved custody arrangements.
Global Contrarian Portfolio risk factors
A substantial portion of this portfolio (not less than 25%) will be invested in
foreign securities, in at least three countries, under normal market
conditions. To that extent, the risk factors described under "Foreign
Securities"will apply. See page 18. Fixed income securities rated below
investment grade present the higher risk characteristics described under
"Income Portfolio risk factors" on page 13. In addition, "contrarian"
investing generally involves substantial risks, particularly in the short term.
Companies or market segments that appear to be undervalued or are out of favor
with investors may remain so for an extended period of time or may never
recover. Investors should only consider this portfolio for long-term
investments and to the extent that they are willing to be exposed to a higher
degree of risk than is present with the other portfolios.
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<PAGE> 18
DIVERSIFICATION
No more than 5% will be invested in one company and 25% in one industry.
Each portfolio is fully diversified. No more than 5% of the value of the total
assets of each portfolio, as of the time any portfolio security is purchased,
will be invested in the securities of any one issuer. No more than 25% of the
value of the total assets of each portfolio, as of the time any portfolio
security is purchased, will be invested in any one industry. For the Money
Market Portfolio, these restrictions do not apply to U.S. Government
securities, and the "industry" restriction does not apply to financial
institutions or, with respect to the Tax-Free Income Portfolio, to municipal
securities (other than industrial revenue bonds). Each portfolio other than
the Money Market and Tax-Free Income Portfolios, to the limited extent
permitted by its investment restrictions and applicable law, reserves the right
to purchase securities of closed-end investment companies with appropriate
investment restrictions.
CREDIT AND MARKET RISKS
All securities are subject, to some degree, to credit risk and market risk.
Credit risk refers to the ability of an issuer of a debt security to pay its
principal and interest, and to the earnings stability and overall financial
soundness of an issuer of an equity security. Market risk refers to the
volatility of a security's price in response to changes in conditions in
securities markets in general and, particularly in the case of debt securities,
changes in the overall level of interest rates. Higher risk levels are usually
equated to higher potential total return, but higher risk investments have a
greater potential for loss as well.
Generally, the greatest degree of market and credit risk can be expected with
the International Portfolio, and the lowest degree of such risks can be
expected with the Money Market Portfolio. A more detailed summary of risk
factors is contained in the Statement of Additional Information.
FOREIGN SECURITIES
Up to 20% may be invested in other countries.
The Income, Income & Growth, Growth and Small Cap Portfolios may each invest up
to 20% of its assets in the securities of foreign issuers (including private
issuers and foreign governments or political subdivisions, agencies or
instrumentalities of foreign governments), American Depository Receipts, and
the securities of United States domiciled issuers that are denominated in
foreign currency. The Money Market Portfolio may invest up to 50% of its
assets in such securities, provided they are denominated in U.S. dollars and
held in custody in the United States. The Tax-Free Income Portfolio will not
invest in foreign securities. At least 25% of Global Contrarian Portfolio
assets, and normally all of International Portfolio assets, will be invested in
foreign securities at all times.
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<PAGE> 19
Foreign Securities risk factors.
Investments in foreign securities involve added risk factors. These factors
include changes in currency exchange rates, currency exchange control
regulations, the possibility of seizure or nationalization of companies,
political or economic instability, imposition of unforeseen taxes, the
possibility of financial information being difficult to obtain or difficult to
interpret under foreign accounting standards, the necessity of trading in
markets that in relation to U.S. markets may be more volatile or less efficient
and have available less information concerning issuers, or the imposition of
other restraints that might adversely affect investments.
Except for the International and Global Contrarian Portfolios, foreign
investments will not normally constitute a substantial portion of ONE Fund
assets. However, ONIMCO will invest in foreign securities whenever deemed
prudent, particularly when deemed advantageous to offset market or economic
factors prevailing in the U.S. In addition, a number of large, multi-national
foreign corporations have a substantial business presence in the U.S. and their
securities are widely traded in this country.
HEDGING TRANSACTIONS
Hedging transactions seek to limit portfolio volatility.
Each portfolio, other than the Money Market Portfolio, for hedging purposes,
may (a) write call options traded on a registered national securities exchange,
if the portfolio owns the underlying securities, and purchase call options for
the purpose of closing out options it has written, (b) purchase put options on
securities owned, and sell such options in order to close its positions in put
options, (c) purchase and sell financial futures contracts and options thereon,
(d) purchase and sell financial index options, and (e) engage in forward
foreign currency contracts, foreign currency options and foreign currency
futures contracts in connection with the purchase, sale or ownership of
specific securities. However, no option or futures contract shall be purchased
or sold if, as a result, more than one-third of the total assets of a portfolio
would be hedged by options or futures contracts, and no more than 5% of the
total assets, at market value, of a portfolio may be used for premiums on open
options and initial margin deposits on futures contracts, and not more than 5%
of portfolio's assets may be invested in foreign currency hedging transactions.
Each type of instrument listed above is commonly known as a "derivative"
instrument and involves risks even when used solely for hedging purposes.
Hedging transactions and their associated risks are more fully described in the
Statement of Additional Information.
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<PAGE> 20
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. It is ONE Fund's policy to comply
with the provisions of the Code regarding distributions of net investment
income and net realized capital gains so that ONE Fund will not be subject to
federal income tax on amounts distributed. Consequently, ONE Fund distributes
to its shareholders each year substantially all of its net investment income
and net realized capital gains (if any).
ONE Fund shareholders are taxed on distributed income and capital gains. To the
extent that Tax-Free Income Portfolio dividends are derived from tax-exempt
interest, they are exempt from federal income tax, but you are still required
to report them as tax-exempt interest income on your tax return. Shareholders
who are not subject to income tax would not be required to pay tax on amounts
distributed to them. ONE Fund will inform shareholders of the amount and
federal income tax status of distributed income and capital gains.
Money Market, Tax-Free Income, and Income Portfolio dividends are accrued daily
and paid monthly.
For the Money Market, Tax-Free Income, and Income Portfolios, all of the
undistributed net income is accrued as daily dividends to shareholders of
record immediately before each computation of the net asset value of these
portfolios. Dividends (representing net investment income) will normally be
paid monthly to shareholders of those 3 portfolios.
Dividends for the other portfolios are paid at the end of each quarter.
Dividends will normally be paid at the end of March, June, September and
December to Income & Growth, Growth, Small Cap, International and Global
Contrarian Portfolio shareholders. Any net realized capital gains will be
distributed annually. However, ONE Fund's Board of Directors may declare such
dividends at other intervals.
ONE FUND MANAGEMENT
The Directors are elected by the shareholders and are responsible for overall
management.
The Board of Directors is responsible for ONE Fund's overall management and
direction. The Board approves all significant agreements including those with
ONE Fund's investment adviser (ONIMCO), the International and Global Contrarian
Portfolios' subadviser Societe Generale Asset Management Corp., or "SGAM").
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<PAGE> 21
ONE Fund's principal underwriter (ONESCO), its custodians (Investors Fiduciary
Trust Co. for the International and Global Contrarian Portfolios and The
Provident Bank for the other portfolios), and its transfer agent (The Provident
Bank). Board members are elected by the shareholders for three-year terms.
Shareholder meetings will normally be held every 3 years. As a result of
ONLI's ownership of ONE Fund shares, it is a controlling person of each
portfolio of ONE Fund other than the International Portfolio.
ONIMCO
ONIMCO has managed the investment and reinvestment of ONE Fund assets since its
inception, subject to the supervision of the Board of Directors. ONIMCO has
been an investment adviser to other mutual funds since 1970.
ONE Fund's Portfolio Managers
The individuals primarily responsible for the day-to-day management of ONE
Fund's portfolios from their inception are Joseph Brom, Michael Boedeker,
Stephen Williams and Jean-Marie Eveillard.
Joseph Brom is president of ONIMCO and senior vice president and chief
investment officer of ONLI. He oversees the management of the Money Market,
Tax-Free Income, Income, Income & Growth, Growth and Small Cap Portfolios. He
is a chartered financial analyst with a bachelor's degree in economics and
finance and a law degree from the University of Wisconsin. He has been an
investment officer of ONLI since 1975 and previously had 15 years of experience
in securities management.
Michael Boedeker, a vice president of ONIMCO, manages the Money Market,
Tax-Free Income, and Income Portfolios. He is a chartered financial analyst
with a bachelor's degree in business and a master of business administration
degree in finance from Indiana University. He has been vice president of fixed
income securities for ONLI since 1989 and previously had over 20 years of
experience in fixed income securities and mutual fund management, most
recently as senior vice president and chief investment office of Mutual
Security Life Insurance Co. for more than 5 years.
Stephen Williams, a vice president of ONIMCO, manages the Income & Growth,
Growth, and Small Cap Portfolios. He has a bachelor's degree in finance from
the University of Cincinnati. He has been an investment analyst and director
of securities for ONLI since 1977.
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<PAGE> 22
Jean-Marie Eveillard, president of SGAM, manages the International and Global
Contrarian Portfolios. He is a graduate of the Ecole des Hautes Etudes
Commerciales in Paris. He has been president of SoGen International Fund since
1984 and for 21 years prior to that had been a securities analyst and mutual
fund manager of Societe Generale and SoGen International Fund.
ONIMCO`S INVESTMENT STYLE
ONIMCO's basic mutual fund investment philosophy is to seek value at reasonable
prices. This philosophy is implemented through both macroeconomic and
microeconomic analyses using both quantitative and qualitative measurements.
ONIMCO's value investing style uses both a top-down and a bottom-up approach.
The macroeconomic (top-down) analysis generates a forecast based on economic,
political and demographic trends. This macro view identifies those business
sectors and industries most likely to benefit from expected conditions or
events. Once these sectors and industries are determined, a universe of
potential investments is selected. The macroeconomic analysis also tests the
reasonableness of current securities valuations in anticipation of short-term
and intermediate-term capital market movements.
The microeconomic (bottom-up) analysis of the selected universe of securities
is carried out jointly by ONIMCO's securities analysts and portfolio managers.
Stock selection is based on fundamental research and technical indicators.
Stock selection is determined primarily through fundamental research. Through
both proprietary and nonproprietary research capabilities, ONIMCO anticipates a
company's future earnings potential. Then, certain quantitative factors are
reviewed to assure that the stock's current price is consistent with its
historical range and earnings potential. These and other technical indicators
are reviewed to gain an understanding of how investors perceive the stock
relative to its industry and the overall market.
Bond selection is based on credit analysis and interest rate forecasts.
Bond selection is determined primarily through credit analysis. Initially,
credit analysis evaluates the probability that the issuer will meet its
scheduled interest and principal payments. This requires ONIMCO to conduct
industry-, company- and indenture-specific analyses. A second dimension of
bond selection is to anticipate bond price movements which are caused by
changes in prevailing interest rates.
ONIMCO uses sell disciplines.
The value investing approach is used by ONIMCO both to determine securities to
be acquired and those to be sold.
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<PAGE> 23
ONIMCO'S COMPENSATION
ONE Fund pays ONIMCO a quarterly management fee as compensation for its
investment advisory services. The fee is based on the average daily net asset
value of each portfolio's assets. For the most recent fiscal year the fee, as
an annualized percentage of net assets, after any applicable voluntary fee
waiver, was 0.00% for the Money Market Portfolio, 0.25% for the Income, Income
& Growth, and Growth Portfolios, 0.30% for the Tax-Free Income Portfolio,
0.325% for the Small Cap Portfolio, and 0.90% for the International and Global
Contrarian Portfolios. The fees paid by the International and Global
Contrarian Portfolios are higher than the fees paid by many funds, but are not
higher than the fees paid by many funds with similar investment objectives and
policies.
ONIMCO is now waiving all of the fees to which it is entitled from the Money
Market Portfolio and half of those fees from the Tax-Free Income, Income,
Income & Growth, Growth and Small Cap Portfolios, but it may cease those
waivers, in whole or in part, without prior notice.
SGAM
Sub-adviser for the International and Global Contrarian Portfolios.
SGAM manages the assets of the International and Global Contrarian Portfolios
under ONIMCO's supervision. SGAM is located at 1221 Avenue of the Americas in
New York City and is owned by Societe Generale, one of the largest banks in
Europe. SGAM and its predecessors have been investment advisers to
international mutual funds since 1970. ONIMCO pays SGAM, for its services as
sub-adviser, fees at an annual rate of 0.75% of the average daily net asset
value of the International and Global Contrarian Portfolios.
CUSTODY OF ASSETS
The Provident Bank, One East Fourth Street, Cincinnati, Ohio 45202, is the
custodian for all ONE Fund assets except those of the International and Global
Contrarian Portfolios. The assets of those two portfolios are in the custody
of Investors Fiduciary Trust Company, 127 West Tenth Street, Kansas City,
Missouri 64105. For assets held outside the United States, Investors Fiduciary
Trust Company enters into subcustodial agreements, subject to approval by the
Board of Directors. The Provident Bank also serves as ONE Fund's transfer
agent and its agent for bookkeeping, dividend disbursing and certain
shareholder services.
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<PAGE> 24
BUYING SHARES
ONE Fund's shares are continuously offered through its principal underwriter,
ONESCO, and through other securities dealers that execute a distribution
agreement with ONESCO.
Investments can be as small as $50.
The minimum initial investment is $500. Subsequent investments must be at
least $50. These minimums may be waived when the shares are purchased through
plans providing for regular periodic investments. ONE Fund and ONESCO reserve
the right to refuse any purchase order.
PURCHASE PRICE
ONE Fund shares are valued each day the NYSE is open.
The net asset value of the shares of each portfolio is determined at 4 p.m.
Eastern time on each day the New York Stock Exchange is open for unrestricted
trading. The net asset value of each portfolio is computed by dividing the
value of the securities in that portfolio plus any cash or other assets less
all liabilities of the portfolio, by the number of capital shares outstanding
for that portfolio. Securities held by the Money Market Portfolio are valued
at amortized cost. Securities held by the other portfolios are valued at
current market value.
ONE Fund's shares are offered at the public offering price. This is the net
asset value per share plus a sales charge, if applicable. The sales charge is
a variable percentage of the offering price depending upon the amount of the
sale. The Money Market Portfolio seeks to maintain a constant price of $1 per
share.
SALES CHARGES
THE SALES CHARGE DOES NOT APPLY TO THE MONEY MARKET PORTFOLIO.
<TABLE>
<CAPTION>
TAX-FREE INCOME AND
INCOME PORTFOLIOS OTHER PORTFOLIOS
----------------------- ------------------------
SALES CHARGE AS A % OF: SALES CHARGE AS A % OF:
AMOUNT OF OFFERING NET AMOUNT DEALER OFFERING NET AMOUNT DEALER
PURCHASE PRICE INVESTED CONCESSION PRICE INVESTED CONCESSION
- -------- ----- -------- ---------- ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Less than $25,000 3.00% 3.09% 2.80% 5.00% 5.26% 4.70%
$25,000 - $49,999 3.00% 3.09% 2.80% 4.50% 4.71% 4.25%
$50,000 - $99,999 2.50% 2.56% 2.35% 4.00% 4.17% 3.80%
$100,000 - $249,999 2.50% 2.56% 2.35% 3.50% 3.63% 3.35%
$250,000 - $499,999 2.00% 2.04% 1.90% 2.50% 2.56% 2.40%
$500,000 - $999,999 1.50% 1.52% 1.45% 2.00% 2.04% 1.95%
$1,000,000 and over None* None* None** None* None* None**
</TABLE>
* While no initial sales charge is imposed on investments of $1 million
or more, a contingent deferred sales charge of 0.5% of the amount
redeemed (up to 0.5% of the amount invested with no initial sales
charge) is imposed within 2 years of such a purchase. This charge
does not apply to amounts held continuously in the Money Market
Portfolio. See "Redeeming Shares" on page 28.
** ONESCO will pay a dealer concession of 0.50% to securities dealers who
initiate and are responsible for any purchase of $1 million or more.
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<PAGE> 25
ONESCO and other qualified dealers are paid a continuing shareholder service
fee not to exceed 0.30% (0.17% for the Money Market Port-folio) annually to
compensate them for providing certain services to shareholders and to promote
growth of ONE Fund's assets. These services include submitting purchase and
redemption transactions, establishing shareholder accounts and providing
information and assistance regarding ONE Fund. The proceeds of ONE Fund's
12b-1 Distribution Plan are used only to pay these shareholder service fees.
REDUCING THE SALES CHARGE
For purposes of Right of Accumulation, Combined Purchases and Group Purchases,
"holdings" means the current value of your shares at the full offering price.
Your registered representative can help you to take advantage of any of the
following methods of reducing the sales charge if you qualify. These rights
may be requested on your ONE Fund account application.
CONCURRENT PURCHASES
...combining your purchases of ONE Fund and contracts issued by its affiliates.
You may qualify for a reduced sales charge by combining concurrent purchases of
two or more portfolios of ONE Fund or any other products underwritten by ONESCO
or its affiliates (the Ohio National companies). A concurrent purchase occurs
whenever ONE Fund shares are purchased at any time from the day any Ohio
National annuity or insurance policy is applied for until 5 days after that
contract is delivered. The amount of the annual (or single) premium of the
Ohio National annuity or insurance policy will then be added to the amount of
your concurrent ONE Fund purchase to determine the percentage of sales charge
to apply to your ONE Fund purchase.
LETTER OF INTENT
...committing to invest a certain amount over 13 months.
You may reduce sales charges on all investments by meeting the terms of a
nonbinding letter of your intent to invest a certain amount within a 13-month
period. Shares representing up to 5% of the intended amount will be held in
escrow to cover additional sales charges that may be due if your total
investments, net of redemptions, over the stated period are insufficient to
qualify for a sales charge reduction. You have up to 90 days after investing
to sign a letter of intent to reduce the sales charges on your investments
including the investments made in the 90 days before the letter. Shares you
currently own will apply toward meeting your letter of intent.
RIGHT OF ACCUMULATION
...adding up all your ONE Fund holdings.
Your sales charge may also be reduced by taking into account your existing
holdings in ONE Fund. Holdings will be valued at the greater of their full
offering price at the time a new purchase is made under a right of accumulation
or the sum of all your purchases (including reinvested dividends) less any
redemptions.
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<PAGE> 26
COMBINED PURCHASES
...with those of your family members.
Your sales charge may be reduced by aggregating holdings for the account(s) of
you, your spouse, your children and grandchildren. This may include purchases
through employee benefit plans such as an IRA, an individual-type 403(b) plan
or a single-participant Keogh plan, or by a business solely controlled by these
individuals (for example, they own the entire business) or by a trust (or other
fiduciary arrangement) solely for the benefit of these individuals.
GROUP PURCHASES
...by members of a qualified group.
A member of a qualified group may purchase ONE Fund shares at the reduced sales
charge applicable to the aggregate holdings of the group as a whole. (For
example, if members of the group had previously purchased $100,000 of ONE Fund
shares and still held those shares, and now were purchasing an additional
$25,000, the sales charge would be 3.50%, or 2.50% for the Tax-Free Income and
Income Portfolios.) A "qualified group" is one that (a) has been in existence
more than 6 months (unless it is a tax-qualified plan), (b) has a purpose other
than acquiring mutual fund shares, and (c) satisfies uniform criteria enabling
ONESCO to realize economies of scale in its costs of distributing shares. A
qualified group must have at least 6 members, must be available to arrange for
group meetings between representatives of dealers who sell ONE Fund shares and
the members, must agree to include sales literature and other materials
relating to ONE Fund in its publications and mailings to members at reduced or
no cost to ONE Fund or to dealers that sell its shares, and must seek to
arrange for payroll deduction or other bulk transmission of ONE Fund purchases.
GROUP LETTER OF INTENT
...by qualified groups committing to invest a certain amount over 24 months.
Qualified groups may reduce sales charges on all investments by meeting the
terms of a nonbinding letter of the group's intention to invest a certain
amount over a 24-month period. Shares representing 5% of the investments of
each group member during that period will be held in escrow to cover additional
sales charges. The group has up to 90 days after investing to enter into the
group letter of intent.
PURCHASES WITHOUT A SALES CHARGE
...by redeeming other fund shares that had a sales charge.
Within 60 days preceding their purchase of ONE Fund shares, investors who have
redeemed an investment in another mutual fund that imposed a sales charge and
which has investment objectives similar to any portfolio(s) of ONE Fund, may
purchase ONE Fund shares, up to the amount redeemed, without paying any sales
charge.
Officers, directors, employees, retirees, agents and registered representatives
of the Ohio National companies, any employee benefit plan with respect to them,
and their spouses, children and grandchildren, may purchase ONE Fund shares
without a sales charge.
25
<PAGE> 27
FLEXIBILITY FEATURES
OPEN ACCOUNTS
You will receive statements every quarter.
Your account is opened in accordance with your registration instructions. It
offers many features allowing you to change your investment program at any time
as circumstances change. Transactions in your account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from The Provident Bank. Any of the following features
may be established through your ONE Fund account application or by contacting
your registered representative or ONE Fund.
AUTOMATIC INVESTING
...from your bank account or pay check.
You may make regular monthly or quarterly investments through automatic charges
to your bank account or, if your employer approves, from your pay check. Once
a plan is established, your account will normally be charged on the 1st or 15th
day of the month, as you choose.
AUTOMATIC REINVESTING
...of income and capital gains.
Unless you indicate otherwise in your account application, dividends and
capital gains distributions are reinvested in additional shares at no sales
charge. You may elect to have dividends and/or capital gains distributions
paid to you by check.
CROSS INVESTING
...of income and capital gains into other portfolios.
You may elect to have your dividends or dividends and capital gains
distributions from one portfolio invested in another portfolio. To use this
service, the value of your account in the paying portfolio must be at least
$5,000.
TRANSFERRING
...among the 8 portfolios.
You may transfer your account balances among the various portfolios in amounts
of at least $50. There is currently no charge for transfers. ONE Fund
reserves the right to limit the number, frequency, method or amount of
transfers or to impose charges on transfers. Transfers from any portfolio on
any one day may be limited to 1% of the previous day's total net assets of that
portfolio if ONE Fund or ONIMCO, in its or their discretion, believes that the
portfolio might otherwise be damaged. The transfer privilege is available in
any state where it may legally be made.
26
<PAGE> 28
TELEPHONE TRANSACTIONS
You must preauthorize in writing.
If you have previously authorized it in writing, you or your registered
representative may do the following transactions by telephoning ONE Fund at
1-800-578-8078:
- -- Make transfers among the portfolios as provided above under
"Transferring."
- -- Change the amount of automatic investments, or discontinue them as
provided above under "Automatic Investing."
- -- Change your election for payment of dividends and capital gains as
provided above under ``Automatic Reinvesting'' and "Cross Investing."
- -- Redeem your shares as provided under "By Telephone"on page 29.
- -- Initiate, change or discontinue automatic redemptions of your shares
as provided under "Automatically" on page 29.
- -- Change your address on our records.
Telephone transaction requests received after 4 p.m. Eastern time will be made
at the net asset values computed at the close of the following business day.
ONE Fund and its transfer agent will honor telephone transaction instructions
from anyone giving such instructions who is able to provide the personal
identifying information requested, but we reserve the right to refuse to honor
any such request if that seems prudent. ONE Fund will use reasonable
procedures to confirm that telephone instructions are genuine. If we do not,
ONE Fund may be liable for any losses due to unauthorized or fraudulent
instructions. ONE Fund will send you a written confirmation of each telephone
transaction. During periods of drastic market fluctuations or technical
difficulties, it might be difficult to execute telephone transactions. In such
situations, you may need to send written instructions to ONE Fund. Telephone
transaction privileges may be modified or discontinued at any time.
AUTOMATIC TRANSFERS
...among the 8 portfolios.
You may automatically transfer shares (in increments of $50 or more) among any
of the portfolios. This will occur on or about the 10th day of each month.
Automatic transfers may be used, for example, to implement a
"dollar-cost-averaging" investment strategy.
SALES CHARGE ON CERTAIN TRANSFERS
No sales charge applies for transfers to a portfolio having a sales charge
equal to or less than that of the portfolio from which the transfer is made.
For transfers from a portfolio with a lower sales charge to one with a higher
sales charge, an additional charge is made equal to the difference between the
sales charge for the portfolio being purchased and any sales charges that
previously applied to the account balance being transferred.
27
<PAGE> 29
CHECK WRITING
...for the Money Market Portfolio.
You may write checks against the balance of your Money Market Portfolio
account. Checks will be provided free, upon request. You may not write a
check for less than $100. Checks will be written through The Provident Bank.
Provident will charge $15 for any check that is not honored because of an
insufficient Money Market Portfolio account balance. Checks may not be written
against account balances held for less than 15 days. ONE Fund reserves the
right to amend, suspend or discontinue check-writing privileges at any time
without prior notice.
REDEEMING SHARES
Payment is normally sent within 3 business days.
You may redeem your shares at any time by contacting ONE Fund or the
broker-dealer through whom you purchased your shares. If you are no longer
serviced by an authorized registered representative, you may contact ONESCO's
principal office by calling 1-800-578-8078, or by writing to P. O. Box 371,
Cincinnati, Ohio 45201. The price you receive for redeemed shares is the next
net asset value after your request is received. Payment is normally sent
within 3 business days. However, the proceeds of redemption will not be sent
until after your check for your investment has cleared (which may take up to 15
days). (Note also, the contingent deferred sales charge of 0.5% on certain
redemptions, within 2 years of purchase with no initial sales charge, of
investments of $1 million or more as described under "Sales Charges" on page
23.)
Request in Writing
When making a written request for redemption, specify the name of the
portfolio, the number of shares or dollar amount to be redeemed (if less than
your entire account), your name and address, account number and your signature.
In addition, (a) for any redemption over $50,000, or (b) for redemptions of
$50,000 or less where the check is to be paid or mailed to someone other than
you at your address of record, a signature guarantee is required. You may
obtain a signature guarantee from a bank or savings & loan that is federally
insured or from a member firm of the National Association of Securities
Dealers, Inc., or any other eligible guarantor institution. Additional
documentation may be required for redemption of shares held in corporate,
partnership or fiduciary accounts.
28
<PAGE> 30
BY TELEPHONE
As provided under "Telephone Transactions" on page 27, you or your registered
representative may call ONE Fund to redeem up to $50,000. You may
pre-authorize that the proceeds be (a) in a check, payable to you and mailed to
your address of record, or (b) by wire to your bank account. Checks will
normally be mailed 3 business days, and no more than 7 days, after your
request. Wire transfers to your bank account will normally be made the next
business day. Wire proceeds may not be for less than $1,000. The Provident
Bank will deduct a fee (presently $10) from the proceeds of each wire
redemption.
AUTOMATICALLY
If your account is $5,000 or more, you may establish an automatic withdrawal
plan. More than one plan may be set up if your account is at least $10,000.
Under each plan, you may make automatic withdrawals for $50 or more each at
specified intervals. Automatic withdrawals are made on or about the 10th day
of each designated month and, if withdrawals are to be made semimonthly, also
on or about the 25th day of each month. Additional purchases (other than to
the Money Market Portfolio) may be inadvisable, when an automatic withdrawal
plan is in effect, because of sales charges and possible tax liabilities. If,
due to your redemptions, your account balance is less than $300 (or a larger
amount specified by the Board of Directors), ONE Fund may choose to close your
account by redeeming your shares and sending you the proceeds. ONE Fund will
give you at least 30 days' written notice before closing your account, and you
may purchase additional ONE Fund shares to avoid the closing.
FUND PERFORMANCE
From time to time, the current yield, average annual total return and
cumulative total returns for the portfolios will be advertised. The results
might be compared to other similar mutual funds or unmanaged indices.
For the Money Market Portfolio, yield refers to the income generated by an
investment in the portfolio over a recent 7-day period. This income is then
"annualized" by assuming that the same amount of income is generated over a
52-week period. "Effective" yield is calculated similarly but, when
annualized, the income earned by an investment in the portfolio is assumed to
be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. For the other
portfolios, yield is calculated by dividing a portfolio's annualized net
investment income per share during a recent 30-day period by the public
offering price per share (including the maximum sales charge) on the last day
of that period.
29
<PAGE> 31
Average annual total return is based on a hypothetical $1,000 investment,
reflecting the reinvestment of all dividends and distributions and the impact
of the maximum sales charge at the beginning of each 1-, 5- and 10- year period
shown. Cumulative total return reflects the aggregate performance of a
portfolio, expressed as a dollar amount change, during the period.
All performance quotations are based on historical investment performance and
are not intended to indicate future performance.
30
<PAGE> 32
ONE FUND, INC.
237 William Howard Taft Road
Cincinnati, Ohio 45219
Telephone 1-800-578-8078
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the prospectus of ONE Fund, Inc. ("ONE Fund") as
amended May 1, 1996.
To obtain a free copy of ONE Fund's prospectus, call or write ONE Fund at the
toll-free telephone number or the address shown above.
<TABLE>
<CAPTION>
Page Table of Contents
- ---- -----------------
<S> <C>
3 ONE Fund
3 ONE Fund Performance
Current Yield of Money Market Portfolio
Current Yield of Tax-Free Income, Income and Income & Growth Portfolios
Total Return
5 Portfolio Turnover
7 Investment Restrictions
(Fundamental)
(Nonfundamental)
10 Investment Policies
Money Market Instruments
Repurchase Agreements
Reverse Repurchase Agreements
Hedging Transactions
Covered Call Options and Put Options
Risk Factors with Options
Futures Contracts
Options on Futures Contracts and Financial Indexes
Risk Factors with Futures, Options on Futures and Options on Indexes
Risk Factors with Foreign Investments
Foreign Currency Hedging Transactions
Risk Factors with High-Yield, High-Risk Securities
17 Management of ONE Fund
Directors and Officers
Compensation of Directors
Shareholders' Meetings
Controlling Persons and Principal Shareholders
Investment Advisory and Other Services
22 Brokerage Allocation
</TABLE>
<PAGE> 33
<TABLE>
<S> <C>
23 Purchase and Redemption of Shares
Reducing the Sales Charge
25 Tax Status
25 Underwriters
25 Experts
26 Legal Counsel
27 Financial Statements
48 Appendix
Debt Security Ratings
</TABLE>
2
<PAGE> 34
ONE FUND
ONE Fund is an open-end diversified management investment company which
presently consists of eight separate portfolios - Money Market Portfolio,
Tax-Free Income Portfolio, Income Portfolio, Income & Growth Portfolio, Growth
Portfolio, Small Cap Portfolio, International Portfolio and Global Contrarian
Portfolio. The investments held by each portfolio are maintained separately
from those held by the other portfolios. ONE Fund was incorporated in Maryland
on April 24, 1992. The Money Market, Income, Income & Growth, and Growth
Portfolios were first offered in August 1992, the International Portfolio in
May 1993, and the Tax-Free Income, Small Cap and Global Contrarian Portfolios
in November 1994.
The investment and reinvestment of ONE Fund assets other than International and
Global Contrarian Portfolio assets is directed by ONE Fund's investment
adviser, Ohio National Investments, Inc. (the "Adviser"), a wholly-owned
subsidiary of The Ohio National Life Insurance Company ("ONLI"). The Adviser
is also the investment adviser to Ohio National Fund, Inc. ("ONF"), a mutual
fund formed by ONLI to support variable benefits under variable annuities and
variable life insurance policies written by ONLI and its subsidiary, Ohio
National Life Assurance Corporation. The principal business address of all
these "Ohio National companies" is 237 William Howard Taft Road, Cincinnati,
Ohio 45219. The investment and reinvestment of International and Global
Contrarian Portfolio assets is managed by Societe Generale Asset Management
Corp. ("SGAM") as sub-adviser. The principal business address of SGAM is 1221
Avenue of the Americas, New York, New York 10020.
The shares of each portfolio, when issued, will be fully paid and
non-assessable, have no preemptive, conversion, cumulative dividend or similar
rights, and are freely transferable. ONE Fund shares do not have cumulative
voting rights, which means the holders of more than half of the ONE Fund shares
voting for election of directors can elect all of the directors if they so
choose. In such event, the holders of the remaining shares would not be able
to elect any directors.
ONE FUND PERFORMANCE
ONE Fund may distribute sales literature using graphs, charts, tables or
examples comparing the performance of its portfolios to the Consumer Price
Index or to established market indices including, but not limited to, the Dow
Jones Industrial Average, the Standard & Poor's 500 Index, IBC's Money Fund
Reports, one or more of Lehman Brothers Bond Indices, Value Line Composite
Index, New York Stock Exchange Composite Index, Russell 2000 Index, Morgan
Stanley Europe Australia and Far East Index, Morgan Stanley World Index,
American Stock Exchange Index, National Association of Securities Dealers
Automated Quotations Composite Index, Investors Business Daily 6000 Index, or
other mutual funds having investment objectives similar to the portfolio being
compared. These comparisons may include graphs, charts, tables or examples.
The average total return and cumulative total returns for each portfolio may
also be advertised.
ONE Fund may also advertise the performance rankings assigned to certain
portfolios or their subadvisers by various statistical services, including
Morningstar, Inc. and Lipper Analytical Services, Inc., or as they appear in
various publications including The Wall Street Journal, Investors Business
Daily, The New York Times, Barron's, Forbes, Fortune, Business Week, Financial
Services Week, Financial World, Kiplinger's Personal Finance and Money
Magazine.
The prospectus sets forth in tabular form, under the caption "Financial
Highlights" certain information concerning ONE Fund and its individual
portfolios. The following discussion describes the methods of calculating
current yields and total return, and states ONE Fund's policy with respect to
each portfolio's turnover rate.
3
<PAGE> 35
CURRENT YIELD OF MONEY MARKET PORTFOLIO
Current yield quotations for the Money Market Portfolio are based on that
portfolio's net investment income for a seven-day period and exclude any
realized or unrealized gains or losses on portfolio securities. Current yield
is computed by determining the net change (exclusive of realized gains and
losses from the sale of securities and unrealized appreciation and
depreciation) in the value of a hypothetical account having a balance of one
share at the beginning of such seven-day period, dividing such net change in
account value by the value of the account at the beginning of the period, and
annualizing this quotient on a 365-day basis. The net change in account value
reflects the value of any additional shares (or fraction thereof) purchased
with dividends from the original share in the account during the seven-day
period, any dividends declared on such original share and any such additional
shares during the period, and expenses accrued during the period. ONE Fund may
also disclose the effective yield of the Money Market Portfolio for a seven-day
period for which the current annualized yield is computed by expressing the
unannualized return on a compounded, annualized basis.
CURRENT YIELD OF TAX-FREE INCOME, INCOME, AND INCOME & GROWTH PORTFOLIOS
Current yield for these three portfolios is calculated by dividing the net
investment income per share earned during a recent 30-day period by the
portfolio's maximum offering price on the last day of the period, and
annualizing the result (assuming compounding of interest) in order to arrive at
an annual percentage rate. In some instances, it may be necessary to use an
estimate of the expected dividends and expenses. When estimates are used to
calculate yields, actual dividends and expenses for that period may be
different because the composition of the portfolio may change, resulting in a
change in actual yield. When yield is used in sales literature for these
portfolios, their total return will also be shown.
TOTAL RETURN
Total returns quoted in advertising reflect all aspects of a portfolio's
investment return, including the effects of reinvesting dividends and capital
gain distributions as well as changes in the portfolio's net asset value per
share over the period shown. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment in a portfolio over a stated period, and then calculating the annual
compounded percentage rate that would have produced the same result had the
rate of growth or decline been constant over that period. While average annual
returns are a convenient means of comparing investment alternatives, no
portfolio will experience a constant rate of growth or decline over time.
The average annual compounded rate of return for a portfolio over a given
period is found by equating the initial amount invested to the ending
redeemable value using the following formula:
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV= the ending redeemable value of a hypothetical $1,000
beginning-of-period payment at the end of the period (or
fractional portion thereof).
4
<PAGE> 36
The average annual and aggregate total return rates for each of the portfolios
from its inception (assuming payment of the maximum applicable sales charge)
and for the year ended on June 30, 1995, are as follows:
<TABLE>
<CAPTION>
Avg. Annual Aggregate
One From From Inception
Year Inception Inception Date
---- --------- --------- -------
<S> <C> <C> <C> <C>
Money Market 5.06% 3.76% 11.17% 8/18/92
Tax-Free Income N/A N/A 6.94% 11/01/94
Income 11.58% 4.47% 14.07% 8/18/92
Income & Growth 19.41% 9.19% 28.65% 8/18/92
Growth 20.54% 12.25% 39.28% 8/18/92
Small Cap N/A N/A 3.18% 11/01/94
International 6.44% 17.15% 40.86% 4/30/93
Global Contrarian N/A N/A (2.20%) 11/01/94
</TABLE>
In addition to total return rates, advertising may reflect cumulative total
returns that simply reflect the change in value of an investment in a portfolio
over a period. This may be expressed as either a percentage change, from the
beginning to the end of the period, or the end-of- period dollar value of an
initial hypothetical investment. The cumulative total returns for each of the
portfolios from its inception and for the year ended on June 30, 1995 (assuming
a hypothetical initial investment of $1,000 and payment of the maximum
applicable sales charge) were as follows:
<TABLE>
<CAPTION>
One From Inception
Year Inception Date
---- --------- ------------
<S> <C> <C> <C>
Money Market $1,051 $1,112 8/18/92
Tax-Free Income N/A $1,069 11/01/94
Income $1,082 $1,141 8/18/92
Income & Growth $1,134 $1,286 8/18/92
Growth $1,145 $1,393 8/18/92
Small Cap N/A $1,032 11/01/94
International $1,011 $1,409 4/30/93
Global Contrarian N/A $ 978 11/01/94
</TABLE>
PORTFOLIO TURNOVER
Each portfolio has a different expected rate of portfolio turnover. However,
the rate of portfolio turnover will not be a limiting factor when the
management of ONE Fund deems it appropriate to purchase or sell securities for
a portfolio, except in the following circumstances. ONE Fund intends to comply
with the various requirements of the Internal Revenue Code so as to qualify as
a "regulated investment company" thereunder. Among such requirements is a
limitation of less than 30% of the amount of gross income which each portfolio
may derive from gains on the sale or other disposition of securities held for
less than three months. Accordingly, the ability of any portfolio to effect
certain portfolio transactions at a given time may be limited. ONE Fund's
policy with respect to each portfolio is as follows:
Money Market Portfolio - Since the assets of the Money Market Portfolio
consist of short-term instruments, replacement of portfolio securities
will occur frequently. However, since purchases are generally effected
with dealers or issuers on a net basis, it is not expected that the Money
Market Portfolio will incur significant brokerage commissions.
5
<PAGE> 37
Tax-Free Income Portfolio - Transactions in the securities of this
portfolio may be made without regard to the length of time particular
investments have been held if the Adviser believes that such transactions
will help achieve the overall objectives of the portfolio. Portfolio
securities may or may not be held to maturity. The rate of portfolio
turnover will vary from time to time, but is not expected to exceed 75%
annually. It was 0% for the period from inception of the portfolio to
the end of the last fiscal year.
Income Portfolio - The Income Portfolio will engage in transactions when
the Adviser believes that they will help to achieve the overall
objectives of this portfolio. Portfolio securities may or may not be
held to maturity. The rate of portfolio turnover will vary from time to
time but is not expected to exceed 50% annually. It was 4% for the last
fiscal year.
Income & Growth Portfolio - The rate of portfolio turnover will vary from
time to time but is not expected to exceed 50% annually. It was 25% for
the last fiscal year.
Growth Portfolio - Although this portfolio will not normally purchase
securities with the intention of obtaining short-term capital
appreciation, purchases and sales will be made whenever deemed prudent
and consistent with the investment objectives of the portfolio. During
periods of relatively stable market and economic conditions, it is
anticipated that the annual portfolio turnover rate of the Growth
Portfolio is not expected to exceed 75% annually. During periods when
changing market or economic conditions are foreseen, shifts in portfolio
emphasis may cause the rate of portfolio turnover to increase. The rate
was 24% for the last fiscal year.
Small Cap Portfolio - While this portfolio purchases and holds securities
with the goal of meeting its investment objectives, portfolio changes are
made whenever the Adviser believes they are advisable, usually without
reference to the length of time a security has been held. The engagement
in a number of short-term transactions may result in relatively high
portfolio turnover rates, but the rate is not normally expected to exceed
150%. It was an annualized rate of 12% for the period from inception of
the portfolio to the end of the last fiscal year.
International Portfolio - Although this portfolio will not normally
engage in short-term trading, purchases and sales of securities will be
made whenever deemed appropriate to achieve the portfolio's objective of
long-term capital growth. The rate of portfolio turnover will not be a
limiting factor when portfolio changes are deemed appropriate to achieve
this portfolio's stated objective. Under normal circumstances, the
portfolio turnover rate for this portfolio is not expected to exceed 75%
annually. It was 39% for the last fiscal year.
Global Contrarian Portfolio - Because of the long-term growth objective
and the purchase of under-valued and out-of-favor securities, this
portfolio will generally tend to hold portfolio securities for a
relatively longer time with the expectation of eventual price
appreciation. As a result, the portfolio turnover rate is not expected
to exceed 50% annually. However, it could be substantially higher at
times due to repositioning of the portfolio. It was an annualized rate
of 12% for the period from inception of the portfolio to the end of the
last fiscal year.
6
<PAGE> 38
INVESTMENT RESTRICTIONS
The prospectus lists the most significant investment restrictions to which ONE
Fund is subject. (See "About ONE Fund" in the prospectus.) A complete list of
ONE Fund's investment restrictions is shown below. The first nine investment
restrictions are fundamental policies that may not be changed without the
affirmative vote of the majority of the outstanding voting securities of ONE
Fund or a particular portfolio, as appropriate. A "majority vote" means the
vote of the lesser of (i) 67% of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented or (ii) more than 50%
of the outstanding voting securities. With respect to the submission of a
change in an investment policy to the holders of outstanding voting securities
of a particular portfolio, such matter shall be deemed to have been effectively
acted upon with respect to that portfolio if a majority of the outstanding
voting securities of the portfolio vote for the approval of such matter,
notwithstanding (1) that the matter has not been approved by the holders of a
majority of the outstanding voting securities of any other portfolio affected
by the matter, and (2) that the matter has not been approved by the vote of a
majority of the outstanding voting securities of ONE Fund. Investment
restrictions 10 and following are nonfundamental. They may be changed by the
Board of Directors without shareholder approval.
ONE Fund may not issue senior securities, except to the extent that the
borrowing of money in accordance with restriction 4. or the purchase of reverse
repurchase agreements may constitute the issuance of a senior security, and
each portfolio of ONE Fund will not:
(Fundamental)
l. invest more than 5% of the value of its total assets in the
securities of any one issuer (except U.S. Government securities);
2. purchase more than l0% of the outstanding voting securities of any
one issuer, and the Money Market Portfolio will not acquire the
voting securities of any issuer except in connection with a merger,
consolidation or other reorganization;
3. invest more than 25% of the value of its total assets in any one
industry, except that the Money Market Portfolio may invest more
than 25% of the value of its total assets in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
or in certificates of deposit, bankers' acceptances, bank time
deposits or other obligations of banks, and the Tax-Free Income
Portfolio may invest more than 25% of its assets in municipal
securities; (For purposes of this restriction, ONE Fund considers
each foreign government to constitute an "industry." ONE Fund
interprets the word "bank," as used in this investment restriction,
to mean "domestic bank.")
4. borrow money, except by means of reverse repurchase agreements or,
for temporary or emergency purposes, from banks, and the aggregate
amount borrowed shall not exceed 5% of the value of the assets of
the portfolio (In the case of such borrowing, each portfolio may
pledge, mortgage or hypothecate up to 5% of its assets);
5. purchase or sell commodities or commodity contracts except that each
portfolio other than the Money Market Portfolio may, for hedging
purposes, purchase and sell financial futures contracts and options
thereon;
6. underwrite securities of other issuers except insofar as ONE Fund
may be considered an underwriter under the Securities Act of l933 in
selling portfolio securities;
7
<PAGE> 39
7. purchase or sell real estate, including limited partnerships, except
that each portfolio may invest in securities secured by real estate
or interests therein or securities issued by companies which invest
in real estate or interests therein (For purposes of this
restriction, "real estate" does not include investments in readily
marketable notes or other evidence of indebtedness secured by
mortgages or deeds of trust relating to real property);
8. lend money or other assets to other persons, in excess of 5% of a
portfolio's total assets, except by the purchase of obligations in
which the portfolio is authorized to invest and by entering into
repurchase agreements (Portfolio securities may be loaned if
collateral values are continuously maintained at no less than 100%
by marking to market daily);
9. purchase securities of other investment companies, except in
connection with a merger, consolidation or reorganization, or except
the purchase by any portfolio other than the Money Market or
Tax-Free Income Portfolio of the securities of closed-end investment
companies if after the purchase: (i) the portfolio does not own
more than 3% of the total outstanding voting stock of the other
investment company or (ii) the value of the securities of all
investment companies held by such portfolio does not exceed 10% of
the value of the total assets of that portfolio (Purchases of
investment company securities will be made (a) only on the open
market or through dealers or underwriters receiving the customary
sales loads, or (b) as part of a merger, consolidation or plan of
reorganization);
(Nonfundamental)
10. invest more than 15% (or such lesser amount as might be required by
federal or state regulatory authorities, currently 10%) of the value
of its assets in securities or other investments, including
repurchase agreements maturing in more than seven days, that are not
readily marketable;
11. purchase or sell put or call options, except that each portfolio
other than the Money Market Portfolio may, for hedging purposes, (a)
write call options traded on a registered national securities
exchange if the portfolio owns the underlying securities subject to
such options, and purchase call options for the purpose of closing
out positions in options it has written; (b) purchase put options on
securities owned, and sell such options in order to close its
positions in put options; (c) purchase and sell financial futures
contracts and options thereon; and (d) purchase and sell financial
index options; provided, however, that no option or futures contract
shall be purchased or sold if, as a result, more than one-third of
the total assets of the portfolio would be hedged by options or
futures contracts, and no more than 5% of any portfolio's total
assets, at market value, may be used for premiums on open options
and initial margin deposits on futures contracts;
12. other than the International and Global Contrarian Portfolios,
invest in securities of foreign issuers except that (a) each of the
Income, Income & Growth, Growth and Small Cap Portfolios may invest
up to 20% of its assets in securities of foreign issuers (including
foreign governments or political subdivisions, agencies or
instrumentalities of foreign governments) American Depository
Receipts, and securities of United States domestic issuers
denominated in foreign currency, and (b) the Money Market Portfolio
may invest up to 50% of its assets in such securities, provided they
are denominated in U.S. dollars and held in custody in the United
States; (For purposes of this restriction, U.S. dollar denominated
depository receipts traded in domestic markets do not constitute
foreign securities.)
13. sell securities short or purchase securities on margin except such
short-term credits as are required to clear transactions;
14. participate on a joint or joint and several basis in any trading
account in securities;
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15. purchase securities for the purpose of exercising control or
management;
16. invest in any oil, gas or other mineral exploration, development or
leasing program;
17. invest in warrants, valued at the lower of cost or market, exceeding
5% of its net assets (Warrants not listed on the New York or
American Stock Exchange shall not exceed 2% of net assets);
18. purchase the securities of any issuer (other than obligations issued
or guaranteed by the U.S. government, its agencies or
instrumentalities) if, as a result, more than 5% of its assets would
then be invested in the securities of companies which, including
predecessors, have a record of less than 3 years' continuous
operation;
19. invest more than 5% of its total assets in repurchase agreements;
20. invest more than 5% of its total assets in securities on a "when
issued" basis;
21. as to the International and Global Contrarian Portfolios, invest
more than 20% of its assets in securities of issuers located in any
one foreign country, except that up to an additional 5% of its
assets may be invested in securities of issuers located in each of
any three of Australia, Canada, France, Germany, Japan or the United
Kingdom, or
22. invest in foreign currency contracts or options except that, in
order to hedge against changes in the exchange rates of foreign
currencies in relation to the U.S. dollar, each portfolio other than
the Money Market and Tax-Free Income Portfolios may engage in
forward foreign currency contracts, foreign currency options and
foreign currency futures contracts in connection with the purchase,
sale or ownership of specific securities (but not more than 5% of a
portfolio's assets may be invested in such currency hedging
contracts).
In addition to the above restrictions, in order to comply with Rule 2a-7 under
the Investment Company Act of 1940, no more than 5% of the assets of the Money
Market Portfolio will be invested in "second-tier" short-term debt instruments,
that is those receiving the second highest rating by any two nationally
recognized statistical rating organizations ("NRSRO's") (or by one NRSRO if (a)
that is the only NRSRO having rated the security or (b) one other NRSRO has
given the security its highest rating), or whose issuer has received such a
rating or ratings with respect to a class of short-term debt obligations that
is now comparable in priority and security to those to be purchased. In
addition, not more than $1 million (or 1% of this portfolio's assets, if
greater) may be invested in the second-tier instruments of any one issuer.
Under normal market conditions, at least 65% of the assets of the International
Portfolio and at least 25% of the assets of the Global Contrarian Portfolio
will be invested in foreign securities, including securities of issuers in at
least three different foreign countries. As of the date of this Statement of
Additional Information, the Board of Directors has approved investment by those
portfolios other than the Money Market and Tax-Free Income Portfolios in 50
countries with developed securities markets, including the following countries
with developed economies: Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Israel, Italy, Japan, Luxembourg,
Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland and the United
Kingdom; and the following countries with developing economies: Argentina,
Bangla Desh, Brazil, Chile, China (Shanghai and Shenzhen Exchanges), Czech
Republic, Egypt, Greece, Hong Kong, Hungary, Indonesia, Jordan, Malaysia,
Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Portugal, Singapore,
South Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey Uruguay,
Venezuela and Zimbabwe.
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INVESTMENT POLICIES
The following descriptions of money market instruments supplement the
investment objectives and policies (see "Money Market Portfolio") set forth in
ONE Fund's prospectus. The Money Market Portfolio will invest extensively in
these instruments. The other portfolios may invest in such instruments to a
very limited extent (to invest otherwise idle cash) or on a temporary basis (if
invested for defensive purposes). The debt security ratings referred to in the
prospectus in connection with the investment policies of the portfolios are
defined in the Appendix to this Statement of Additional Information.
MONEY MARKET INSTRUMENTS
U.S. Government Obligations - Bills, notes, bonds and other debt
securities issued or guaranteed as to principal or interest by the United
States or by agencies or authorities controlled or supervised by and
acting as instrumentalities of the U.S. Government established under
authority granted by Congress, including, but not limited to, the
Government National Mortgage Association, the Tennessee Valley Authority,
the Bank for Cooperatives, the Farmers Home Administration, and Federal
Home Loan Banks. Some obligations of U.S. Government agencies,
authorities and other instrumentalities are supported by the full faith
and credit of the U.S. Treasury; others by the right of the issuer to
borrow from the U.S. Treasury; and others only by the credit of the
issuer. Certain of the foregoing may be purchased on a "when issued"
basis at which time the rate of return will not have been set.
Certificates of Deposit - Certificates issued against funds deposited in
a bank for a definite period of time, at a specified rate of return.
Normally they are negotiable.
Bankers' Acceptances - Short-term credit instruments issued by
corporations to finance the import, export, transfer or storage of goods.
They are termed "accepted" when a bank guarantees their payment at
maturity and reflect the obligation of both the bank and drawer to pay
the face amount of the instrument at maturity.
Commercial Paper - Promissory notes issued by corporations to finance
their short-term credit needs. Commercial paper obligations may include
variable amount master demand notes. Variable amount master demand notes
are obligations that permit the investment of fluctuating amounts by the
portfolio at varying rates of interest pursuant to direct arrangements
between the portfolio, as lender, and the borrower. These notes permit
daily changes in the amounts borrowed. The portfolio has the right to
increase the amount under the note at any time up to the full amount
provided by the note agreement, or to decrease the amount, and the
borrower may prepay up to the full amount of the note without penalty.
Because variable amount master demand notes are direct lending
arrangements between the lender and the borrower, it is not generally
contemplated that such instruments will be traded, and there is no
secondary market for these notes, although they are redeemable (and thus
immediately repayable by the borrower) at face value, plus accrued
interest, at any time. In connection with a master demand note
arrangement, the Adviser will monitor, on an ongoing basis, the earning
power, cash flow, and other liquidity ratios of the issuer and its
ability to pay principal and interest on demand. While master demand
notes, as such, are not typically rated by credit rating agencies, if not
so rated the portfolio may invest in them only if at the time of an
investment the issuer meets the criteria set forth above for all other
commercial paper issuers. Such notes will be considered to have a
maturity of the longer of the demand period or the period of the interest
guarantee.
Corporate Obligations - Bonds and notes issued by corporations in order
to finance longer-term credit needs.
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REPURCHASE AGREEMENTS
Under a repurchase agreement, the portfolio purchases a security and obtains a
simultaneous commitment from the seller (a member bank of the Federal Reserve
System or a government securities dealer recognized by the Federal Reserve
Board) to repurchase the security at a mutually agreed upon price and date. It
may also be viewed as a loan of money by the portfolio to the seller. The
resale price is normally in excess of the purchase price and reflects an agreed
upon market rate. The rate is effective for the period of time the portfolio
is invested in the agreement and unrelated to the coupon rate on the purchased
security. The period of these repurchase agreements will usually be short,
from overnight to one week, and at no time will the portfolio invest in
repurchase agreements for more than one year. These transactions afford an
opportunity for the portfolio to earn a return on temporarily available cash.
Although repurchase agreements carry certain risks not associated with direct
investments in securities, ONE Fund intends to enter into repurchase agreements
only with financial institutions believed by the Adviser to present minimal
credit risks in accordance with criteria established by ONE Fund's Board of
Directors. The Adviser will review and monitor the creditworthiness of such
institutions under the Board's general supervision. ONE Fund will only enter
into repurchase agreements pursuant to a master repurchase agreement that
provides that all transactions be fully collateralized and that the collateral
be in the actual or constructive possession of ONE Fund. The agreement must
also provide that ONE Fund will always receive as collateral securities whose
market value, including accrued interest, will be at least equal to 100% of the
dollar amount invested by the portfolio in each agreement, and the portfolio
will make payment for such securities only upon physical delivery or evidence
of book entry transfer to the account of the custodian. If the seller were to
default, the portfolio might incur a loss if the value of the collateral
securing the repurchase agreement declines and may incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by the portfolio may be delayed or limited and
a loss may be incurred if the collateral securing the repurchase agreement
declines in value during the bankruptcy proceedings.
REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, a portfolio sells a debt security and
agrees to repurchase it at an agreed upon time and at an agreed upon price.
The portfolio retains record ownership of the security and the right to receive
interest and principal payments thereon. At an agreed upon future date, the
portfolio repurchases the security by remitting the proceeds previously
received, plus interest. The difference between the amount the portfolio
receives for the security and the amount it pays on repurchases is deemed to be
payment of interest. The portfolio will maintain in a segregated custodial
account cash, Treasury bills or other U.S. Government securities having an
aggregate value equal to the amount of such commitment to repurchase including
accrued interest, until payment is made. In certain types of agreements, there
is no agreed-upon repurchase date and interest payments are calculated daily,
often based on the prevailing overnight repurchase rate. The Securities and
Exchange Commission views these transactions as collateralized borrowings by
the portfolio and the portfolio will abide by the limitations set out in
fundamental investment restriction number 4 with respect to the borrowing of
money.
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HEDGING TRANSACTIONS
The purpose of hedging transactions using put and call options on individual
securities, financial futures contracts, and options on such contracts and on
financial indexes, all to the extent provided in investment restrictions 5 and
11, is to reduce the risk of fluctuation of portfolio securities values or to
take advantage of expected market fluctuations. However, while such
transactions are defensive in nature and are not speculative, some risks
remain.
The use of options and futures contracts may help ONE Fund to gain exposure or
to protect itself from changes in market values. For example, ONE Fund may
have a substantial amount of cash at the beginning of a market rally.
Conventional procedures of purchasing a number of individual issues requires
time and may result in missing a significant market movement. By using futures
contracts, ONE Fund can obtain immediate exposure to the market. The buying
program will then proceed and, once it is completed (or as it proceeds), the
futures contracts will be closed. Conversely, in the early stages of a market
decline, market exposure can be promptly offset by selling futures contracts,
and individual securities can be sold over a longer period under cover of the
resulting short contract position.
COVERED CALL OPTIONS AND PUT OPTIONS
In writing (i.e., selling) "covered" call options on securities owned by a
portfolio, the portfolio gives the purchaser of the call option the right to
purchase the underlying securities owned by the portfolio at a specified
"exercise" price at any time prior to the expiration of the option, normally
within nine months. In purchasing put options on securities owned by a
portfolio, the portfolio pays the seller of the put option a premium for the
right of the portfolio to sell the underlying securities owned by the portfolio
at a specified exercise price prior to the expiration of the option.
Whenever a portfolio has a covered call option outstanding, the underlying
securities will be segregated by ONE Fund's custodian and held in an escrow
account to assure that such securities will be delivered to the option holder
if the option is exercised. While the underlying securities are subject to the
option, the portfolio remains the record owner of the securities, entitling it
to receive dividends and to exercise any voting rights. In order to terminate
its position as the writer of a call option or the purchaser of a put option,
the portfolio may enter into a "closing" transaction, which is the purchase of
a call option or sale of a put option on the same underlying securities and
having the same exercise price and expiration date as the option previously
sold or purchased by the portfolio.
RISK FACTORS WITH OPTIONS
The purchaser of an option pays the option writer a "premium" for the option.
In the case of a covered call option written by a portfolio, if the purchaser
does not exercise the call option, the premium will generate additional capital
gain to the portfolio. If the market price of the underlying security
declines, the premium received for the call option will reduce the amount of
the loss the portfolio would otherwise incur. However, if the market price of
the underlying security rises above the exercise price and the call option is
exercised, the portfolio will lose its opportunity to profit from that portion
of the rise which is in excess of the exercise price plus the option premium.
Therefore, ONE Fund will write call options only when the Adviser believes that
the option premium will yield a greater return to the portfolio than any
capital appreciation that might occur on the underlying security during the
life of the option.
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In the case of a put option purchased by a portfolio, if the market price of
the underlying security remains or rises above the exercise price of the
option, the portfolio will not exercise the option and the premium paid for
such option will reduce the gain the portfolio would otherwise have earned.
Conversely, if the market price of the underlying security falls below the
exercise price less the premium paid for the option, the portfolio will
exercise the option, thereby reducing the loss the portfolio would have
otherwise suffered. Accordingly, a portfolio will purchase put options only
when the Adviser believes that the market price of the underlying security is
more likely to decrease than increase.
Whenever a portfolio enters into a closing transaction, the portfolio will
realize a gain (or loss) if the premium plus commission it pays for a closing
call option is less (or greater) than the premium it received on the sale of
the original call option. Conversely, the portfolio will realize a gain (or
loss) if the premium it receives, less commission, for a closing put option is
greater (or less) than the premium it paid for the original put option. The
portfolio will realize a gain if a call option it has written lapses
unexercised, and a loss if a put option it has purchased lapses unexercised.
FUTURES CONTRACTS
Each portfolio, other than the Money Market Portfolio, may invest in two kinds
of financial futures contracts: stock index futures contracts and interest
rate futures contracts. Stock index futures contracts are contracts developed
by and traded on national commodity exchanges whereby the buyer will, on a
specified future date, pay or receive a final cash payment equal to the
difference between the actual value of the stock index on the last day of the
contract and the value of the stock index established by the contract
multiplied by the specific dollar amount set by the exchange. Futures
contracts may be based on broad-based stock indexes such as the Standard &
Poor's 500 Index or on narrow- based stock indexes. A particular index will be
selected according to the Adviser's investment strategy for the particular
port- folio. An interest rate futures contract is an agreement whereby one
party agrees to sell and another party agrees to purchase a specified amount of
a specified financial instrument (debt security) at a specified price at a
specified date, time and place. Although interest rate futures contracts
typically require actual future delivery of and payment for financial
instruments, the contracts are usually closed out before the delivery date. A
public market exists in interest rate futures contracts covering primarily the
following financial instruments: U.S. Treasury bonds; U.S. Treasury notes;
Government National Mortgage Association (GNMA) modified pass-through
mortgage-backed securities; three- month U.S. Treasury bills; 90-day commercial
paper; bank certificates of deposit; and Eurodollar certificates of deposit. It
is expected that futures contracts trading in additional financial instruments
will be authorized.
At the time a portfolio enters into a contract, it sets aside a small portion
of the contract value in an account with ONE Fund's custodian as a good faith
deposit (initial margin) and each day during the contract period requests and
receives or pays cash equal to the daily change in the contract value (variable
margin). ONE Fund, its futures commission merchant and ONE Fund's custodian
retain control of the initial margin until the contract is liquidated.
OPTIONS ON FUTURES CONTRACTS AND FINANCIAL INDEXES
Instead of entering into a financial futures contract, a portfolio may buy an
option giving it the right to enter into such a contract at a future date. The
price paid for such an option is called a premium. A portfolio also may buy
options on financial indexes that are traded on securities exchanges. Options
on financial indexes react to changes in the value of the underlying index in
the same way that options on financial futures contracts do. All settlements
for options on financial indexes also are for cash.
Financial futures contracts, options on such contracts and options on financial
indexes will only be used for hedging purposes and will, therefore, be
incidental to ONE Fund's activities in the securities market. Accordingly,
portfolio securities subject to options, or money market instruments having the
market value of any futures contracts, will be set aside to collateralize the
options or futures contracts.
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RISK FACTORS WITH FUTURES, OPTIONS ON FUTURES AND OPTIONS ON INDEXES
One risk of entering into financial futures contracts, buying options on such
contracts and buying options on financial indexes is that there may not be
enough buyers and sellers in the market to permit the portfolio to close a
position when it wants to do so. In such event, besides continuing to be
subject to the margin requirements, the portfolio would experience a gain or
loss to the extent that the price movement of the securities subject to the
hedge differed from the position. To limit the risk, the portfolios will
invest only where there is an established secondary market.
A risk applicable to both futures contracts and related options is that changes
in the value of the contracts or option may not correlate with changes in the
underlying financial index or with changes in the value of the securities
subject to hedge or both. This failure may be due, in part, to temporary
activity of speculators in the futures markets. To the extent there is not a
perfect correlation, changes in the value of a portfolio's assets would not be
offset by changes in the value of the contracts and options it had bought.
When a portfolio buys an option on a futures contract or an option on a
financial index, its risk of loss is limited to the amount of the premium paid.
When a portfolio enters into a futures contract, there is no such limit.
However, the loss on an options contract would exceed that of a futures
contract if the change in the value of the index does not exceed the premium
paid for the option.
The success of a hedge depends upon the Adviser's ability to predict increases
or decreases in the relevant financial index. If this expectation proves
incorrect, a portfolio could suffer a loss, and would be better off if those
futures contracts or options had not been purchased. The skills involved in
determining whether to enter into a futures contract or purchase or sell an
option are different from those involved in determining whether to buy or sell
a security. The Adviser has had only limited experience using financial
futures contracts, options on financial futures and options on financial
indexes.
Because of the low margin deposits required, futures trading involves a high
degree of leverage. As a result, a relatively small price movement in a
futures contract may result in immediate and substantial gain or loss. A
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the futures contract. However, the portfolio would
presumably have sustained comparable losses if, instead of the futures
contract, it had invested in the underlying financial instrument.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no more
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movements during a particular trading day and therefore does
not limit potential losses because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures and subjecting some futures
traders to substantial losses.
RISK FACTORS WITH FOREIGN INVESTMENTS
Investments in foreign securities involve considerations not normally
associated with investing in domestic issuers. Such factors include changes in
currency exchange rates, currency exchange control regulations, the possibility
of seizure or nationalization of companies, political or economic instability,
imposition of unforeseen taxes, the possibility of financial information being
difficult to obtain or difficult to interpret under foreign accounting
standards, the necessity of trading in markets that in
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relation to U.S. markets may be less efficient and have available less
information concerning issuers, or the imposition of other restraints that
might adversely affect investments.
In selecting foreign investments, each portfolio seeks to minimize these
factors. It seeks to invest in securities having investment characteristics
and qualities comparable to the kinds of domestic securities in which it
invests. Each portfolio seeks to avoid investments in countries with volatile
or unstable political or economic conditions.
The portfolios may invest in securities of foreign issuers either directly or
in the form of American Depository Receipts (ADRs). ADRs are securities
typically issued by an American bank or trust company which evidence ownership
of underlying securities issued by a foreign corporation. ADRs enable foreign
stocks to be traded and cleared on United States markets. They bear the same
investment risks as the underlying foreign stocks. The portfolios may invest
in both sponsored and unsponsored ADRs. There may be less financial and other
information available for unsponsored ADRs than for sponsored ADRs.
Since investments in foreign securities, other than U.S. dollar denominated
securities, involve currencies of foreign countries, the value of a portfolio's
assets, as measured in U.S. dollars may be affected favorably or unfavorably by
changes in currency exchange rates and in currency exchange control
regulations.
FOREIGN CURRENCY HEDGING TRANSACTIONS
In order to hedge against changes in the exchange rates of foreign currencies
in relation to the U.S. dollar, each portfolio, other than the Money Market and
Tax-Free Income Portfolios, may engage, to the extent permitted in restriction
22, above, in forward foreign currency contracts, foreign currency options and
foreign currency futures contracts in connection with the purchase, sale or
ownership of a specific security.
The portfolios generally conduct their foreign currency exchange transactions
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
exchange currency market. When a portfolio purchases or sells a security
denominated in a foreign currency, it may enter into a forward foreign currency
contract ("forward contract") for the purchase or sale, for a fixed amount of
dollars, of the amount of currency involved in the underlying security
transaction. A forward contract involves 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 agreed upon by the parties, at a price set at the time
of the contract. In this manner, a portfolio may obtain protection against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the foreign currency during the period between the date the
security is purchased or sold and the date upon which payment is made or
received. Although such contracts tend to minimize the risk of loss due to the
decline in the value of the hedged currency, at the same time they tend to
limit any potential gain which might result should the value of such currency
increase.
Forward contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers.
Generally a forward contract has no deposit requirement, and no commissions are
charged. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference between the prices
at which they buy and sell various currencies. When the portfolio manager
believes that the currency of a particular foreign country may suffer a
substantial decline against the U.S. dollar, a portfolio may enter into a
forward contract to sell, for a fixed amount of dollars, the amount of foreign
currency approximating the value of some or all of that portfolio's securities
denominated in such foreign currency. No portfolio will enter into such
forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the portfolio to deliver an amount
of foreign currency in excess of the value of its assets denominated in that
currency.
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At the consummation of a forward contract for delivery by a portfolio of a
foreign currency, the portfolio may either make delivery of the foreign
currency or terminate its contractual obligation to deliver the foreign
currency by purchasing an offsetting contract obligating it to purchase, at the
same maturity date, the same amount of the foreign currency. If the portfolio
chooses to make delivery of the foreign currency, it may be required to obtain
such currency through the sale of its securities denominated in such currency
or through conversion of other portfolio assets into such currency. It is
impossible to forecast the market value of portfolio securities at the
expiration of the forward contract. Accordingly, it may be necessary for the
portfolio to purchase additional foreign currency on the spot market (and bear
the expense of such purchase) if the market value of the security is less than
the amount of foreign currency the portfolio is obligated to deliver, and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary for the portfolio to sell on the
spot market some of the foreign currency received on the sale of its hedged
security if the security's market value exceeds the amount of foreign currency
the portfolio is obligated to deliver.
If the portfolio retains the hedged security and engages in an offsetting
transaction, it will incur a gain or loss to the extent that there has been
movement in spot or forward contract prices. If a portfolio engages in an
offsetting transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline during the period
between the portfolio's entering into a forward contract for the sale of a
foreign currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, the portfolio will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the
portfolio will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
Buyers and sellers of foreign currency options and futures contracts are
subject to the same risks previously described with respect to options and
futures generally (see "Risk Factors with Options" and "Risk Factors with
Futures, Options on Futures and Options on Indexes," above). In addition,
settlement of currency options and futures contracts with respect to most
currencies must occur at a bank located in the issuing nation. The ability to
establish and close out positions on such options is subject to the maintenance
of a liquid market that may not always be available. Currency rates may
fluctuate based on political considerations and governmental actions as opposed
to purely economic factors.
Predicting the movements of foreign currency in relation to the U.S. dollar is
difficult and requires different skills than those necessary to predict
movements in the securities market. There is no assurance that the use of
foreign currency hedging transactions can successfully protect a portfolio
against loss resulting from the movements of foreign currency in relation to
the U.S. dollar. In addition, it must be remembered that these methods of
protecting the value of a portfolio's securities against a decline in the value
of a currency do not eliminate fluctuations in the underlying prices of the
securities. They simply establish rates of exchange which can be achieved at
some future point in time. Additionally, although such contracts tend to
minimize the risk of loss due to the decline in the value of the hedged
currency, at the same time they tend to limit any potential gain which might
result should the value of such currency increase.
RISK FACTORS WITH HIGH-YIELD, HIGH-RISK SECURITIES
The high-yield, high-risk securities in which the Income Portfolio may invest
up to 15% of its assets present special risks to investors. The market value
of lower-rated securities may be more volatile than that of higher-rated
securities and generally tends to reflect the market's perception of the
creditworthiness of the issuer and short-term market developments to a greater
extent than more highly-rated securities, which primarily reflect fluctuations
in prevailing interest rates. Periods of economic uncertainty and change can
be expected to result in increased volatility in the market value of
lower-rated securities. Further, such securities may be subject to greater
risks of loss of income and principal, particularly in the event of adverse
economic changes or increased interest rates, because their issuers generally
are not as financially secure or as creditworthy as issuers of higher-rated
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securities. Additionally, to the extent that there is no national market
system for secondary trading of lower-rated securities, there may be a low
volume of trading in such securities which may make it more difficult to value
or sell those securities than higher-rated securities. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may
decrease the values and liquidity of high-yield, high-risk securities,
especially in a thinly traded market.
Investors should recognize that the market for high-yield, high-risk securities
is a relatively recent development that has not been fully tested by a
prolonged economic recession. An economic downturn may severely disrupt the
market for such securities and cause financial stress to the issuers which may
adversely affect the value of such securities held by the Income Portfolio and
the ability of the issuers of such securities to pay principal and interest. A
default by an issuer may result in the Income Portfolio incurring additional
expenses to seek recovery of the amounts due it.
MANAGEMENT OF ONE FUND
DIRECTORS AND OFFICERS OF ONE FUND
The directors and officers of ONE Fund, together with information as to their
principal occupations during the past five years are listed below:
<TABLE>
<CAPTION>
Position with Principal Occupation
Name and address the Fund during past five years
- ---------------- ------------- ----------------------
<S> <C> <C>
Ronald L. Benedict* Secretary and Second Vice President and Counsel and
237 William H. Taft Rd. Director and Assistant Secretary, ONLI; Secretary
Cincinnati, Ohio of ONIMCO and of the Adviser;
Secretary and Director of ONF.
George E. Castrucci Director Business consultant and private
8355 Old Stable Road investor; Chairman & Director of
Cincinnati, Ohio Baldwin Piano & Organ Co.;
Director of ONF; Formerly
President and Chief Operating
Officer of Great American
Communications Co. and Chief
Executive Officer of Great
American Broadcasting Co.; Director
of Benchmark Savings Bank.
Maurice H. Kirby, Jr. Director Retired; Director of ONF.
6726 Farmbrook Drive Formerly Senior Vice
Cincinnati, Ohio President, First National Bank
of Cincinnati.
George M. Vredeveld Director Professor of Economics, University of
University of Cincinnati Cincinnati; Director of Center for
P.O. Box 210223 Economic Education; Private Consultant;
Cincinnati, Ohio Director of Benchmark Savings Bank.
Donald J. Zimmerman* President and Director and Senior Vice President
237 William H. Taft Rd. Director Insurance Operations and
Cincinnati, Ohio Secretary, ONLI; President and
Director of ONF.
</TABLE>
17
<PAGE> 49
<TABLE>
<S> <C> <C>
Michael A. Boedeker Vice President Vice President, Fixed Income
237 William H. Taft Rd. Securities, ONLI; Vice President
Cincinnati, Ohio and Director of ONIMCO and of
the Adviser; Vice President of ONF.
Joseph P. Brom Vice President Senior Vice President & Chief
237 William H. Taft Rd. Investment Officer, ONLI; President
Cincinnati, Ohio and Director of ONIMCO and of
the Adviser; Vice President of ONF.
David G. McClure Vice President Vice President, Variable Product
237 William H. Taft Rd. Sales, ONLI; Vice President and
Cincinnati, Ohio Director of ONIMCO and of the Adviser.
Stephen T. Williams Vice President Director of Securities, ONLI;
237 William H. Taft Rd. Vice President and Director of ONIMCO
Cincinnati, Ohio and of the Adviser; Vice President of ONF.
Dennis R. Taney Treasurer Mutual Funds Financial Operations
237 William H. Taft Rd. Director, ONLI; Treasurer of ONIMCO
Cincinnati, Ohio and of the Adviser; Treasurer of ONF
Amy D. Starkey Assistant Secretary Compliance Director for ONLI's affiliated
237 William H. Taft Rd. broker-dealers. Prior to February 1994
Cincinnati, Ohio was a full-time graduate student and from
September 1990 to September 1992 was a bank
internal auditor.
</TABLE>
* Indicates Directors who are "Interested Persons" as defined by the Investment
Company Act of 1940, as amended.
COMPENSATION OF DIRECTORS
Directors not affiliated with ONLI, the Adviser or SGAM were compensated as
follows during the fiscal year ended June 30, 1995:
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
Name of Director from ONE Fund from Fund Complex*
- ---------------- ---------------------------- ------------------
<S> <C> <C>
James E. Baker $4,250 $13,450
George E. Castrucci 4,250 13,450
Maurice H. Kirby, Jr. 4,250 13,450
</TABLE>
*The "Fund Complex" consists of ONE Fund and ONF.
Directors and officers of ONE Fund who are affiliated with ONLI or the Adviser
receive no compensation from the Fund Complex. ONE Fund has no pension,
retirement or deferred compensation plan for its directors or officers.
18
<PAGE> 50
SHAREHOLDERS' MEETINGS
ONE Fund's by-laws provide that shareholders' meetings need only be held every
three years unless matters requiring shareholder approval should occur more
frequently. It is anticipated that shareholders' meetings will generally occur
every three years.
CONTROLLING PERSONS AND PRINCIPAL SHAREHOLDERS
Because of its ownership of ONE Fund shares, ONLI is a controlling person of
each portfolio of ONE Fund other than the International Portfolio. As a
result, ONLI likely will be able to control the outcome of a shareholder vote
for any of those portfolios unless and until the percentage of shares of a
portfolio held by other investors significantly expands. ONLI is also a
controlling person of ONIMCO.
As of April 1, 1996, ONLI's ownership of ONE Fund shares was as follows:
<TABLE>
<CAPTION>
Number of Net Asset Percent of
Portfolio Shares Value _Portfolio_
- --------- ------------ ------------ ----------
<S> <C> <C> <C>
Money Market 13,996,088 $ 13,996,088 86.8%
Tax-Free Income 537,612 $ 5,816,967 93.4%
Income 491,755 $ 4,760,194 67.8%
Income & Growth 401,767 $ 5,122,528 50.0%
Growth 290,447 $ 4,321,850 39.4%
Small Cap 208,190 $ 2,504,433 61.4%
International 120 $ 1,696 0.0%
Global Contrarian 262,182 $ 2,947,002 54.6%
</TABLE>
In addition, as of that date, A. Wayne Phillips of Sherwood, Arkansas, owned
60,909 shares of the Income Portfolio having a total net asset value of
$585,335 and representing 8.4% of the Portfolio. As of that date, no other
shareholder owned more than 5% of the shares of any ONE Fund portfolio. The
amount of shares of each portfolio of ONE Fund held by officers and directors
of ONE Fund, as a group, was less than 1%.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser is an Ohio corporation organized on January 17, 1996 to provide
investment advice and management services to funds affiliated with ONLI. The
Adviser is a wholly-owned subsidiary of ONLI. The Adviser succeeded O.N.
Investment Management Company ("ONIMCO") as ONE Fund's investment adviser on
May 1, 1996. Prior to that date, ONIMCO had been the investment adviser from
ONE Fund's inception. The Adviser, like ONIMCO before it, uses ONLI's
investment personnel and administrative systems.
The Adviser regularly furnishes to ONE Fund's Board of Directors
recommendations with respect to an investment program consistent with the
investment policies of each investment portfolio. Upon approval of an
investment program by ONE Fund's Board of Directors, the Adviser implements the
program by placing the orders for the purchase and sale of securities or, in
the case of the International Portfolio, delegates that implementation to SGAM.
The Adviser's services are provided under an Investment Advisory Agreement with
ONE Fund. Under the Investment Advisory Agreement, the Adviser provides
personnel, including executive officers for ONE Fund. The Adviser also
furnishes at its own expense or pays the expenses of ONE Fund for clerical and
related administrative services (other than those provided by the custodian and
agency agreements with The Provident Bank and the custodian agreement with
Investors Fiduciary Trust Company), office space, and other facilities. ONE
Fund pays corporate expenses incurred in its operations, including, among
others, local income, franchise, issuance or other taxes; certain printing
19
<PAGE> 51
costs; brokerage commissions on portfolio transactions; custodial and transfer
agent fees; auditing and legal expenses; and expenses relating to registration
of its shares for sale and shareholders' meetings.
As compensation for its services, the Adviser receives from ONE Fund an annual
investment advisory fee based on the average daily net asset value of each
portfolio's assets during the quarterly period for which the fee is paid based
on the following schedule: (a) for those assets held in the Income, Income &
Growth and Growth Portfolios, the fee is at an annual rate of 0.5% of the first
$l00 million of those assets in each portfolio, 0.4% of the next $l50 million
and 0.3% of assets over $250 million; (b) as to assets held in the Money Market
Portfolio, the fee is at an annual rate of 0.3% of the first $100 million of
such assets, 0.25% of the next $150 million, and 0.2% of assets over $250
million; (c) for assets held in the Tax-Free Income Portfolio, the fee is at an
annual rate of 0.6% of the first $100 million of those assets, 0.5% of the next
$150 million, and 0.4% of assets over $250 million; (d) for assets held in the
Small Cap Portfolio, the fee is at an annual rate of 0.65% of the first $100
million, 0.55% of the next $150 million, and 0.45% of assets over $250 million;
and (e) for assets held in the International and Global Contrarian Portfolios,
the fee is at an annual rate of 0.9% of such assets in each portfolio.
Under the Investment Advisory Agreement, ONE Fund authorizes the Adviser to
retain a sub-adviser for the International and Global Contrarian Portfolios,
subject to the approval of ONE Fund's Board of Directors. The Adviser has
entered into a Sub-Advisory Agreement with SGAM to manage the investment and
reinvestment of International and Global Contrarian Portfolio assets, subject
to the supervision of the Adviser. As compensation for its services, SGAM
receives from the Adviser fees at the annual rate of 0.75% of the average daily
net assets of each of those portfolios during the quarter for which the fee is
paid.
For each of the fiscal years ended June 30, investment advisory fees from each
of ONE Fund's portfolios were paid to ONIMCO (the Adviser's predecessor) as
follows:
<TABLE>
<CAPTION>
1995 Earned Waived Net Fees
------ ------ --------
<S> <C> <C> <C>
Money Market $ 40,669 ($ 40,669) $ 0
Tax-Free Income 21,136 ( 10,568) 10,568
Income 28,148 ( 14,074) 14,074
Income & Growth 36,964 ( 18,482) 18,482
Growth 31,091 ( 15,546) 15,545
Small Cap 10,790 ( 5,395) 5,395
International 104,197 0 104,197
Global Contrarian 19,262 0 19,262
---------- ---------------- ----------
$ 292,257 ( $104,734) $187,523
</TABLE>
<TABLE>
<CAPTION>
1994* Earned Waived Net Fees
------ ------ --------
<S> <C> <C> <C>
Money Market $ 58,467 ($ 58,467) $ 0
Income 26,766 ( 13,383) 13,383
Income & Growth 36,266 ( 18,133) 18,133
Growth 24,244 ( 12,122) 12,122
International 56,712 0 56,712
--------- -------------- ------
$ 202,455 ($ 102,105) $100,350
</TABLE>
<TABLE>
<CAPTION>
1993** Earned Waived Net Fees
------ ------ --------
<S> <C> <C> <C>
Money Market $ 54,275 ($ 54,275) $ 0
Income 21,894 ( 10,947) 10,947
Income & Growth 23,612 ( 11,806) 11,806
Growth 14,702 ( 7,351) 7,351
International 4,232 0 4,232
----------- ------------ -----------
$118,715 ($ 84,379) $ 34,336
</TABLE>
20
<PAGE> 52
* The Tax-Free Income, Small Cap and Global Contrarian Portfolios are
not shown because they did not commence operations until November 1,
1994.
** The Money Market, Income, Income & Growth and Growth Portfolios
commenced operations on August 18, 1992. The International
Portfolio commenced operations on April 30, 1993.
The Investment Advisory Agreement also provides that if, and to the extent
that, the total expenses applicable to any portfolio during any calendar
quarter (excluding taxes, brokerage commissions, interest and the investment
advisory fee) exceed l%, on an annualized basis, of the portfolio's average
daily net asset value, the Adviser will pay such expenses. During the last
fiscal year, ONIMCO reimbursed the Global Contrarian Portfolio $10,732 under
the same terms.
Under a Service Agreement among ONE Fund, the Adviser and ONLI, the latter has
agreed to furnish the Adviser, at cost, such research facilities, services and
personnel as may be needed by the Adviser in connection with its performance
under the Investment Advisory Agreement. The Adviser reimburses ONLI for its
expenses in this regard.
The Investment Advisory Agreement, the Service Agreement and the Sub-Advisory
Agreement for the International and Global Contrarian Portfolios were approved
by a vote of ONE Fund's Board of Directors on January 24, 1996, and the
shareholders on March 28, 1996. These agreements will continue in force from
year to year hereafter, if such continuance is specifically approved at least
annually by a majority of ONE Fund's directors who are not parties to such
agreements or interested persons of any such party, with votes to be cast in
person at a meeting called for the purpose of voting on such continuance, and
also by a majority of ONE Fund's Board of Directors or by a majority of the
outstanding voting securities of each portfolio voting separately.
The Investment Advisory, Sub-Advisory and Service Agreements may be terminated
at any time, without the payment of any penalty, on 60 days' written notice to
the Adviser by ONE Fund's Board of Directors or, as to any portfolio, by a vote
of the majority of the portfolio's outstanding voting securities. The
Investment Advisory Agreement may be terminated by the Adviser on 90 days'
written notice to ONE Fund. The Service Agreement may be terminated, without
penalty, by the Adviser or ONLI on 90 days' written notice to ONE Fund and the
other party. The Sub-advisory Agreement may be terminated, without penalty, by
the Adviser or SGAM on 90 days' written notice to ONE Fund and the other party.
The Agreements will automatically terminate in the event of their assignment.
ONE Fund's 12b-1 Plan is used solely to compensate broker-dealers that sell ONE
Fund shares (the "Selling Dealers") for shareholder services and for sales.
The basic payment is 0.15% (on an annualized basis) of the average net assets
of the Money Market Portfolio and 0.25% of the average net assets of each other
portfolio. The fees are increased to the extent necessary to pay incentive
bonuses to individual registered representatives who service $5 million or more
of ONE Fund shares. Such increases can never increase the fees paid to more
than 0.17% and 0.30% respectively. No interested person of ONE Fund other than
the Selling Dealers has a direct or indirect financial interest in ONE Fund's
12b-1 Plan. ONE Fund benefits from the 12b-1 Plan payments to Selling Dealers
by having the registered representatives of those dealers answer shareholder
questions and by having those registered representatives motivated to sell ONE
Fund shares to persons likely to remain shareholders for a period of time.
21
<PAGE> 53
BROKERAGE ALLOCATION
The Adviser buys and sells the portfolio securities for all the portfolios,
other than the International and Global Contrarian Portfolios, and selects the
brokers to handle such transactions. It is the Adviser's intention to place
orders for the purchase and sale of securities with the primary objective of
obtaining the most favorable price consistent with good brokerage service. The
cost of securities transactions for each portfolio will consist primarily of
brokerage commissions or dealer or underwriter spreads. Bonds and money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes.
Occasionally, securities may be purchased directly from the issuer. For
securities traded primarily in the over-the-counter market, the Adviser will,
where possible, deal directly with dealers that make a market in the securities
unless better prices and execution are available elsewhere. Such dealers
usually act as principals for their own account.
In selecting brokers through which to effect transactions, the Adviser
considers a number of factors including the value, quality, efficiency of
execution and research, statistical, quotation and valuation services provided.
Research services by brokers include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
purchasing or selling securities, the availability of securities or purchasers
or sellers of securities, and analyses and reports concerning issuers,
industries, securities, economic factors and trends and portfolio strategy. In
making such determination, the Adviser may use a broker whose commission in
effecting a securities transaction is in excess of that of some other broker if
the Adviser determines in good faith that the amount of such commission is
reasonable in relation to the value of the research and related services
provided by such broker.
It is not possible to place a dollar value on research and related services
provided by brokers and receipt of such services is not expected to
significantly affect the Adviser's expenses. Research, statistical and similar
information furnished by brokers may be of incidental assistance to ONLI, ONF
or other clients or affiliates of the Adviser and conversely, transaction costs
paid by ONLI, ONF or other clients or affiliates of the Adviser may generate
information which is beneficial to ONE Fund.
SGAM selects the brokers and dealers that execute orders for the purchase and
sale of International and Global Contrarian Portfolio securities. SGAM seeks
to obtain the best price and execution available after taking into account
research services provided by such brokers and dealers for the International
Portfolio's benefit. Consistent with this policy, portfolio transactions may
be executed by brokers affiliated with Societe Generale (SGAM's ultimate
controlling person) so long as the commission paid to the affiliated broker is
reasonable and fair compared to the commission that would be charged by an
unaffiliated broker in a comparable transaction.
For each of the fiscal years ended June 30, the following brokerage commission
amounts were paid by each portfolio:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Money Market None None None
Tax-Free Income None N/A N/A
Income None None $ 600
Income & Growth $ 5,101 $ 960 10,997
Growth 3,776 795 12,340
Small Cap 5,074 N/A N/A
International 26,616 28,128 10,247
Global Contrarian 11,278 N/A N/A
------- --------- ---------
Total $ 51,845 $29,883 $34,184
</TABLE>
22
<PAGE> 54
During the fiscal year ended June 30, 1995, 100% of such commissions were paid
to brokers who furnished statistical data and research information to ONIMCO
(the predecessor to the Adviser) or SGAM. The Tax-Free Income, Small Cap and
Global Contrarian Portfolios did not commence operations until November 1,
1994.
PURCHASE AND REDEMPTION OF SHARES
ONE Fund shares are sold at the public offering price, which is their net asset
value plus a sales charge, as described in the prospectus, if applicable. They
may be redeemed at their net asset value next computed after a purchase or
redemption order is received by ONE Fund. (The net asset value for the Money
Market Portfolio is normally $l per share.)
Depending upon the net asset values at that time, the amount paid upon
redemption may be more or less than the cost of the shares redeemed. Payment
for shares redeemed will be made as soon as possible, but in any event within
seven days after evidence of ownership of the shares is tendered to ONE Fund.
However, ONE Fund may suspend the right of redemption or postpone the date of
payment beyond seven days during any period when (a) trading on the New York
Stock Exchange is restricted, as determined by the Securities and Exchange
Commission, or such Exchange is closed for other than weekends and holidays;
(b) an emergency exists, as determined by the Commission, as a result of which
disposal by ONE Fund of securities owned by it is not reasonably practicable,
or it is not reasonably practicable for ONE Fund fairly to determine the value
of its net assets; or (c) the Commission by order so permits for the protection
of security holders of ONE Fund.
Redemptions of shares of any ONE Fund portfolio by any shareholder during any
90-day period will be paid in cash, up to the lesser of (a) $250,000 or (b) 1%
of the portfolio's total net asset value. Larger redemptions may, at ONE
Fund's discretion, be paid wholly or in part by securities or other assets of
the portfolio. A shareholder who receives securities would likely incur
brokerage expenses in disposing of them.
Shares of one portfolio may be exchanged for shares of another portfolio of ONE
Fund on the basis of the relative net asset values next computed after an
exchange order is received by ONE Fund. However, in the case of transfers from
the Money Market Portfolio to another portfolio, the sales charge will be
levied unless such assets had previously been subjected to a sales charge by
having been earlier transferred from another portfolio to the Money Market
Portfolio.
The net asset value of ONE Fund's shares is determined at 4 p.m. Eastern time
on each day the New York Stock Exchange is open for unrestricted trading. That
is normally each weekday (Monday through Friday) except for the following
holidays: New Years Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas. The net asset
value of each portfolio is computed by dividing the value of the securities in
that portfolio plus any cash or other assets less all liabilities of the
portfolio, by the number of shares outstanding for that portfolio.
Securities which are held in a portfolio and listed on a securities exchange
are valued at the last sale price or, if there has been no sale that day, at
the last bid price reported as of 4 p.m. Eastern time. Over-the-counter
securities are valued at the last bid price as of 4 p.m. Eastern time.
Short-term debt securities in all portfolios with remaining maturities of 60
days or less are valued at amortized cost. All other assets (not including
those of the Money Market Portfolio), including restricted debt securities and
other investments for which market quotations are not readily available, are
valued at their fair value as determined in good faith by ONE Fund's Board of
Directors. ONE Fund relies on Rule 2a-7 under the Investment Company Act of
1940 to value the assets of the Money Market Portfolio on the basis of
amortized cost with a view toward stabilizing the net asset value at $l per
share and allowing dividend payments to reflect net interest income as earned.
Accordingly, the short-term debt assets of the Money Market Portfolio are
valued at their cost on the date of acquisition
23
<PAGE> 55
with a daily adjustment being made to accrued income to reflect amortization of
premium or accretion of discount to the maturity date.
In relying on Rule 2a-7 with respect to short-term debt securities in its Money
Market Portfolio, ONE Fund has agreed to maintain a dollar-weighted average
portfolio maturity of not more than 90 days and to not purchase any such debt
security having a maturity of more than 397 days. The dollar-weighted average
maturity of short-term debt securities is determined by dividing the sum of the
dollar value of each such security times the remaining days to maturity of such
security by the sum of the dollar value of all short-term debt securities.
Should the disposition of a short-term debt security result in a
dollar-weighted average maturity of more than the number of days allowed under
the exemptive order or Rule 2a-7, as the case may be, the Money Market
Portfolio will invest any available cash so as to reduce such average maturity
to the required number of days or less as soon as reasonably practicable. ONE
Fund normally holds short-term debt securities to maturity and realizes par
therefor unless an earlier sale is required to meet redemption requirements.
In addition, the Money Market Portfolio is required to limit its short-term
debt investments, including repurchase agreements, to those United States
dollar denominated instruments which the Board of Directors determines present
minimal credit risks and which are in the top two rating categories of any
nationally recognized statistical rating organizations or, in the case of any
instrument that is not rated, of comparable quality as determined by the Board
of Directors. Although the use of amortized cost provides certainty in
valuation, it may result in periods during which value so determined is higher
or lower than the price the portfolio would receive if it liquidated its
securities.
ONE Fund's Board of Directors is obligated, as a particular responsibility
within the overall duty of care owed to the Money Market Portfolio
shareholders, to establish procedures reasonably designed, taking into account
current market conditions and the investment objective of such portfolio, to
stabilize the portfolio's net asset value per share as computed for the purpose
of distribution, redemption and repurchase, at $l per share. The procedures
adopted by the Board of Directors include periodically reviewing, as it deems
appropriate and at such intervals as are reasonable in light of current market
conditions, the extent of deviation, if any, between the net asset value per
share based on available market quotations and such value based on the
portfolio's $l amortized cost price. If such deviation exceeds 1/2 of 1
percent, or if there is any other deviation which the Board of Directors
believes would result in a material dilution to shareholders or purchasers, the
Board of Directors will promptly consider what action, if any, it should
initiate. Such action may include redemption in kind; selling portfolio
instruments prior to maturity to realize capital gains or losses, or to shorten
the average portfolio maturity; withholding dividends; splitting, combining or
otherwise recapitalizing outstanding shares; or using available market
quotations to determine net asset value per share. The Money Market Portfolio
may reduce the number of its outstanding shares by requiring shareholders to
contribute to capital proportionately the number of full and fractional shares
as is necessary to maintain the net asset value per share of $l.
REDUCING THE SALES CHARGE
The prospectus describes a variety of ways you may qualify for scheduled
reductions in sales load for large purchases. In general, these special
purchase methods permit you to treat your purchase as if it were part of a
larger purchase. Certain ways to reduce sales load are available to you
individually, and other ways in combination with other investors. First, you
may make a single purchase (of shares of one or more ONE Fund portfolios) in an
aggregate amount that qualifies for a reduced sales charge (at least $25,000).
Second, you may add the amount of your existing ONE Fund holdings to the amount
being purchased (with the sum equaling your "accumulated holdings"), and pay
only the percentage sales
24
<PAGE> 56
charge that would apply to your purchase if it were part of a purchase the size
of your accumulated holdings. Third, you may add to your accumulated holdings
the amount of the annual or single premium of any Ohio National annuity or
insurance policy you purchase concurrently with the ONE Fund shares (i.e., ONE
Fund shares are purchased in the time between application for, and 5 days after
delivery of, an Ohio National annuity or insurance policy) and pay only the
sales charge that would apply to your purchase if it were part of a purchase
the size of your accumulated holdings plus the amount of your concurrent
purchase. Fourth, you may add to your accumulated holdings (and your
concurrent purchases, if any) an amount of ONE Fund shares you state (in a
letter of intent) that you intend to purchase within a 13-month period and pay
only the sales charge that would apply to that total. To the extent that your
sales charge reduction depends on purchases pursuant to a letter of intent, a
number of the shares you purchase will be escrowed to pay the sales charge that
would apply if some or all of the future purchases under the letter of intent
are not made.
In addition, you may be able to aggregate the holdings or purchases of other
persons with the amounts determined in the methods described in the prior
paragraph. First, you are entitled to aggregate your accumulated holdings
with purchases and holdings of ONE Fund shares by your spouse, children and
grandchildren. Second, if you are a member of a "qualified group" (as
described in "Group Purchases" in the prospectus), you may aggregate your
holdings and purchases with those of the entire qualified group. However, you
may not aggregate purchases of your family members with those of a qualified
group, to which such family members do not belong, for purposes of qualifying
for a reduced sales charge. In addition, you may not aggregate the holdings or
purchases of more than one qualified group with your own holdings or purchases.
TAX STATUS
ONE Fund intends to qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code (the "Code"). Under such provisions, ONE Fund
is not subject to federal income tax on such part of its net ordinary income
and net realized capital gains which it distributes to shareholders. Each
portfolio is treated as a separate entity for federal income tax purposes,
including determining whether it qualifies as a regulated investment company
and determining its net ordinary income (or loss) and net realized capital
gains (or losses). To qualify for treatment as a regulated investment company,
each portfolio must, among other things, derive in each taxable year at least
90% of its gross income from dividends, interest and gains from the sale or
other disposition of securities and derive less than 30% of its gross income in
each taxable year from the gains (without deduction for losses) from the sale
or other disposition of securities held for less than three months.
The foregoing is a general and abbreviated summary of the applicable provisions
of the Code and Treasury Regulations currently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and the
Treasury Regulations promulgated thereunder. Shareholders should consult their
own tax advisers with regard to the tax status of ONE Fund distributions.
UNDERWRITERS
The O.N. Equity Sales Company, a wholly-owned subsidiary of ONLI, has served as
principal underwriter for ONE Fund shares from ONE Fund's inception. However,
on January 17, 1996, ONLI formed another wholly-owned subsidiary, Ohio National
Equities, Inc., which will serve as ONE Fund's principal underwriter once Ohio
National Equities, Inc. has obtained all necessary regulatory approvals. ONE
Fund shares are offered by the registered representatives of The O.N. Equity
Sales Company and other broker-dealers with whom the principal underwriter
enters into distribution agreements. ONE Fund shares are offered on a
best-efforts basis. The offering is continuous.
EXPERTS
The financial statements of ONE Fund as of June 30, 1995 and for the periods
indicated herein included in this Statement of Additional Information and the
Financial Highlights included in the prospectus dated November 1, 1995 have
been included herein and in the prospectus in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing in this
25
<PAGE> 57
Statement of Additional Information, and upon the authority of said firm as
experts in accounting and auditing. KPMG Peat Marwick LLP's business address
is 201 East Fifth Street, Cincinnati, Ohio 45202.
LEGAL COUNSEL
Messrs. Jones & Blouch L.L.P., Washington, D.C., have passed on matters
pertaining to the federal securities laws and Ronald L. Benedict, Esq.,
Secretary of ONE Fund and Second Vice President and Counsel of ONLI, has
passed on all other legal matters relating to the legality of the shares
described in the prospectus and this Statement of Additional Information.
26
<PAGE> 58
ONE FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1995
<TABLE>
<CAPTION>
Portfolio
-------------------------------------------------------------------
Money Tax-Free Income
Market Income Income & Growth Growth
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities at market
value (note 1).................................... $14,126,492 $ 5,524,500 $ 7,023,064 $ 7,834,530 $ 7,203,439
Cash in bank........................................ 85.481 76,743 63,570 3&142 33,343
Receivable for securities sold...................... -- -- -- -- --
Receivable for fund shares sold..................... -- -- -- 34,291 --
Dividends and accrued interest receivable........... -- 93,047 99,704 51,459 11,218
Deferred organizational expenses (note 1)........... 7,406 2,258 7,406 7,406 7,350
Other............................................... 1,335 74 -- 688 206
----------- ----------- ----------- ----------- -----------
Total assets...................................... 14,220,714 5,696,622 7,193,744 7,932,225 7,289,847
----------- ----------- ----------- ----------- -----------
Liabilities:
Payable for securities purchased.................... -- -- -- 18,626 --
Payable for investment management
services (note 3)................................. -- 4,191 4,300 4,717 4,333
Payable for fund shares redeemed.................... -- -- -- -- --
Accrued 12b-1 fees (note 5)......................... -- 3,451 4,202 4,641 4,245
Other accrued expenses.............................. 12,527 8,073 10,421 8,159 10,592
Dividends payable................................... 60,325 24,173 31,618 180,140 298,790
----------- ----------- ----------- ----------- -----------
Total liabilities................................. 72,852 39,888 50,541 216,283 317,960
----------- ----------- ----------- ----------- -----------
NET ASSETS AT MARKET VALUE............................ $14,147,802 $ 5,656,734 $ 7,143,203 $ 7,715,942 $ 6,971,887
=========== =========== =========== =========== ===========
Net assets consist of:
Par value, $.001 par share.......................... $ 14,148 $ 530 $ 731 $667 $ 536
Paid-in capital in excess of par value.............. 14,133,714 5,318,417 7,106,690 6,529,205 5,622,237
Accumulated undistributed net realized gain (loss)..
Investments....................................... -- -- (61,593) -- 1,524
Net unrealized appreciation on:
Investments....................................... -- 337,787 97,375 1,185,793 1,347,764
Foreign currency related transactions............. -- -- -- -- --
Undistributed (over distributed)
net investment income............................. -- -- -- 277 (174)
----------- ----------- ----------- ----------- -----------
NET ASSETS AT MARKET VALUE............................ $14,147,862 $ 5,856,734 $ 7,143,203 $ 7,715,942 $ 6,971,887
=========== =========== =========== =========== ===========
SHARES OUTSTANDING.................................... 14,147,905 530,473 730,619 667,022 534,928
=========== =========== =========== =========== ===========
MET ASSET VALUE PER SHARE............................. $ 1.00 $ 10.66 $ 9.78 $ 11.57 $ 13.03
=========== =========== =========== =========== ===========
MAXIMUM OFFERING PRICE PER SHARE...................... $ 1.00 $ 10.99 $ 10.08 $ 12.18 $ 13.72
=========== =========== =========== =========== ===========
Portfolio
--------------------------------------
Small Global
Cap International Contrarian
----------- ------------- -----------
<S> <C> <C> <C>
Assets:
Investments in securities at market
value (note 1).................................... $ 3,813,088 $11.049,100 $ 3,685,505
Cash in bank........................................ 93,915 702,207 66,509
Receivable for securities sold...................... -- 172,429 42,419
Receivable for fund shares sold..................... -- 48,941 41,524
Dividends and accrued interest receivable........... 1,429 58,618 36,488
Deferred organizational expenses (note 1)........... 2,258 6,768 2,260
Other............................................... 51 -- --
----------- ----------- -----------
Total assets...................................... 3,280,741 12,098,063 3,874,705
----------- ----------- -----------
Liabilities:
Payable for securities purchased.................... 337,224 35,125 --
Payable for investment management
services (note 3)................................. 2,275 26,738 8,309
Payable for fund shares redeemed.................... -- 848 --
Accrued 12b-1 fees (note 5)......................... 1,679 7,427 2,308
Other accrued expenses.............................. &396 15,037 6,836
Dividends payable................................... 17,258 40,989 302
----------- ----------- -----------
Total liabilities................................. 364,832 126,184 17,755
----------- ----------- -----------
NET ASSETS AT MARKET VALUE............................ $ 2,915,909 $11,971,899 $ 3,856,950
Net assets consist of:
Par value, $.001 par share.......................... $ 274 $ 929 $ 385
Paid-in capital in excess of par value.............. 2,752,119 11,151,828 3,817,504
Accumulated undistributed net realized gain (loss)..
Investments....................................... -- 14,175 127
Net unrealized appreciation on:
Investments....................................... 163,409 803,479 38,719
Foreign currency related transactions............. -- 1,499 170
Undistributed (over distributed)
net investment income............................. 107 (11) 45
----------- ----------- -----------
NET ASSETS AT MARKET VALUE............................ $ 2,915,909 $11,971,899 $ 3,856,950
=========== =========== ===========
SHARES OUTSTANDING (note 4)........................... 274,392 928,820 385,410
=========== =========== ===========
MET ASSET VALUE PER SHARE............................. $ 10.63 $ 12.89 $ 10.01
=========== =========== ===========
MAXIMUM OFFERING PRICE PER SHARE...................... $ 11.19 $ 13.57 $ 10.53
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 59
ONE FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
Portfolio
----------------------------------------------------
Money Tax-Free Income
Market Income(a) Income & Growth
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Investment income:
Interest................................................ $ 746,485 $ 22,520 $ 385,955 $ 186,422
Dividends............................................... -- 190,945 47,474 147,955
--------- --------- --------- -----------
746,485 213,465 433,429 334,377
--------- --------- --------- -----------
Expenses:
12b-1 fees (note 5)..................................... 20,419 8,749 12,668 17,644
Management fees (note 3)................................ 40,669 21,136 28,148 36,964
Custodian fees (note 3)................................. 24,503 6,341 10,133 13,307
Directors' fees......................................... 3,105 1,036 1,380 1,610
Professional fees....................................... 8,756 2,439 3,719 4,337
Other................................................... 10,027 3,177 3,308 2,141
Organization Expense (note 1)........................... 2,824 346 2,824 2,824
Expenses voluntarily reduced or reimbursed (note 3)..... (40,669) (10,568) (14,074) (18,482)
--------- --------- --------- -----------
69,634 32,656 48,106 60,345
--------- --------- --------- -----------
Net investment income................................ 676,651 180,809 385,323 274,032
--------- --------- --------- -----------
Realized and unrealized gain (loss) on
investments and foreign currency
Net realized gain (loss) from:
Investment........................................ -- -- (61,593) 402,083
Foreign currency related transactions............. -- -- -- --
Net increase (decrease) in unrealized
appreciation (depreciation) on:
Investments.................................... -- 337,787 374,895 655,646
Foreign currency related transactions.......... -- -- -- --
--------- --------- --------- -----------
Net gain on investments..................... -- 337,787 313,302 1,057,729
--------- --------- --------- -----------
Net increase in net assets from operations.. $ 676,851 $ 518,596 $ 698,625 $ 1,331,761
========= ========= ========= ===========
<CAPTION>
Portfolio
--------------------------------------------------------
Small Global
Growth Cap(a) International Construction
--------- --------- --------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Interest................................................ $ 36,305 $ 63,457 ($ 16,006) $ 27,769
Dividends............................................... 99,181 8,809 319,952(b) 82,111(c)
---------- --------- --------- --------
135,486 72,266 303,946 109,880
---------- --------- --------- --------
Expenses:
12b-1 fees (note 5)..................................... 14,481 4,111 27,717 4,013
Management fees (note 3)................................ 31,091 10,790 104,197 19,262
Custodian fees (note 3)................................. 11,193 2,988 14,999 24,999
Directors' fees......................................... 1,380 460 2,531 458
Professional fees....................................... 3,719 1,084 6,505 1,753
Other................................................... 2,256 2,803 16,738 6,026
Organization Expense (note 1)........................... 2,870 346 2,321 345
Expenses voluntarily reduced or reimbursed (note 3)..... (15,546) (5,395) -- (10,732)
---------- --------- --------- --------
51,444 17,187 175,008 46,134
---------- --------- --------- --------
Net investment income................................ 84,042 55,079 128,838 63,746
---------- --------- --------- --------
Realized and unrealized gain (loss) on
investments and foreign currency
Net realized gain (loss) from:
Investments....................................... 425,561 9,797 880,178 43,215
Foreign currency related transactions............. -- -- 1,641 (103)
Net increase (decrease) in unrealized
appreciation (depreciation) on:
Investments.................................... 701,680 163,409 (236,110) 38,719
Foreign currency related transactions.......... -- -- 336 170
---------- --------- --------- --------
Net gain on investments..................... 1,127,241 173,206 646,045 82,001
---------- --------- --------- --------
Net increase in net assets from operations.. $1,211,283 $ 228,285 $ 774,983 $145,747
========== ========= ========= ========
<FN>
(a) Commenced operations November 1, 1994
(b) Net of $23,647 foreign taxes withheld.
(c) Net of $2,763 foreign taxes withheld.
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 60
ONE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
Portfolio
------------------------------------------------------------------------------------------
Money Tax
Market Free(b) Income Income & Growth
-------------------------- ----------- ----------------------- -----------------------
1995 1994 1995 1995 1994 1995 1994
------------ ------------ ----------- ----------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income...............$ 676,851 $ 578,123 $ 180,809 $ 385,323 $ 321,893 $ 274,032 $ 221,785
Realized gain (loss) on
investments and foreign
currency related transactions.... -- -- -- (61,593) 26,864 402,083 147,438
Unrealized gain (loss) on
investments and foreign
currency related transactions.... -- -- 337,787 374,895 (509,152) 655,646 (247,155)
------------ ------------ ----------- ----------- ------------ ----------- ----------
Net assets increase (decrease)
from operations............... 676,851 578,123 518,596 698,625 (160,395) 1,331,761 122,068
------------ ------------ ----------- ----------- ------------ ----------- ----------
Dividends and distributions
to shareholders:
Dividends paid from net
investment income................ (676,851) (578,123) (180,809) (385,323) (321,893) (273,755) (221,995)
Capital gains distributions......... -- -- -- -- (26,864) (402,083) (129,207)
------------ ------------ ----------- ----------- ------------ ----------- ----------
Total dividends and
distributions................. (676,851) (578,123) (180,809) (385,323) (348,757) (675,838) (351,202)
------------ ------------ ----------- ----------- ------------ ----------- ----------
From capital share transactions
(note 4):
Received from shares sold........... 9,788,975 2,500,562 5,175,095 2,020,251 546,585 743,255 2,609,009
Received from dividends reinvested.. 655,189 586,275 155,845 369,674 359,220 606,182 223,867
Paid for shares redeemed............ (8,595,276) (12,097,085) (11,993) (165,975) (1,505,786) (1,767,322) (1,780,979)
------------ ------------ ----------- ----------- ------------ ----------- ----------
Increase (decrease) in net
assets derived from
capital share transactions.... 1,848,888 (9,010,248) 5,318,947 2,223,950 (599,981) (417,885) 1,051,897
------------ ------------ ----------- ----------- ------------ ----------- ----------
Increase (decrease) in
net assets................. 1,848,888 (9,010,248) 5,656,734 2,537,252 (1,109,252) 238,038 822,763
Net assets:
Beginning of period................. 12,298,974 21,309,222 -- 4,605,951 5,715,084 7,477,904 6,655,141
------------ ------------ ----------- ----------- ------------ ----------- ----------
End of period (a)................... 14,147,862 12,296,974 5,656,734 7,143,203 45,605,951 7,715,942 7,477,904
============ ============ =========== =========== ============ =========== ==========
(a) Includes undistributed net
investment income (loss) of..... -- -- -- -- -- $ 277 $ 210
============ ============ =========== =========== ============ =========== ==========
(b) Commenced operations November 1, 1994
<CAPTION>
Portfolio
--------------------------------------------------------------------------------------
Small Global
Growth Cap(b) International Construction
-------------------------- ----------- --------------------------- ------------
1995 1994 1995 1995 1994 1995
----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income............... $ 84,402 $ 50,125 $ 55,079 $ 128,938 $ 29,052 $ 53,740
Realized gain (loss) on
investments and foreign
currency related transactions.... 425,561 64,561 9,797 881,819 389,416 43,112
Unrealized gain (loss) on
investments and foreign
currency related transactions.... 701,680 (15,354) 163,409 (235,774) 1,070,017 38,889
----------- ----------- ----------- ------------ ------------ -----------
Net assets increase (decrease)
from operations............... 1,211,283 99,262 228,265 774,983 1,488,485 145,747
----------- ----------- ----------- ------------ ------------ -----------
Dividends and distributions
to shareholders:
Dividends paid from net
investment income................ (84,216) (50,125) (54,972) (128,590) (30,757) (63,511)
Capital gains distributions......... (424,275) (64,491) (9,797) (668,069) (387,783) (43,088)
----------- ----------- ----------- ------------ ------------ -----------
Total dividends and
distributions................. (508,491) (114,618) (64,769) (996,667) (418,540) (106,686)
----------- ----------- ----------- ------------ ------------ -----------
From capital share transactions
(note 4):
Received from shares sold........... 1,480,257 2,176,656 2,800,024 6,323,833 6,141,579 3,771,274
Received from dividends reinvested.. 226,740 107,232 47,418 955,687 89,101 106,380
Paid for shares redeemed............ (703,929) (1,233,324) (95,049) (5,489,358) (107,117) (59,765)
----------- ----------- ----------- ------------ ------------ -----------
Increase (decrease) in net
assets derived from
capital share transactions.... 923,088 1,050,564 2,752,393 1,790,162 6,123,563 3,817,889
----------- ----------- ----------- ------------ ------------ -----------
Increae (decrease) in
net assets................. 1,625,860 1,035,210 2,915,909 1,568,478 7,193,500 3,856,950
Net assets:
Beginning of period................. 5,346,027 4,310,817 -- 10,403,421 3,209,913 --
----------- ----------- ----------- ------------ ------------ -----------
End of period (a)................... 6,971,887 5,346,027 2,915,909 11,971,899 10,403,421 3,856,950
=========== =========== =========== ============ ============ ===========
(a) Includes undistributed net
investment income (loss) of..... $ (174) -- $ 107 $ (11) $ (1,705) $ 45
=========== =========== =========== ============ ============ ===========
(b) Commenced operations November 1, 1994.
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 61
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Face Interest Market
Amount Short-Term Notes Rate Maturity Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUTOMOTIVE AND RELATED (5.0%)
$600,000 Ford Motor Credit Corp........................................ 5.870% 07-24-95 $ 597,750
100,000 Ford Motor Credit Corp........................................ 5.930% 07-24-95 99,621
-----------
697,371
-----------
CHEMICALS (8.5%)
600,000 Lubrizol Corp................................................. 5.950% 07-25-95 597,620
600,000 Dupont de Nemours and Co...................................... 5.890% 07-26-95 597,546
-----------
1,195,166
-----------
COMPUTERS AND RELATED (4.2%)
600,000 Hewlett-Packard............................................... 5.890% 09-19-95 592,267
-----------
CONSUMER PRODUCTS (7.7%)
450,000 Procter and Gamble............................................ 5.940% 07-11-95 449,257
650,000 Temple-inland Inc............................................. 5.900% 08-25-95 644,141
-----------
1,093,398
-----------
DRUGS (3.8%)
550,000 Eli Lilly & Co................................................ 5.800% 09-12-95 543,531
-----------
EDUCATION (4.9%)
700,000 N.W University................................................ 5.820% 09-12-95 691,739
-----------
ELECTRICAL EQUIPMENT (4.9%)
700,000 G.E. Capital Corp............................................. 5.910% 08-18-95 694,484
-----------
FINANCE (17.1%)
600,000 American Express Credit Corp.................................. 5.860% 08-23-95 594,824
525,000 American Family Financial Services............................ 5.860% 07-31-95 522,436
650,000 American General Finance Corp................................. 5.900% 07-17-95 648,295
450,000 Household Finance Corp........................................ 5.900% 07-07-95 449,557
200,000 Household Finance Corp........................................ 5.940% 07-07-95 199,802
-----------
2,414,914
-----------
INSURANCE (12.1%)
500,000 Pacific Mutual Life........................................... 5.750% 08-07-95 497,045
575,000 Prudential Funding Corp....................................... 5.850% 08-28-95 569,581
650,000 Safeco Credit Co., Inc........................................ 5.870% 08-11-95 645,655
-----------
1,712,281
-----------
MACHINERY (7.7%)
400,000 Crown, Cork & Seal............................................ 6.200% 08-16-95 396,831
600,000 John Deere Capital Corp....................................... 5.840% 09-11-95 592,992
100,000 John Deere Capital Corp....................................... 5.740% 09-11-95 98,852
-----------
1,088,675
-----------
OIL, ENERGY AND NATURAL GAS (8.8%)
550,000 Chevron Oil Finance Co........................................ 5.800% 08-24-95 545,215
700,000 Texaco Inc.................................................... 5.850% 08-10-95 695,450
-----------
1,240,665
-----------
RETAIL (3.9%)
550,000 Wal-Mart Stores Inc........................................... 5.950% 07-05-95 549,636
-----------
TRANSPORTATION (4.4%)
625,000 Consolidated Rail Corp........................................ 5.880% 08-24-85 619,488
-----------
UTILITIES (7.0%)
600,000 Central & Southwest Corp...................................... 5.850% 07-25-95 597,660
400,000 Southwest Bell Capital Corp................................... 5.740% 09-14-95 395,217
-----------
992,877
-----------
TOTAL HOLDINGS (COST $14,126,492) (a)......................... $14,126,492
===========
<FN>
(a) Also represents cost for Federal income tax purposes.
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 62
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
TAX-FREE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Face Interest Market
Amount Municipal Bonds Rate Maturity Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GENERAL OBLIGATION BONDS (14.3%)
$200,000 Charleston County S. Carolina................................. 7.250% 02-01-02 $ 210,250
100,000 Clairborne County Mississippi................................. 7.300% 05-01-25 101,125
250,000 State of Nevada............................................... 6.600% 12-01-13 260,938
250,000 State of Washington........................................... 5.000% 05-01-17 216,875
----------
789,188
----------
INSURED BONDS (19.3%)
250,000 Atlanta RTA................................................... 6.800% 07-01-14 268,125
250,000 Matagorda Texas............................................... 6.700% 03-01-27 266,250
250,000 New York State Med Care....................................... 6.750% 08-15-14 266,563
250,000 Pennsylvania lntergovernment Corp............................. 6.750% 06-15-21 265,625
----------
1,066,563
----------
AIRPORT REVENUE (3.9%)
250,000 Chicago Illinois O'Hare Airport............................... 5.000% 01-01-13 217,500
----------
HOSPITAL REVENUE (4.6%)
250,000 Massachusetts State Hospital.................................. 6.200% 10-01-16 251,562
----------
POWER REVENUE (16.4%)
250,000 Jacksonville Florida Electric................................. 5.500% 10-01-14 236,875
250,000 North Carolina Eastern Municipal Power........................ 6.000% 01-01-22 233,437
250,000 Salt River Arizona Project.................................... 5.000% 01-01-04 223,438
200,000 Southern California Public Power.............................. 6.000% 07-01-18 213,250
----------
907,000
----------
WATER REVENUE (4.2%)
250,000 Metropolitan Water District of S. California.................. 5.500% 07-01-13 233,750
----------
POLLUTION CONTROL AND INDUSTRIAL REVENUE (17.3%)
250,000 Lawrenceburg, Indiana......................................... 5.900% 11-01-19 229,375
250,000 Richland County, S. Carolina.................................. 6.550% 11-01-20 255,625
200,000 San Diego, California......................................... 7.625% 07-01-21 206,250
250,000 West Feliciana, Louisiana..................................... 8.000% 12-01-24 262,500
----------
953,750
----------
ADVANCE REFUNDED (9.3%)
250,000 Clark County, Nevada School Dist.............................. 7.000% 06-01-09 280,625
225,000 Salt Lake City, Utah Go....................................... 7.600% 06-15-06 234,562
----------
515,187
----------
FINANCIAL/LETTER OF CREDIT (4.5%)
250,000 Lexington County, S. Carolina (b)............................. 4.200% 06-01-07 250,000
----------
TOTAL MUNICIPAL BONDS (93.8%) (COST $4,846,713)............... $5,184,500
----------
<CAPTION>
Face Interest Market
Amount Repurchase Agreements Rate Maturity Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANKING (6.2%)
$340,000 Provident Bank (Cost $340,000)................................ 5.550% 07-03-95 $ 340,000
----------
TOTAL HOLDINGS (COST $5,186,713)(a)........................... $5,524,500
==========
<FN>
(a) Also represents cost for Federal income tax purposes.
(b) Weekly put option.
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 63
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
INCOME PORTFOLIO
<TABLE>
<CAPTION>
Face Interest Market
Amount Long-Term Notes Rate Maturity Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GOVERNMENT (32.0%)
$1,000,000 U.S. Treasury Notes ................................... 6.375% 08-15-02 $1,012,080
200,000 U.S. Treasury Notes ................................... 6.000% 10-15-99 200,078
1,000,000 U.S. Treasury Notes ................................... 7.375% 11-15-97 1,032,470
----------
2,244,628
----------
COMPUTER AND RELATED ....(3.7%)
250,000 IBM Corp. ............................................ 7.250% 11-01-02 259,688
----------
CONSUMER GOODS (3.4%)
250,000 RJR Nabisco, Inc. .................................... 7.625% 09-15-03 241,875
----------
FORESTRY AND PAPER PRODUCTS (3.7%)
250,000 ITT Rayonier, Inc. ................................... 7.500% 10-15-02 259,375
----------
HOTEL/LODGING (3.0%)
200,000 Marriott International ............................... 7.875% 04-15-05 210,750
----------
MEDICAL AND RELATED (6.7%)
250,000 Bergen Brunswig Corp. ................................ 7.375% 01-15-03 257,813
200,000 Manor Care, Inc. ..................................... 9.500% 11-15-02 214,250
----------
472,063
----------
OIL. ENERGY AND NATURAL GAS (I 5.4%)
250,000 Maxus Energy .......................................... 9.875% 10-15-02 240,311
200,000 POV America, Inc. .................................... 7,875% 08-01-03 181,750
300,000 Puget Power ........................................... 6.450% 04-11-05 300,021
100,000 Seagull Energy ........................................ 7,875% 08-01-03 95,625
250,000 Tenneco Inc. ......................................... 7,875% 10-01-02 263,750
----------
1,081,457
----------
RETAIL (1.3%)
100,000 Genesco, Inc. ........................................ 0.375% 02-01-03 87,500
----------
TEXTILES AND RELATED (3.6%)
250,000 Fruit of the Loom Corp. .............................. 7.875% 10-15-99 254,688
----------
TRANSPORTATION (3.5%)
250,000 Illinois Central Gulf Railroad ........................ 6.750% 05-15-03 244,375
----------
UTILITIES (3.8%)
250,000 Mississippi Power and Light ........................... 8.800% 04-01-05 267,188
----------
TOTAL LONG-TORM NOTES (80.1%) (COST $5,516,112) ....... $5,623,587
----------
<CAPTION>
Face Interest Market
Amount Short-Term Notes Rate Maturity Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCE (9.2%)
$120,000 Household Finance Corp. .............................. 5.950% 07-07-95 $119,881
310,000 General Motors Acceptance Corp. ...................... 6.020% 07-06-95 309,741
220,000 Sears Roebuck Acceptance Corp. ....................... 5.920% 07-05-95 219,855
----------
649,477
----------
TOTAL SHORT-TERM NOTES (9.2%) (COST $649.477) ......... $649,477
----------
<CAPTION>
Market
Shares Preferred Stock Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (5.5%)
8,000 GTE Delaware, 8.750% Series B ......................................................... $209,000
12,000 Westinghouse Electric, red, cum., conv. ............................................... 180,000
----------
389,000
----------
FINANCE (2.7%)
7,000 Connecticut Light, Power & Capital. 9.300% Series A ................................... 185,500
----------
OIL, ENERGY AND NATURAL GAS (2.5%)
6,500 Phillips Gas Co., 9.320%, Series A .................................................... 175,500
----------
TOTAL PREFERRED STOCK (I 0.7%) (COST $760.1 00) ....................................... $750,000
----------
TOTAL HOLDINGS (COST $6,925,689) (a) .................................................. $7,023,064
==========
<FN>
(a) Also represents cost for Federal Income tax purposes.
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 64
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
INCOME & GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Face Interest Market
Amount Long-Term Notes Rate Maturity Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMPUTER AND RELATED (3.3%)
$250,000 IBM Corp...................................................... 7.250% 11-01-02 $ 259,687
----------
FORESTRY AND PAPER PRODUCTS (3.3%)
250,000 ITT Rayonier, Inc............................................. 7.500% 10-15-02 259,375
----------
OIL, ENERGY AND NATURAL GAS (13.2%)
250,000 Maxus Energy.................................................. 9.875% 10-15-02 240,312
300,000 POV America, Inc.............................................. 7.875% 08-01-03 272,625
250,000 Tenneco, Inc.................................................. 7.875% 10-01-02 263,750
250,000 Union Texas Petroleum......................................... 8.250% 11-15-99 256,563
----------
1,033,250
----------
UTILITIES (2.7%)
200,000 Mississippi Power and Light................................... 8.800% 04-01-05 213,750
----------
TOTAL LONG-TERM NOTES (22.5%) (COST $1,742,494)............... $1,766,062
----------
<CAPTION>
Face Interest Market
Amount Short-Term Notes Rate Maturity Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCE (12.3%)
$175,000 General Motors Acceptance Corp................................ 6.020% 07-06-95 $ 174,854
175,000 Household Finance Corp........................................ 5.950% 07-07-95 174,827
375,000 Prudential Funding............................................ 5.980% 07-10-95 374,439
240,000 Sear Roebuck Acceptance Corp.................................. 5.920% 07-05-95 239,842
----------
963,962
----------
TOTAL SHORT-TERM NOTES (12.3%) (COST $963,962)................ $ 963,962
----------
<CAPTION>
Market
Shares Common Stock Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE (2.9%)
5,000 Allied Signal, Inc........................................................................ $ 222,500
----------
AUTOMOTIVE AND RELATED (5.3%)
1,650 Chrysler Corp............................................................................. 78,994
8,000 *Custom Chrome Inc......................................................................... 160,000
4,000 Magna Intemational, Inc................................................................... 176,500
----------
415,494
----------
BUSINESS SERVICES (5.1%)
2,500 First Data Corp........................................................................... 142,187
3,000 Reynolds and Reynolds..................................................................... 88,500
7,000 *Verifone, Inc............................................................................. 171,500
----------
402,187
----------
CHEMICALS (2.2%)
4,000 Learonalinc............................................................................... 84,500
3,000 OM Group Inc.............................................................................. 85,500
----------
170,000
----------
COMPUTER AND RELATED (12.7%)
3,500 Hewlett Packard Co........................................................................ 260,750
3,000 Intel Corp................................................................................ 189,938
2,000 *Microsoft Corp............................................................................ 180,750
5,000 *Novell Inc................................................................................ 99,687
2,000 Texas Instruments, Inc.................................................................... 267,759
----------
998,875
----------
(continued)
</TABLE>
33
<PAGE> 65
ONE Fund, Inc.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
INCOME & GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
Market
Shares Common Stock Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS (1.8%)
3,000 Panamerican Beverages, Inc................................................................ $ 90,000
1,600 Stanhome Inc.............................................................................. 52,800
----------
142,800
----------
ENTERTAINMENT AND LEISURE (2.0%)
5,000 Cedar Fair LP............................................................................. 159,375
----------
FINANCE (6.6%)
11,150 Bando McGlocklin Capital.................................................................. 133,800
15,000 *Benson Financial Corp..................................................................... 198,750
5,500 Community First Bankshare Inc............................................................. 93,500
5,000 Hanson Trust, PLC......................................................................... 88,125
----------
514,175
----------
INDUSTRIAL SERVICES (7.5%)
5,000 Minerals Technologies, Inc................................................................ 180,000
12,000 Regal Beloit Corp......................................................................... 186,000
5,000 York International........................................................................ 225,000
----------
591,000
----------
MEDICAL AND RELATED (2.9%)
5,000 Health Care Realty Trust.................................................................. 101,250
4,500 National Health Investors................................................................. 122,625
----------
223,875
----------
METALS & MINING (2.3%)
8,000 *Easco Inc................................................................................. 98,000
6,000 Greenbrier Companies Inc.................................................................. 78,750
----------
176,750
----------
OIL, ENERGY AND GAS (2.4%)
8,000 Camco International, Inc.................................................................. 187,000
----------
REAL ESTATE (1.3%)
8,000 Commercial Net Lease Realty............................................................... 105,000
----------
TEXTILES AND RELATED (1.9%)
8,000 Oxford Industries, Inc.................................................................... 146,000
----------
TOTAL COMMON STOCKS (56.9%) (COST $3,324,681)............................................. $4,455,031
----------
<CAPTION>
Market
Shares Preferred Stock Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (2.3%)
12,000 Westinghouse Electric, red., cum., conv................................................... $ 180,000
----------
REAL ESTATE (0.8%)
2,500 *Oasis Residential, 9.000% Series A........................................................ 63,125
----------
TRANSPORTATION (3.0%)
3,500 Burlington North Series A................................................................. 236,250
----------
UTILITIES (2.2%)
6,300 Phillips Gas Co., 9.320%, Series A........................................................ 170,100
----------
TOTAL PREFERRED STOCKS (8.3%) (COST $617,600)............................................. 649,475
----------
TOTAL HOLDINGS (COST $6,648,737) (a)...................................................... $7,834,530
==========
<FN>
(a) represents cost for Federal income tax purposes.
*Non-income producing securities.
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE> 66
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Face Interest Market
Amount Short-Term Notes Rate Maturity Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCE (8.6%)
$130,000 General Motors Acceptance Corp. ....................... 6.020% 07-06-95 $129,891
260,000 Prudential Funding Corp. .............................. 5.980% 07-10-95 259,611
230,000 Sears Roebuck Acceptance Corp. ........................ 5.920% 07-05-95 229,849
----------
619,351
----------
TOTAL SHORT-TERM NOTES (8.6%) (COST $619,351) ......... $619,351
----------
</TABLE>
<TABLE>
<CAPTION>
Market
Shares Common Stock Value
- ------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE (5.3%)
4,500 Allied Signal, Inc.................... $200,250
4,000 Rockwell International Corp. ......... 183,000
-----------
383,250
-----------
AUTOMOTIVE END RELATED (9.5%)
5,500 Arvin Industries, Inc. ............... 123,063
1,500 Chrysler Corp. ....................... 71,812
7,000 *Custom Chrome Inc. ................... 140,000
5,000 Magna International, Inc. ............ 220,625
7,000 Walbro Corp. ......................... 126,000
-----------
681,500
-----------
BANKING (1.4%)
10,500 *Franklin National Bank ............... 99,750
-----------
BUSINESS SERVICES (7.6%)
3,000 *Andros Inc. .......................... 52,500
2,500 First Data Corp. ..................... 142,187
3,000 *Medaphis Corp. ....................... 65,250
3,000 Reynolds & Reynolds .................. 88,500
8,000 *Verifone, Inc. ....................... 196,000
-----------
544,437
-----------
CHEMICALS (1.6%)
4,000 OM Group Inc. ........................ 114,000
-----------
COMPUTER AND RELATED (21.2%)
5,000 *Cisco Systems Inc. ................... 252,813
6,000 *Continental Circuits Corp. ........... 70,500
3,000 Hewlett Packard Co. .................. 223,500
2,000 Intel Corp. .......................... 126,625
0,000 *Madar Inc. ........................... 91,250
2,000 *Microsoft Corp. ...................... 180,750
5,000 *Netframe Systems...................... 26,250
5,000 *Novell, Inc. ......................... 99,687
4,000 *Pyxis Corp. .......................... 90,500
5,000 System Software Associates, Inc. ..... 100,000
2,000 Texas Instruments, Inc. .............. 267,750
-----------
1,529,625
-----------
CONSUMER GOODS (2.0%)
3,000 Panamerican Beverages Inc. ........... 90,000
1,600 Stanhome Inc. ........................ 52,800
-----------
142,800
-----------
DIVERSIFIED (1.2%)
6,900 Cluixote Corp. ....................... 86,250
-----------
DURABLE GOODS (1.5%)
8,500 *Mastac Inc. .......................... 111,563
-----------
ELECTRICAL EQUIPMENT (1.0%)
3,000 BMC Industries, Inc. ................. 75,375
-----------
<CAPTION>
Market
Shares Common Stock Value
- ------------------------------------------------------------------------------
<S> <C> <C>
Entertainment and Leisure (3.7%)
5,000 Cedar Fair............................ $159,375
7,000 *General Cable Plc .................... 104,125
-----------
263,500
-----------
FINANCE (3.8%)
14,000 *Benson Financial Corp. ............... 185,500
5,000 Community First Bankshare ............ 85,000
-----------
270,500
-----------
INDUSTRIAL SERVICES (6.4%)
4,500 Minerals Technologies, Inc. .......... 162,000
11,000 *Nuclear Support Services ............. 19,250
8,000 Regal Beloit Corp. ................... 124,000
3,500 York International ................... 157,500
-----------
462,750
-----------
MACHINERY (3.4%)
5,000 *Bridgeport Machines Inc. ............. 85,000
2,900 Kysor Industrial Corp. ............... 60,175
3,000 Trinity Industries, Inc. ............. 99,750
-----------
244,925
-----------
MEDICAL AND RELATED (5.8%)
4,400 Columbia HCA Healthcare Corp. ........ 190,300
1,000 *Foundation Health Corp. .............. 27,000
7,000 *Heart Technology Inc. ................ 135,625
2,000 *Humana Inc. .......................... 35,250
1,000 U.S. Healthcare, Inc. ................ 30,625
-----------
418,800
-----------
METAL FABRICATING (2.6%)
10,000 Amcast Industrial Corp. .............. 190,000
-----------
METALS & MINING (2.4%)
7,500 *Easco Inc. ........................... 91,875
6,000 Grennbrier Co., Inc. ................. 78,750
-----------
170,625
-----------
OIL, ENERGY AND NATURAL GAS (3.2)
6,000 Camco International, Inc. ............ 140,250
6,000 *Louis Dreyfus Natural Gas ............ 88,500
-----------
228,750
-----------
RETAIL (0.7%)
2,500 *Regis Corp. .......................... 48,125
-----------
TEXTILES AND RELATED (2.0%)
8,000 Oxford Industries, Inc. .............. 146,000
-----------
TRANSPORTATION (1.6%)
5,000 American President Companies, Ltd. ... 118,750
-----------
TOTAL COMMON STOCKS (87.9%)
(COST $4,981,674) ................... $ 6,331,275
===========
(continued)
</TABLE>
35
<PAGE> 67
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1996
GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
Market
Shares Preferred Stock Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (1.7%)
8,000 Westinghouse Electric Co., red., cum., conv............................................... $ 120,000
----------
REAL ESTATE (0.4%)
1,250 *Oasis Residential, 9.000% Series.......................................................... 31,563
----------
TRANSPORTATION (1.4%)
1,500 Burlington Northern, Series A............................................................. 101,250
----------
TOTAL PREFERRED STOCKS (3.5%)
(COST $254,650)......................................................................... 252,813
----------
TOTAL HOLDINGS
(COST $5,856,675) (a)................................................................... $7,203,439
==========
<FN>
(a) Also represents cost for Federal income tax purposes.
*Non-income producing securities.
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE> 68
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
SMALL CAP PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Common Stock Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE AND RELATED (4.6%)
3,500 *Custom Chrome Inc......................................................................... $ 70,000
6,000 Defiance, Inc............................................................................. 39,000
2,000 Walbro Corp............................................................................... 36,000
----------
145,000
----------
BANKING (1.5%)
5,150 *Franklin National Bank.................................................................... 48,925
----------
BUSINESS SERVICES (8.4%)
3,500 *Andros, Inc............................................................................... 61,250
3,000 Advo Inc.................................................................................. 56,625
2,000 *Medaphis Corp............................................................................. 43,500
2,000 Pittston Services......................................................................... 48,000
2,000 Reynolds & Reynolds....................................................................... 59,000
----------
268,375
----------
CHEMICALS (3.8%)
3,000 Learonalinc............................................................................... 63,375
2,000 OM Group Inc.. ........................................................................... 57,000
----------
120,375
----------
CONSUMER PRODUCTS (2.5%)
800 Stanhome Inc.............................................................................. 26,400
4,000 Unifirst Corp ............................................................................ 54,000
----------
80,400
----------
COMPUTER AND RELATED (6.4%)
6,000 *Continental Circuits Corp................................................................. 70,500
5,000 *Ikos Systems Inc.......................................................................... 45,625
2,000 *Medar Inc................................................................................. 18,250
3,000 *Pyxis Corp................................................................................ 67,875
----------
202,250
----------
DURABLE GOODS (3.2%)
4,500 *Mastec Inc................................................................................ 59,063
3,000 Myers Industries ......................................................................... 43,125
----------
102,188
----------
ELECTRICAL EQUIPMENT (4.1%)
3,500 BMC Industries Inc........................................................................ 87,938
2,000 Federal Signal Corp....................................................................... 43,250
----------
131,188
----------
ENTERTAINMENT AND LEISURE (1.4%)
3,000 *General Cable Plc ........................................................................ 44,625
----------
FINANCE (5.7%)
3,850 Bando McGlocklin Capital.................................................................. 46,200
5,000 *Benson Financial Corp..................................................................... 66,250
4,000 Community First Bankshare................................................................. 68,000
----------
180,450
----------
MACHINERY (2.7%)
2,000 *Bridgeport Machines Inc................................................................... 34,000
2,500 Kysor Industrial Corp .................................................................... 51,875
----------
85,875
----------
(continued)
</TABLE>
37
<PAGE> 69
ONE Fund, Inc.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
SMALL CAP PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
Market
Shares Common Stock Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MEDICAL AND RELATED (4.9%)
2,000 Healthcare Realty Trust................................................................... $ 40,500
3,000 *Heart Technology Inc...................................................................... 58,125
4,000 *ICU Medical............................................................................... 56,500
----------
155,125
----------
METAL AND MINING (4.7%)
2,500 Amcast Industrial Corp.................................................................... 47,500
4,500 *Easco Inc................................................................................. 55,125
3,500 Greenbrier Co., Inc....................................................................... 45,937
----------
148,562
----------
OIL, ENERGY AND NATURAL GAS (3.7%)
2,500 Camco International....................................................................... 58,437
4,000 *Louis Dreyfus Natural Gas................................................................. 59,000
----------
117,437
----------
REAL ESTATE (1.2%)
3,000 Commercial Net Lease Realty............................................................... 39,375
----------
RETAIL (2.1 %)
3,500 *Regis Corp................................................................................ 67,375
----------
MISCELLANEOUS (1.5%)
3,500 *Offshore Logistics Inc.................................................................... 49,000
----------
TOTAL COMMON STOCK (62.4%) (COST $1,823,429).............................................. $1,986,525
----------
<CAPTION>
Market
Shares Preferred Stock Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE (1.0%)
1,250 *Oasis Residential 9.000%, Series A........................................................ $ 31,563
----------
TOTAL PREFERRED STOCK (1.0%)
(COST $31,250)............................................................................. $ 31,563
----------
<CAPTION>
Market
Amount Repurchase Agreement Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANKING (36.6%)
$1,165,000 Provident Bank, 5.750% due 07-03-95 (Cost $1,165,000)...................................... $1,165,000
----------
TOTAL HOLDINGS (COST $3,019,679)........................................................... $3,183,088
==========
<FN>
(a) Also represents cost for Federal income tax purposes.
*Non-income producing securities.
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE> 70
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30,1995
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
Market Market
Shares Common and Preferred Stock Value Shares Common and Preferred Stock Value
- -------------------------------------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JAPAN (10.2%) GERMANY (5.0%)
1,500 Hitachi Ltd. AOR (11).................. $ 150,376 1,000 Bayer AG (7))........................... $ 248,608
3,000 Chofu Seisakusbo (9)................... 72,960 500 Buderus AG (5).......................... 245,931
10,000 Fuji Photo Film Co. Ltd. (9)........... 237,295 50 SAP AG Pfd. (8)......................... 63,399
20,000 Iino Kaiun Kaisha (5).................. 110,266 -----------
4,000 Ito-Yokado Co. Ltd. (27)............... 211,086 557,938
20,000 Nisshinbo Industries (9)............... 157,960 -----------
6,000 Shimano Inc. (9)....................... 104,127 SWEDEN (3.7%)
500 Toho Co. (19).......................... 83,231 7,500 *Assi Doman AB (14)...................... 161,470
---------- 18,000 Bylock & Nordsjokrakt AB 'B' (31)....... 143,620
1,127,301 7,500 Orrefors Kosta Bode 'Free' (9).......... 101,628
---------- -----------
FRANCE (10.1%) 406,718
1,850 Emin Leydier (23)....................... 234,497 -----------
3,000 Gaumont SA (19)......................... 158,547 INDONESIA (3.5%)
2,000 Legrand ADP (10)........................ 198,184 5,500 Freeport McMoran Pfd. 'C' (21).......... 183,563
1,000 Nicolas Schlumberger et Cie (18)........ 196,326 10,500 Freeport McMoRan Pfd. 'D' (21).......... 204,750
1,000 Promodes Cl (27)........................ 175,475 -----------
100 Sucriere de Pithiviers-le-Vieil (1)..... 42,734 388,313
350 Taititinger Cl (13)..................... 101,157 -----------
---------- HONG KONG (3.5%)
1,106,920 500,000 CDL Hotels lnf I Ltd. (16).............. 243,936
---------- 150,000 Shaw Brothers Hong Kong Ltd. (19)....... 140,545
SWITZERLAND (9.2%) -----------
50 Bank for International Settlements (3).. 441,362 384,481
50 Lindt & Sprungli AG p.c. (9)............ 69,574 -----------
1,250 Safra Republic Holdings SA (3).......... 106,875 SINGAPORE (3.2%)
150 Schindler AG pc (5)..................... 145,454 65,000 Clipsal Industries Ltd. (10)............ 150,150
500 SIKA Finanz AG (7)...................... 158,717 15,000 Singapore Bus Service Ltd. (31)......... 104,689
1 Vetropack Holdings AG Bearer (22)....... 3,261 40,000 Times Publishing Ltd. (24).............. 99,069
300 Vetropack Holdings AG pc (22)........... 92,620 -----------
---------- 353,908
1,017,863 -----------
---------- UNITED KINGDOM (2.5%)
CANADA (7.3%) 25,000 Blenheim Group plc (19)................. 102,048
10,000 Canadian Pacific Ltd. (14).............. 173,751 25,000 Royal Doukon pic (9).................... 104,041
7,500 Dofasco, Inc. (14)...................... 94,245 10,000 Scottish Television plc (19)............ 68,244
15,000 Noranda. Inc. (26)...................... 295,028 -----------
55,000 Redstone Resources, Inc. (1)............ 148,242 274,333
12,000 Le Groupe Videotron, Ltd. (1)........... 98,342 -----------
---------- FINLAND (1.7%)
809,608 45,000 *Tampelia Oy AB ((5)..................... 113,817
---------- 2,500 Vaisala Oy A (5)........................ 69,086
LATIN AMERICA (6.5%) -----------
30,000 Antofagasta Holding pic (20)............ 154,507 182,903
5,500 Bladex (3).............................. 182,188 -----------
145,000 Ledesma SA (1).......................... 166,791 DENMARK (1.5%)
300,000 Siderca S.A.I.C. (12)................... 213,053 3,500 Cadsberg International A/S 'B' (9)...... 163,439
---------- -----------
716,539 SOUTH AFRICA (1.3%)
---------- 10,500 Anglo American Platinum Corp. (21)...... 75,088
NETHERLANDS (6.2%) 7,500 Omni Media Corp. (19)................... 72,199
3,500 German City Estates NV (26)............. 60,356 -----------
3,500 Apothekers Cooperatie OPG U.A. (17)..... 87,031 147,287
4,500 Randstad Holding NV (28)................ 318,543 -----------
5,000 Philips NV AOR (1 1).................... 213,750 MEXICO (1.3%)
---------- 50,000 Industries Penoles S.A. de C.V (20)..... 147,881
679,680 -----------
---------- NORWAY (1.1%)
NEW ZEALAND (5.3%) 10,000 Schibsted AS (19)....................... 126,633
100,549 Carter Hok Harvey Ltd. (14)............. 245,923 -----------
62,500 Evergreen Forests Ltd. (14)............. 28,818 ISRAEL (1.0%)
130,000 Shortland Properties, Ltd. (26)......... 73,841 35,000 Israel Land Development Co. Ltd. (33)... 104,975
212,600 Tasman Agriculture Ltd. (1)............. 146,332 -----------
135,000 Wrightson Ltd. (1)...................... 92,920 TURKEY (0.7%)
---------- 2,662,640 Medya Holdings SA (24).................. 81,297
587,834 -----------
---------- AUSTRALIA (0.7%)
45,000 Eltin Ltd. (21)......................... 77,996
-----------
MISCELLANEOUS (5.8%)
12,000 North European Oil Royalty Trust (12)... 162,000
10,000 Minorco ADR (33)........................ 247,500
100,000 Lonrho pic (33)......................... 235,986
-----------
645,486
-----------
TOTAL COMMON & PREFERRED STOCK
(91.3%) (COST $9,327,381) 10,089,333
-----------
(continued)
</TABLE>
39
<PAGE> 71
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
INTERNATIONAL PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
Face Interest Market
Amount Non-Convertible Bonds Rate Maturity Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. DOLLAR (1.4%)
$100,000 Federal Republic of Brazil (15) ....................... 7.250% 04-15-06 $59,875
150,000 Republic of Poland (15) ............................... 3.250% 10-27-14 90,187
----------
TOTAL MON-CONVERTIBLE BONDS (COST $148,737) (1.4%) .... $150,062
----------
<CAPTION>
Face Interest Market
Amount Convertible Subordinated Debentures Rate Maturity Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. DENOR CONVERTIBLE SUBORDINATED DEBENTURES (5.6%)
$150,000 Cheil Foods & Chemicals Co. (9) ....................... 3.000% 12-31-06 $177,750
100,000 PT lnti lndorayon Utama (23) .......................... 5.500% 10-01-02 118,750
75,000 Ssangyong Cement Co. (6) .............................. 3.000% 12-31-05 87,937
50,000 PT Pabrik Kertas Tiiwi Kimia (23) ..................... 7.250% 04-12-01 47,750
100,000 Tubos de Acero de Mexico (12) ......................... 7.500% 06-12-97 76,500
100,000 Tung Ho Steel Corp. (29) .............................. 4.000% 07-26-01 118,687
----------
627,374
----------
MEN-U.S. DOLLAR SUBORDINATED DEBSOURES (1.7%)
170,000 NZ$ Shortland Properties Inc. (26) ....................... 7.500% 12-31-98 97,130
7,000,000 FF$ Nippon Yusen (31) .................................... 2.000% 09-29-00 85,201
----------
182,331
----------
TOTAL CONVERTIBLE SUBORDINATED DEBENTURES (7.3%)
(Cost $769,503).................................... $809,705
----------
TOTAL HOLDIOP (COST $10,245,621) (a) ................ $11,049,100
----------
<FN>
(a) Also represents cost for Federal tax purposes.
*Non-income producing securities.
FOREIGN CURRENCIES
NZ$ - New Zealand Dollar
FF$ - French Franc
INDUSTRY CLASSIFICATIONS
<CAPTION>
<S> <C>
(1) Agriculture (17) Health Care
(2) Automotive (18) Machinery
(3) Bank (19) Media
(4) Building Products (20) Metals (non-ferrous)
(5) Capital Goods (21) Mining
(6) Cement (22) Packaging
(7) Chemicals (23) Paper
(8) Computer Products (24) Publishing
(9) Consumer Products (25) Rail Equipment
(10) Electrical Products (26) Real Estate
(11) Electronics (27) Retailing
(12) Energy & Oil (28) Services
(13) Food & Beverages (29) Steel
(14) Forest Products (30) Textile
(15) Governmental (31) Transportation
(16) Hotels (32) Utilities
(33) Miscellaneous
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE> 72
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
GLOBAL CONTRARIAN PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Common and Preferred Stock Value
- ------------------------------------------------------------------------------
<S> <C> <C>
U.S. STOCKS
CHEMICALS (1.6%)
5,000 Lawter International Inc. ............ $60,000
-----------
COMOMER PRODUCTS (7.8%)
2,000 Allen Organ Co. ...................... 89,000
2,500 Dole Foods Co. Inc. .................. 72,813
10,000 Interco Inc. ......................... 58,750
5,000 Unifirst Corp. ....................... 67,500
-----------
288,063
-----------
ELECTRONICS (2.0%)
5,000 Zero Corp. ........................... 75,000
-----------
FINANCE (2.7%)
7,000 *East Texas Financial Services ........ 98,000
-----------
FORAM PRODUCTS (4.4%)
500 Georgia Pacific Corp. ................ 43,375
2,000 Greif Brothers Corp. ................. 46,750
2,000 Rayonier Inc. ........................ 71,000
-----------
161,125
-----------
MEDIA (3.4%)
8,000 Integrity Music, Inc. ................ 37,000
12,000 *Plasti Line, Inc. .................... 90,000
-----------
127,000
-----------
METAL & MINERALS (1.4%)
1,000 Reynolds Metal Co. ................... 51,750
-----------
OIL AND ENERGY (7.6%)
5,000 *Enterra Corp. ........................ 105,000
6,500 North European Oil Royalty Trust ..... 87,750
1,300 Rochester & Pittsburgh Coal Co. ...... 37,700
5,000 *Sithe Energies, Inc. ................. 48,750
-----------
279,200
-----------
REAL ESTATE (3.7%)
3,000 Alico Inc. ........................... 53,250
2,000 Catellus Development Conv. Pfd. ...... 82,500
-----------
135,750
-----------
TECHNOLOGY (0.6%)
30,000 *Anacomp, Inc. ........................ 22,500
-----------
UTILITIES (1.2%)
2,000 Montana Power Co. .................... 46,000
-----------
TOTAL U.S. (36.4%) ................... 1,344,388
-----------
FOREIGN
FRANCE (6.5%)
5 Bank for International Settlements (3) 37,676
500 Comptoir Lyon Alemand (33) ........... 41,805
1,100 Gaumont SA (19) ...................... 58,134
500 Logrand ADP (10) ..................... 49,546
250 Nicolas Schiumberger et Cie (18) ..... 49,082
-----------
236,243
-----------
SWITZERLAND (5.0%)
5 Bank for International Settlements (3) 44,136
100 Merck AG (7) ......................... 77,402
65 Schindler Holding AG (5) ............. 63,030
------------
184,568
------------
<CAPTION>
Market
Shares Common and Preferred Stock Value
- ------------------------------------------------------------------------------
<S> <C> <C>
INDONESIA (4.9%)
2,500 Freeport McMoran Pfd. 'O' (21)........ $48,750
4,000 Freeport McMoran Pfd. 'C' (21)........ 133,500
------------
182,250
------------
LATIN AMERICA (4.8%)
10,000 Antofagasta Holdings plc (20)......... 51,503
1,500 Bladex (3)............................ 49,688
65,000 Ledesma SA (1)........................ 74,769
------------
175,960
------------
GERMANY (4.6%)
250 Bayer AG (7).......................... 62,152
100 Buderus AG (5)........................ 49,187
100 Axel Springer Veriag AG (19).......... 56,420
------------
167,759
------------
NEW ZEALAND (4.5%)
25,000 Carter Holt Harvey Ltd. (14).......... 61,145
100,000 Tasman Agriculture Ltd. (1)........... 68,830
50,000 Wrightson Ltd. (1).................... 34,414
------------
164,389
------------
HONG KONG (2.6%)
100,000 CDL Hotels lnf I Ltd. (16)............ 48,787
50,000 Shaw Brothers Hong Kong Ltd. (19)..... 46,848
------------
95,635
------------
SWEDEN (2.3%)
5,000 Bylock & Nordsjofrakt AB (31)......... 39,894
2,500 Terra Mining AB (21).................. 45,741
------------
85,635
------------
SINGAPORE (1.9%)
10,000 Singapore Bus Service Ltd. (31)....... 69,792
------------
JAPAN (1.6%)
2,500 Fuji Photo Film Co. Ltd. (9).......... 59,323
------------
CANADA (1.6%)
3,000 Noranda, Inc. (20).................... 59,006
------------
BELGIUM (1.4%)
55 Socfinasia 33)........................ 52,212
------------
AUSTRALIA (1.2%)
30,000 Badile Corp. Ltd. (1)................. 44,753
------------
NETHERLANDS (1.2%)
2,500 German City Estates NV (26)........... 43,111
------------
TURKEY (0.8%)
1,000,000 Medya Holdings SA (24) ............... 29,967
------------
ISRAEL (0.8%)
10,000 Israel Land Development Co. (33) ...... 29,992
------------
MISCELLANEOUS (1.6%)
25,000 Lonrho plc (33)........................ 58,996
------------
TOTAL FOREIGN (47.3%).................. 1,739,591
------------
TOTAL COMMON & PREFERRED STOCK
(83.7%) (COST $3,062,193)............ $ 3,083,979
------------
(continued)
</TABLE>
41
<PAGE> 73
ONE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
GLOBAL CONTRARIAN PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
Face Interest Market
Amount Non-Convertible Bonds Rate Maturity Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. DOLLAR (10.3%)
$ 50,000 Aracruz Cellulose SA (14) .............................. 9.000% 07-22-98 $49,000
50,000 Cemex SA (6) ........................................... 10.000% 11-05-99 43,812
50,000 Noble Drilling (12) .................................... 9.250% 10-01-03 51,125
300,000 Republic of Argentina FRB (15) ......................... 6.500% 03-31-05 184,875
50,000 PT Pabrik Kertas Tjiwi Kimia (14) ...................... 13.250% 08-01-01 52,625
----------
TOTAL NON-CONVERTIBLE BONDS (COST $384,440) (10.3%) .... $381,437
----------
<CAPTION>
Face Interest Market
Amount Convertible Subordinated Debentures Rate Maturity Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. DOLLAR (3.5%)
$ 50,000 Riverwood International Corp. (14) ..................... 6.750% 09-15-03 $68,000
50,000 Tung Ho Steel Corp. (29) ............................... 4.000% 07-26-01 59,343
----------
127,343
----------
NON U.S. DOLLAR (2.5%)
100,000 NZ$ Shortland Properties, Inc. (16) ........................ 7.500% 12-31-98 57,135
260,000 FF$ Immobilier Hoteliere (26) .............................. 5.000% 01-01-01 35,611
----------
92,746
----------
TOTAL CONVERTIBLE SUBORDINATED DEBENTURES (6.0%)
(COST $200,153) ..................................... $220,089
----------
TOTAL HOLDINGS (COST $3,646,786) (a) ................... $3,685,505
==========
<FN>
(a) Also represents cost for Federal tax purposes.
*Non-income producing securities.
FOREIGN CURRENCIES
NZ$ - New Zealand Dollar
FF$ - French Franc
</TABLE>
<TABLE>
<CAPTION>
INDUSTRY CLASSIFICATIONS
<S> <C>
(1) Agriculture (17) Health Care
(2) Automotive (18) Machinery
(3) Bank (19) Media
(4) Building Products (20) Metals (non-ferrous)
(5) Capital Goods (21) Mining
(6) Cement (22) Packaging
(7) Chemicals (23) Paper
(8) Computer Products (24) Publishing
(9) Consumer Products (25) Rail Equipment
(10) Electrical Products (26) Real Estate
(11) Electronics (27) Retailing
(12) Energy & Oil (28) Services
(13) Food & Beverages (29) Steel
(14) Forest Products (30) Textile
(15) Governmental (31) Transportation
(16) Hotels (32) Utilities
(33) Miscellaneous
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE> 74
ONE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
(1) Basis of Presentation and Significant Accounting Policies
ONE Fund, Inc. (Fund) is registered under the Investment Company Act of
1940 as amended, as a diversified open-end management investment company.
The following is a summary of significant accounting policies:
Investments in the Money Market Portfolio are valued at amortized cost in
accordance with Rule 2a-7 which approximates market value. For the Money
Market, Income and the Tax-Free Income Portfolios, all of the undistributed
net income is accrued as daily dividends to shareholders of record
immediately before each computation of the net asset value of these
portfolios. Dividends (representing net investment income) will normally be
paid monthly to the shareholders of these three portfolios. Distributions
arising from net investment income from the remaining portfolios are
declared and paid to shareholders quarterly and are recorded on the
ex-dividend date. Accumulated net realized capital gains are distributed to
shareholders at least once a year.
For all other portfolios, securities which are traded on U.S. and foreign
stock exchanges or in the over-the-counter markets are valued at the last
sale price on the day the securities are being valued or, lacking any
sales, at the mean between the closing bid and asked prices. Short-term
investments (investments with maturities of 60 days or less) are valued at
amortized cost and fixed income securities are valued by using market
quotations, or independent pricing services which use prices provided by
market makers or estimates of market values obtained from yield data
relating to instruments or securities with similar characteristics. All
investments quoted in foreign currencies are valued daily in U.S. dollars
on the basis of the foreign currency exchange rates prevailing at the time
of such valuation.
Foreign currency exchange rates are generally determined prior to the close
of the New York Stock Exchange (NYSE). Occasionally, events affecting the
value of foreign investments and such exchange rates occur between the time
at which they are determined and the close of the NYSE, which in the case
of the International and Global Contrarian Portfolios, would not be
reflected in the computation of the portfolios' net asset values. If
events materially affecting the value of such securities or currency
exchange rates occurred during such time period, the securities are valued
at their fair value as determined in good faith by or under the direction
of the Fund's Board of Directors.
Each portfolio may acquire repurchase agreements from member banks of the
Federal Reserve System which ONIMCO, the investment advisor to the Fund
deems creditworthy under guidelines approved by the Board of Directors,
subject to the seller's agreement to repurchase such securities at a
mutually agreed upon date and price. The repurchase price generally equals
the price paid by the portfolio 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,
is required to maintain as collateral for the repurchase transaction
securities in which the portfolio has a perfected security interest with a
value not less than 100% of the repurchase price (including accrued
interest). Securities subject to repurchase agreements are held by the
Fund's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to
be loans by the portfolio under the 1940 Act.
In connection with purchases and sales of securities denominated in foreign
currencies, the Fund may enter into forward foreign currency exchange
contracts (forward contract). A forward contract is a commitment to
purchase or sell a foreign currency at a future date, at a negotiated rate.
Additionally, the Fund may enter into such contracts to hedge certain other
foreign currency denominated investments. These contracts are recorded at
market value, and the related realized and unrealized foreign exchange
gains and losses are included in the statement of operations. In the event
that counterparties fail to settle these currency contracts or the related
foreign security trades, the Fund could be exposed to foreign currency
fluctuations.
Securities transactions are recorded on a trade date basis. Dividend income
is recognized on the ex-dividend date (except in the case of the
International and Global Contrarian Portfolios in which dividends are
recorded as soon after the exdividend date as the fund becomes aware of
such dividends), and interest income is accrued daily as earned. Net
realized gain or loss on investments and foreign exchange transactions are
determined on the basis of identified cost.
(continued)
43
<PAGE> 75
ONE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
The books and records of the International and Global Contrarian Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(1) market value of investments, other assets and liabilities -- at exchange
rates prevailing at the end of the period.
(2) purchases and sales of investments, income and expenses -- at the rates
of exchange prevailing on the respective dates of such transactions.
Although the net assets and the market value of the portfolios are presented at
the foreign exchange rates at the end of the period, the portfolios do not
generally isolate the effect of fluctuations in foreign exchange rates from the
effect of changes in the market price of the investments. However, the
portfolios do isolate the effect of fluctuations in foreign exchange rates when
determining the gain or loss upon sale or maturity of foreign-currency
denominated debt obligations pursuant to Federal income tax regulations. Foreign
investment and currency transactions may involve certain considerations and
risks not typically associated with investing in U.S. companies and the U.S.
Government. These risks, including re-evaluation of currency and future adverse
political and economic developments, could cause investments and their markets
to be less liquid and prices more volatile than those of comparable U.S.
companies and the U.S. Government.
It is the policy of the Fund to distribute to its shareholders substantially all
of its taxable income, thus gaining relief from Federal income taxes under
provisions of current tax regulations applicable to investment companies of this
type. Accordingly, no provision for Federal income taxes has been made.
For Federal Income Tax purposes, the Income Portfolio has a net capital loss of
$61,593 at June 30, 1995, which if not offset by subsequent capital gains, will
expire June 30, 2003. The Board of Directors does not intend to authorize a
distribution of any net realized gain for the portfolio until the capital loss
carryover has been offset or expires.
The gross unrealized appreciation and depreciation of investments in each
portfolio as of June 30, 1995 were as follows:
<TABLE>
<CAPTION>
Portfolio
--------------------------------------------------------------------------------------------------------
Money Tax-Free Income Small Global
Market Income Income & Growth Growth Cap International Contrarian
- ------------------------------------------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation....... $ -- $338,400 $191,988 $1,327,032 $1,622,574 $200,028 $1,601,463 $244,670
Depreciation....... -- 613 94,613 141,239 274,810 36,619 797,984 205,951
------ -------- -------- ---------- ---------- -------- ---------- --------
Net unrealized
appreciation....... $ -- $337,787 $ 97,375 $1,185,793 $1,347,764 $163,409 $ 803,479 $ 38,719
====== ======== ======== ========== ========== ======== ========== ========
</TABLE>
The Money Market, Income, Income & Growth and Growth Portfolios were organized
on May 12, 1992 with the commencement of operations on August 18, 1992. The
International Portfolio was organized on March 18, 1993 with commencement of
operations on April 30, 1993. The Small Cap, Tax-Free Income and Global
Contrarian Portfolios were organized on September 15, 1994 with the commencement
of operations on November 1, 1994. Organizational expenses of approximately
$68,000 were incurred with the start up of the original four portfolios, $11,590
with the start up of the International Portfolio and $7,813 with the Small Cap,
Tax-Free Income and Global Contrarian Portfolios. Such expenses will be charged
against operations on a straight line basis over a period of 60 months from the
commencement of operations of the respective portfolios. The Fund's sponsoring
entity, Ohio National Life Insurance Company (ONLIC), has agreed that it shall
continue to hold the initial shares purchased by it for at least as long as
unamortized deferred organizational expenses continue to be carried as an asset
of the Fund. The initial shares purchased were 25,000 shares of the Money Market
Portfolio, 2,500 shares each of the Income, Income & Growth and Growth
Portfolios and 100 shares of the International, Small Cap, Tax-Free Income and
Global Contrarian Portfolios. ONLIC and its affiliates have also purchased
additional shares of each portfolio and as of June 30, 1995 the additional
shares owned were as follows: 11,019,266 shares of the Money Market Portfolio,
517,054 shares of the Tax-Free Income Portfolio, 465,654 shares of the Income
Portfolio, 390,153 shares of the Income & Growth Portfolio, 280,760 shares of
the Growth Portfolio, 204,907 shares of the Small Cap Portfolio and 257,213
shares of the Global Contrarian Portfolio.
(continued)
44
<PAGE> 76
ONE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30,1995
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
securities) from July 1, 1994 to June 30, 1995 were as follows:
<TABLE>
<CAPTION>
PORTFOLIO
------------------------------------------------------------------------------------------------------
MONEY TAX-FREE INCOME SMALL GLOBAL
MARKET INCOME INCOME & GROWTH GROWTH CAP INTERNATIONAL CONTRARIAN
------ ----------- ----------- ----------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common and Preferred
Stocks and Bonds:
Purchases .......... $ - $ 4,773,313 $ 2,114,755 $ 1,627,317 $ 2,157,326 $ 1,924,678 $ 4,516,763 $ 3,828,088
Sales .............. - - 188,125 2,055,761 1,323,274 79,797 3,846,962 224,687
</TABLE>
(3) INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has an investment advisory agreement with O.N. Investment
Management Company (ONIMCO), a wholly owned subsidiary of ONLIC, under
the terms of which ONIMCO provides portfolio management and investment
advice to the Fund and administers its other affairs, subject to the
supervision of the Fund's Board of Directors. As compensation for its
services, the Fund pays a fee based on the average daily net asset value
of each of the portfolio's assets.
For assets held in the Money Market, Tax-Free Income, Income, Income &
Growth, Growth and Small Cap Portfolios, the fees are as follows:
<TABLE>
<CAPTION>
PORTFOLIO
------------------------------------------------------------------------
MONEY TAX-FREE INCOME SMALL
MARKET INCOME INCOME & GROWTH GROWTH CAP
------ ------ ------ -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
First $100 mil ................ 0.30% 0.60% 0.50% 0.50% 0.50% 0.65%
Next $150 mil ................. 0.25% 0.50% 0.40% 0.40% 0.40% 0.55%
Over $250 mil ................. 0.20% 0.40% 0.30% 0.30% 0.30% 0.45%
</TABLE>
For the International and Global Contrarian Portfolios, ONIMCO is paid a
fee at an annual rate of 0.90% of the Portfolios' average daily
net asset values. ONIMCO then pays Societe Generale Asset Management
Corporation (SGAM) a fee at an annual rate of 0.75% of the average daily
net asset value for directing the investment and reinvestment of the
portfolios' assets pursuant to sub-advisory agreements between ONIMCO and
SGAM dated March 18, 1993 and September 15, 1994. Currently, the entire
management fee for the Money Market portfolio and one-half of the
management fees for the Tax-Free Income, Income, Income & Growth, Growth
and Small Cap Portfolios are being waived by ONIMCO. Management fees
waived by ONIMCO for the year ended June 30, 1995 were $40,669 ($.003 per
share), $10,568 ($.021 per share), $14,074 ($.023 per share), $18,482
($.027 per share) $15,546 ($.031 per share) and $5,395 ($.021 per share)
for the Money Market, Tax-Free Income, Income, Income & Growth, Growth
and Small Cap Portfolios, respectively. Under the agreement between the
Fund and ONIMCO, ONIMCO has agreed to reimburse the portfolios for
expenses, other than the advisory fees, 12b-1 fees, taxes and interest,
in excess of 1 % of their average daily net assets. For the year ended
June 30, 1995 the reimbursement to the Global Contrarian Portfolio was
$10,732.
The Fund's transfer agent and dividend paying agent is The
Provident Bank, One East Fourth Street, Cincinnati, Ohio. The
Provident Bank is also the custodian for all Portfolios other than the
International and Global Contrarian Portfolios. The custodian for the
International and Global Contrarian Portfolios is Investors Fiduciary
Trust Company, 127 West Tenth Street, Kansas City, Missouri.
International and Global Contrarian Portfolio assets held outside the
United States are held under subcustodial agreements between the
depository and Investors Fiduciary Trust Company, subject to approval by
the Board of Directors of the Fund.
Certain directors and officers of the Fund are also directors and
officers of ONIMCO and ONLIC.
(continued)
45
<PAGE> 77
ONE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(4) CAPITAL SHARES TRANSACTIONS
Capital share transactions for the years ended June 30, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
PORTFOLIO
-----------------------------------------------------------------------------------------
MONEY TAX-FREE INCOME &
MARKET INCOME (a) INCOME & GROWTH
-----------------------------------------------------------------------------------------
1995 1994 1995 1995 1994 1995 1994
--------- ---------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital shares issued
on sales ............... 9,788,975 2,500,562 516,664 218,237 52,794 67,968 230,727
Capital shares issued on
reinvested dividends .... 655,189 586,275 14,929 39,464 35,125 57,059 23,093
Capital shares
redeemed ............... 8,595,276 12,097,085 1,120 17,716 145,324 160,244 158,918
<CAPTION>
-----------------------------------------------------------------------------
PORTFOLIO
-----------------------------------------------------------------------------
SMALL GLOBAL
GROWTH CAP(a) INTERNATIONAL CENTRARIAN(a)
-------------------- ------------- ---------------------- ----------------
1995 1994 1995 1995 1994 1995
--------- --------- ------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued
on sales ............... 121,570 180,465 278,900 469,800 458,089 380,856
Capital shares issued on
reinvested dividends .... 19,094 8,884 4,622 75,358 6,944 10,626
Capital shares
redeemed ............... 63,769 101,938 9,130 397,410 8,251 6,072
<FN>
(a) Commenced operations November 1, 1994
</TABLE>
Sales charges imposed on capital shares sold by ONESCO, the Fund's
principal underwriter, a wholly owned subsidiary of ONLIC, for the
year ended June 30, 1995 were approximnately $5,000, $40,000, $35,000,
$75,000, $35,000, $300,000 and $110,000 for the Tax-Free Income,
Income, Income & Growth, Growth, Small Cap, International and Global
Contrarian Portfolios, respectively.
The Fund is authorized to issue 10 billion of its capital shares.
The Money Market Portfolio has been allocated 200 million shares and the
other seven portfolios have been allocated 100 million shares each. The
remaining shares have not been allocated.
(5) DISTRIBUTION PLAN
The Fund has a distribution agreement (12b-I Plan) with ONESCO under
the terms of which the Fund pays a fee for shareholders services and
sales of ONE Fund shares based on the average daily net assets of the
portfolios. For those assets not in the Money Market Portfolio, the fee
is at an annual rate of 0.25% of average net assets and can increase to
0.30% for sales representatives who service $5 million or more of ONE
Fund shares. The fee for the Money Market Portfolio is 0.15% of average
net assets and can increase to a maximum of 0.17% for the aforementioned
servicing level.
(6) FINANCIAL HIGHLIGHTS
The Financial Highlights on pages 4 and 5 of the prospectus are a part of
these Financial Statements.
46
<PAGE> 78
ONE FUND, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Ohio National Fund, Inc.:
We have audited the accompanying statements of assets and liabilities and the
schedules of investments of ONE Fund, Inc. (comprising, respectively, Money
Market, Tax-Free Income, Income, Income and Growth, Growth, Small Cap,
International and Global Contrarian Portfolios) as of June 30, 1995, and the
related statements of operations, statements of changes in net assets and the
financial highlights for each of the periods indicated herein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of June 30, 1995, by correspondence with the
custodian and brokers, and where replies are not received, we carried out other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios comprising ONE Fund, Inc. as of June 30, 1995, the results of
their operations, the changes in their net assets and their financial highlights
for each of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
August 2, 1995
47
<PAGE> 79
APPENDIX
DEBT SECURITY RATINGS
The Securities and Exchange Commission has designated six nationally recognized
statistical rating organizations: Duff and Phelps, Inc. ("D & P"), Fitch
Investors Service, Inc. ("Fitch"), Moody's Investors Service, Inc. (Moody's"),
Standard & Poor's Corp. ("S & P"), and, with respect to bank-supported debt and
debt issued by banks, broker-dealers and their affiliates, IBCA Inc. and its
British affiliate, IBCA Limited ("IBCA") and Thompson Bankwatch, Inc. ("TBW").
ONIMCO may use the ratings of all six such rating organizations as factors to
consider in determining the quality of debt securities, although it will
generally only follow D&P, Fitch, Moody's and S&P. IBCA and TBW will only be
consulted if fewer than two of the other four rating organizations have given
their top rating to a security. Only the ratings of Moody's and S & P will be
considered in determining the eligibility of bonds for acquisition by the ONE
Fund.
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
COMMERCIAL PAPER:
Moody's short-term debt ratings are opinions of the ability of issuers to
punctually repay senior debt obligations having an original maturity not
exceeding one year.
P-1 The Prime-1 (P-1) rating is the highest commercial paper rating assigned
by Moody's. Issuers (or supporting institutions) rated P-1 have a
superior ability for repayment of senior short-term debt obligations.
P-1 repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established
industries, high rates of return on funds employed, conservative
capitalization structure with moderate reliance on debt and ample asset
protection, broad margins in earnings coverage of fixed financial charges
and high internal cash generation, and well-established access to a range
of financial markets and assured sources of alternate liquidity.
P-2 Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
ability for repayment of senior short-term obligations. This will
normally be evidenced by many of the characteristics cited above for P-1,
but to a lesser degree. Earnings trends and coverage ratios, while
sound, may be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
BONDS:
Aaa Bonds which are rated Aaa by Moody's are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa Bonds which are rated as Aa by Moody's are judged to be of high quality
by all standards. Together with the Aaa group, they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than in Aaa securities.
48
<PAGE> 80
A Bonds which are rated A by Moody's 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 Bonds which are rated Baa by Moody's are considered as medium grade
obligations, that is, 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.
Ba Bonds which are rated Ba by Moody's are judged to have speculative
elements. Their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during other good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B by Moody's generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other term of the contract over any long period of time
may be small.
STANDARD & POOR'S CORP. ("S & P")
COMMERCIAL PAPER:
An S & P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than one year.
A-1 This is S & P's highest category and it indicates that the degree of
safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are designated A-1+.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated as A-1.
Bonds:
AAA Bonds rated AAA by S&P are the highest grade obligations. They possess
the ultimate degree of protection as to principal and interest. Market
prices move with interest rates, and hence provide maximum safety on all
counts.
AA Bonds rated AA by S&P also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here,
too, prices move with the long-term money market.
A Bonds rated A by S&P are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from the
adverse effects of changes in economic and trade conditions. Interest
and principal are regarded as safe. They predominantly reflect money
rates in their market behavior, but to some extent, also economic
conditions.
BBB The BBB or medium grade category is the borderline between definitely
sound obligations and those where the speculative element begins to
predominate. These bonds have adequate asset coverage and normally are
protected by satisfactory earnings. Their susceptibility to changing
conditions, particularly to depressions, necessitates constant watching.
Marketwise, the bonds are more responsive to business and trade
conditions than to interest rates. This is the lowest group which
qualifies for commercial bank investments.
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BB Debt rated BB by S&P has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB rating.
B Debt rated B by S&P has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
DUFF & PHELPS, INC. ("D & P")
COMMERCIAL PAPER:
D & P's short-term ratings have incorporated gradations of "1+" and "1-" in
recognition of quality differences within the first tier.
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds,
is outstanding, and safety is just below risk-free U.S. Treasury
short-term 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.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors
are small.
FITCH INVESTORS SERVICE, INC. ("FITCH")
COMMERCIAL PAPER
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes.
Fitch's short-term ratings emphasize the existence of liquidity necessary to
meet the issuer's obligations in a timely manner.
F-1+ Exceptionally strong credit quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2 Good credit quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the F-1+ and F-1 categories.
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