<PAGE> 1
File No. 33-47811
File No. 811-6675
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 14 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 13 [X]
---------------
ONE FUND, INC.
(Exact Name of Registrant)
One Financial Way
Cincinnati, Ohio 45242
(Address of Principal Executive Office)
Area Code (513) 794-6230
(Registrant's Telephone Number)
Ronald L. Benedict, Secretary
ONE Fund, Inc.
One Financial Way
Cincinnati, Ohio 45242
(Name and Address of Agent for Service)
Notice to:
W. Randolph Thompson, Esq.
Of Counsel
Jones & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson Street, NW
Washington, D.C. 20007
-----------------
Approximate Date of Proposed Public Offering: as soon after the effective date
of this registration statement as is practicable.
Registrant has heretofore registered an indefinite amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2.
It is proposed that this filing will become effective (check appropriate box):
X immediately upon filing pursuant to paragraph (b)
---
on (date) pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
--- on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
---
on (date) pursuant to paragraph (a)(2) of Rule 485.
---
If appropriate, check the following box:
this post-effective amendment designates a new effective date
--- for a previously filed post-effective amendment.
<PAGE> 2
PROSPECTUS
NOVEMBER 1, 2000
ONE FUND, INC.
One Financial Way
Cincinnati, Ohio 45242
Telephone 1-800-578-8078
ONE Fund, Inc. ("ONE Fund") is a mutual fund with eight diversified portfolios.
Those portfolios have the following investment objectives:
- MONEY MARKET PORTFOLIO -- current income consistent with preservation of
capital and liquidity.
- INCOME PORTFOLIO -- high current income. Preservation of capital is a
secondary objective.
- INCOME & GROWTH PORTFOLIO -- moderate income with the potential for increasing
income over time. Growth of capital is also a primary objective.
- GROWTH PORTFOLIO -- long-term capital growth.
- CORE GROWTH PORTFOLIO -- long-term capital appreciation.
- SMALL CAP PORTFOLIO -- maximum capital growth by investing primarily in common
stocks of small and medium sized companies.
- INTERNATIONAL PORTFOLIO -- long-term capital growth by investing primarily in
common stocks of foreign companies.
- S&P 500 INDEX PORTFOLIO -- total return.
This prospectus sets forth concisely the information about ONE Fund that you
should know before investing. This prospectus should be retained for future
reference.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Form 5830
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fee Table................................................... 3
Risk/Return Summary......................................... 4
General Investment Objectives............................. 4
Money Market Portfolio.................................... 4
Income Portfolio.......................................... 6
Income & Growth Portfolio................................. 8
Growth Portfolio.......................................... 10
Core Growth Portfolio..................................... 11
Small Cap Portfolio....................................... 13
International Portfolio................................... 14
S&P 500 Index Portfolio................................... 16
Additional Risk Factors..................................... 18
ONE Fund Management......................................... 21
Board of Directors, Investment Adviser and Sub-advisers... 21
The Adviser's Investment Style............................ 22
ONE Fund's Portfolio Managers............................. 23
Fund Services............................................. 24
Shareholder Information..................................... 25
Buying Shares............................................. 25
Purchase Price............................................ 25
Sales Charges............................................. 26
12b-1 Fees................................................ 26
Sales Contests............................................ 26
Reducing the Sales Charge................................... 26
Flexibility Features........................................ 28
Redeeming Shares............................................ 30
Dividends, Distributions and Taxes.......................... 32
Financial Highlights Information............................ 33
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION CONTENTS
Investment Policies and Restrictions
Controlling Persons and Principal Shareholders
Brokerage Allocation
Tax Status
Underwriters
Form 5830
2
<PAGE> 4
ABOUT ONE FUND
ONE Fund has eight fully diversified portfolios.
ONE Fund's assets are managed by Ohio National
Investments, Inc. (the "Adviser"), which is a
wholly-owned subsidiary of The Ohio National Life
Insurance Company ("ONLI"). The principal
underwriter of ONE Fund is Ohio National Equities,
Inc. ("ONEQ"), which is also a wholly-owned
subsidiary of ONLI. Each of these companies is
located at One Financial Way, Cincinnati, Ohio
45242.
FEE TABLE
This table and example describe the fees and expenses that you may pay if you
buy and hold shares of ONE Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT):
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) (1)
<TABLE>
<S> <C>
Money Market Portfolio...................................... None
Income Portfolio............................................ 3.00%
Income & Growth Portfolio................................... 5.00%
Growth Portfolio............................................ 5.00%
Core Growth Portfolio....................................... 5.00%
Small Cap Portfolio......................................... 5.00%
International Portfolio..................................... 5.00%
S&P 500 Index Portfolio..................................... 5.00%
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM ONE FUND
ASSETS):
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT (12b-1) OTHER FUND OPERATING
FEES (2) FEES EXPENSES EXPENSES
---------- ------------ -------- ---------------
<S> <C> <C> <C> <C>
Money Market Portfolio................. 0.30% 0.15% 0.63% 1.08%
Income Portfolio....................... 0.50% 0.25% 0.91% 1.66%
Income & Growth Portfolio.............. 0.50% 0.25% 0.75% 1.50%
Growth Portfolio....................... 0.50% 0.25% 0.76% 1.51%
Core Growth Portfolio.................. 0.95% 0.25% 0.80% 2.00%
Small Cap Portfolio.................... 0.65% 0.25% 1.27% 2.17%
International Portfolio................ 0.90% 0.25% 1.27% 2.42%
S&P 500 Index Portfolio................ 0.40% 0.25% 0.96% 1.61%
</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. If you transfer funds from
lower load portfolios, you pay the additional load at the time of transfer.
(2) The Adviser is presently voluntarily waiving 0.15% of its Management Fees
for certain portfolios. With those waivers, the Management Fees are 0.15%
for the Money Market Portfolio, 0.35% for the Income, Income & Growth and
Growth Portfolios, and 0.50% for the Small Cap Portfolio. Current Operating
Expenses are 0.94% for the Money Market Portfolio, 1.51% for the Income
Portfolio, 1.35% for the Income & Growth Portfolio, 1.36% for the Growth
Portfolio and 1.74% for the Small Cap Portfolio.
Form 5830
3
<PAGE> 5
EXAMPLE:
The Example is intended to help you compare the cost of investing in ONE Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the ONE Fund portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Portfolio................................ $110 $ 343 $ 595 $1,317
Income Portfolio...................................... 464 808 1,175 2,206
Income & Growth Portfolio............................. 645 950 1,278 2,201
Growth Portfolio...................................... 646 953 1,283 2,211
Core Growth Portfolio................................. 693 1,096 1,524 2,711
Small Cap Portfolio................................... 709 1,145 1,606 2,878
International Portfolio............................... 733 1,217 1,726 3,118
S&P 500 Index Portfolio............................... 656 983 1,332 2,315
</TABLE>
---------------
RISK/RETURN SUMMARY
- GENERAL INVESTMENT OBJECTIVES
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. Risks associated
with particular portfolios are discussed as part
of the description of those portfolios. Following
the portfolio descriptions, there is a general
discussion of risks that affect all of the
portfolios.
- 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. 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. Commercial paper is
unsecured promissory notes issued by corporations
to finance short-term credit needs. The Money
Market Portfolio may invest up to 50% of its
assets in foreign securities, provided they have
values expressed in U.S. dollars and are held in
custody in the United States.
The dollar-weighted average maturity of all
securities in this portfolio will never be more
than 90 days. The Statement of Additional
Information
Form 5830
4
<PAGE> 6
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 the least risk
of the eight ONE Fund portfolios, but also offers
the least opportunity for above-average long-term
return compared to the other ONE Fund portfolios.
Income will fluctuate with changes in the level of
short-term interest rates.
An investment in the Money Market Portfolio is not
a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Although the Money Market Portfolio seeks to
preserve the value of investments at $1 per share,
it is possible to lose money by investing in this
portfolio.
The bar chart shown below provides an indication
of the risks of investing in the Money Market
Portfolio by showing changes in the portfolio's
performance for full calendar years since its
inception on August 18, 1992. How the portfolio
has performed in the past is not necessarily an
indication of how the portfolio will perform in
the future. Sales loads are not reflected in the
chart because this portfolio's shares are sold
without any sales charge.
<TABLE>
<CAPTION>
1993 2.82
---- ----
<S> <C>
1994 3.97
1995 5.42
1996 4.99
1997 4.7
1998 4.85
1999 4.38
</TABLE>
During the period shown in the bar chart, the
highest return for a quarter was 1.36% (quarter
ending March 31, 1995) and the lowest return for a
quarter was .70% (quarter ending September 30,
1993). The year-to-date return as of September 30,
2000 was 4.06%.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS SINCE
(FOR THE PERIODS ENDING PAST ONE PAST FIVE INCEPTION
DECEMBER 31, 1999) YEAR YEARS (8/92)
<S> <C> <C> <C> <C>
Money Market Portfolio 4.38% 4.87% 4.39%
</TABLE>
Money Market Portfolio Seven Day Yield Ending
9/30/00: 5.58%
Form 5830
5
<PAGE> 7
- 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. The Adviser 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. The portfolio
may not achieve its investment objective during
times it takes a temporary defensive position.
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 ("junk bonds").
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 the Adviser believes present
relatively low risk. To the extent deemed prudent,
the Adviser will also seek to increase the income
to this portfolio by positioning no more than 15%
of its assets in high yield 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. The portfolio's
ability to sell a security or to obtain current
pricing information might be impaired at times
when an issuer's creditworthiness is not perceived
to be sound.
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. The
Income Portfolio generally holds short-term to
intermediate term debt securities. During periods
of rising interest rates, the market prices of all
income producing securities will tend to decline.
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.
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
Form 5830
6
<PAGE> 8
securities markets in general and, particularly in
the case of debt securities, changes in the
overall level of interest rates. 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. 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.
The bar chart and table shown below provide an
indication of the risks of investing in the Income
Portfolio by showing changes in the portfolio's
performance for full calendar years since its
inception on August 18, 1992 and by showing how
the portfolio's average annual returns for one
year, five years and since inception compare to
those of a broad-based securities market index.
How the portfolio has performed in the past is not
necessarily an indication of how the portfolio
will perform in the future. Sales loads are not
reflected in the bar chart. If they were
reflected, returns would be less than those shown.
[GRAPH]
INCOME PORTFOLIO
<TABLE>
<S> <C>
1993 17.85
1994 -10.75
1995 16.73
1996 4.85
1997 8.17
1998 6.74
1999 -0.8
</TABLE>
During the period shown in the bar chart, the
highest return for a quarter was 5.94% (quarter
ending March 31, 1993) and the lowest return for a
quarter was (3.77)% (quarter ending March 31,
1994). The year-to-date return as of September 30,
2000 was 3.90%.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS SINCE
(FOR THE PERIODS ENDING PAST ONE PAST FIVE INCEPTION
DECEMBER 31, 1999) YEAR YEARS (8/92)
<S> <C> <C> <C> <C>
Income Portfolio (3.77)% 6.30% 5.03%
Lehman Brothers
Government/Corporate Bond
Index
-- Intermediate* 4.18% 7.04% 6.22%
</TABLE>
*The Lehman Brothers Government/Corporate Bond
Index-Intermediate is a widely recognized,
unmanaged intermediate government and corporate
bond index.
Form 5830
7
<PAGE> 9
- 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 or
those securities that pay dividends, or debt
securities with intermediate to short term
maturities. Normally, at least 50% of the assets
will be invested in dividend-paying common stocks
that the portfolio manager determines are suitable
securities based on the company's growth potential
and analysis of the company's fundamental business
practices. 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. Securities are
generally investment grade, although the portfolio
may invest in below investment grade bonds ("junk
bonds").
Income & Growth Portfolio
risk
factors The risk factors of the Income and Growth
Portfolio are similar to those of the Income
Portfolio and the Growth Portfolio.
The market value of below investment grade
securities 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. The portfolio's ability to sell
a security or to obtain current pricing
information might be impaired at times when an
issuer's creditworthiness is not perceived to be
sound.
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. The
Income and Growth Portfolio generally holds
short-term to intermediate term debt securities.
During periods of rising interest rates, the
market prices of all income producing securities
will tend to decline. 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.
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 the overall view of
economic and financial trends, expectations about
business activity, and anticipation of changes in
corporate earnings. However, market risk factors
for debt securities and stocks may offset each
other.
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
Form 5830
8
<PAGE> 10
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.
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. 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.
The bar chart and table shown below provide an
indication of the risks of investing in the Income
& Growth Portfolio by showing changes in the
portfolio's performance for full calendar years
since its inception on August 18, 1992 and by
showing how the portfolio's average annual returns
for one year, five years and since inception
compare to those of a broad-based securities
market index. How the portfolio has performed in
the past is not necessarily an indication of how
the portfolio will perform in the future. Sales
loads are not reflected in the chart. If they were
reflected, returns would be less than those shown.
[GRAPH]
INCOME & GROWTH PORTFOLIO
<TABLE>
<CAPTION>
1993 17.51
---- -----
<S> <C>
1994 -0.67
1995 24.61
1996 16.82
1997 22.87
1998 3.69
1999 11.19
</TABLE>
During the period shown in the bar chart, the
highest return for a quarter was 11.82% (quarter
ending September 30, 1997) and the lowest return
for a quarter was (9.64%) (quarter ending
September 30, 1998). The year-to-date return as of
September 30, 2000 was 4.77%.
Form 5830
9
<PAGE> 11
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS SINCE
(FOR THE PERIODS ENDING PAST ONE PAST FIVE INCEPTION
DECEMBER 31, 1999) YEAR YEARS (8/92)
<S> <C> <C> <C> <C>
Income & Growth Portfolio 5.63% 14.39% 11.72%
S&P 500 28.58% 24.05% 20.82%
Blended Index (Based on
Russell 3000 Index and
Lehman Brothers
Government/Corporate Bond -
Intermediate Index)* 22.30% 19.89% 18.01%
</TABLE>
*The blended index, a blend based on 70% Russell
3000 Index and 30% Lehman Brothers
Government/Corporate Bond - Intermediate Index,
serves as an accurate comparison of performance
because of the similar composition of the blended
index to the securities held in the portfolio.
- 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. The Adviser may temporarily invest a
larger portion of the assets in cash or cash
equivalents for defensive purposes or to meet
anticipated redemption requests. The portfolio may
not achieve its investment objective when it takes
temporary defensive positions.
Growth Portfolio risk
factors 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 the overall view of
economic and financial trends, expectations about
business activity, and anticipation of changes in
corporate earnings.
The bar chart and table shown below provide an
indication of the risks of investing in the Growth
Portfolio by showing changes in the portfolio's
performance for full calendar years since its
inception on August 18, 1992 and by showing how
the portfolio's average annual returns for one
year, five years and since inception compare to
those of a broad-based securities market index.
How the portfolio has performed in the past is not
necessarily an indication of how the portfolio
will perform in the future. Sales loads are not
reflected in the chart. If they were reflected,
returns would be less than those shown.
Form 5830
10
<PAGE> 12
[graph]
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
1993 17.08
---- -----
<S> <C>
1994 0.61
1995 28.16
1996 17.81
1997 16.72
1998 2.61
1999 20.96
</TABLE>
During the period shown in the bar chart, the
highest return for a quarter was 18.91% (quarter
ending December 31, 1999) and the lowest return
for a quarter was (18.63)% (quarter ending
September 30, 1998). The year-to-date return as of
September 30, 2000 was 6.46%.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS SINCE
(FOR THE PERIODS ENDING PAST ONE PAST FIVE INCEPTION
DECEMBER 31, 1999) YEAR YEARS (8/92)
<S> <C> <C> <C>
Growth Portfolio 14.92% 15.75% 14.05%
S&P 500* 28.58% 24.05% 20.82%
</TABLE>
*The S&P 500 is the Standard & Poor's Composite
Index of 500 Stocks, a widely recognized,
unmanaged index of common stock prices.
- CORE GROWTH PORTFOLIO
Long-term capital
appreciation The objective of the Core Growth Portfolio is to
provide long-term capital appreciation by
investing primarily in equity securities of large,
medium and small companies that Pilgrim Baxter &
Associates, Ltd. ("PBA") believes have strong
earnings growth and long-term capital appreciation
prospects. PBA seeks companies poised for rapid
growth that have a history of above-average
earnings growth, demonstrate the ability to
sustain that growth, and operate in industries or
markets experiencing increased demand for their
products or services.
PBA's investment process PBA seeks to construct an investment portfolio
having strong growth characteristics. PBA begins
by creating a universe of rapidly growing
companies having desired quality characteristics.
Using proprietary software and research models
that incorporate attributes of successful growth
(such as positive earnings surprises, upward
earnings estimate revisions, and accelerating
sales and earnings growth), PBA creates a universe
of growing companies. Then, using fundamental
research, PBA evaluates each company's earnings
quality and assesses the sustainability of the
company's current growth trends.
Form 5830
11
<PAGE> 13
Core Growth Portfolio risk
factors This portfolio's investments in small and medium
capitalization companies may experience greater
price volatility than portfolios investing
primarily in larger, more established companies.
Because the universe of companies in which this
portfolio invests will experience stock price
volatility, it is important that investors
maintain a long-term investment perspective.
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 the overall view of
economic and financial trends, expectations about
business activity, and anticipation of changes in
corporate earnings.
The bar chart and table shown below provide an
indication of the risks of investing in the Core
Growth Portfolio by showing changes in the
portfolio's performance for full calendar years
since its inception on November 1, 1996 and by
showing how the portfolio's average annual returns
for one year and since inception compare to those
of a broad-based securities market index. How the
portfolio has performed in the past is not
necessarily an indication of how the portfolio
will perform in the future. Sales loads are not
reflected in the chart. If they were reflected,
returns would be less than those shown.
[GRAPH]
CORE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
1997 -6.37
---- -----
<S> <C>
1998 6.8
1999 105.53
</TABLE>
During the period shown in the bar chart, the
highest return for a quarter was 54.69% (quarter
ending December 31, 1999) and the lowest return
for a quarter was (22.70)% (quarter ending
September 30, 1998). The year-to-date return as of
September 30, 2000 was 26.89%.
Form 5830
12
<PAGE> 14
<TABLE>
<CAPTION>
SINCE
AVERAGE ANNUAL TOTAL RETURNS PAST ONE INCEPTION
(FOR THE PERIODS ENDING DECEMBER 31, 1999) YEAR (11/96)
<S> <C> <C> <C>
Core Growth Portfolio 95.25% 23.76%
Russell 3000 Index* 24.13% 28.78%
</TABLE>
*The Russell 3000 Index is a widely recognized,
unmanaged index of growth stock prices.
- 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 small capitalization companies. Small
capitalization companies generally are understood
to include all those publicly traded U.S.
companies that are not among the 1,000 largest
publicly traded U.S. companies. While the market
capitalization of the largest small capitalization
companies will vary from time to time, it is
presently about $2.2 billion. However, under
unusual market conditions, it may temporarily
invest more than 35% of its assets in larger
companies if they appear to present better
prospects for capital appreciation. The portfolio
may not achieve its investment objective when it
takes a temporary defensive position.
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.
The bar chart and table shown below provide an
indication of the risks of investing in the Small
Cap Portfolio by showing changes in the
portfolio's performance for full calendar years
since its inception on November 1, 1994 and by
showing how the portfolio's average annual returns
for one year and since inception compare to those
of a broad-based securities market index. How the
portfolio has performed in the past is not
necessarily an indication of how the portfolio
will perform in the future. Sales loads are not
reflected in the chart. If they were reflected,
returns would be less than those shown.
Form 5830
13
<PAGE> 15
[GRAPH]
SMALL CAP PORTFOLIO
<TABLE>
<CAPTION>
1995 21.6
---- ----
<S> <C>
1996 17.01
1997 16.92
1998 -13.35
1999 0.86
</TABLE>
During the period shown in the bar chart, the
highest return for a quarter was 16.21% (quarter
ending June 30, 1999) and the lowest return for a
quarter was (20.87)% (quarter ending September 30,
1998). The year-to-date return as of September 30,
2000 was 11.51%.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS SINCE
(FOR THE PERIODS ENDING PAST ONE PAST FIVE INCEPTION
DECEMBER 31, 1999) YEAR YEARS (11/94)
<S> <C> <C> <C> <C>
Small Cap Portfolio (4.18)% 6.67% 6.53%
Russell 2000 Index* (7.55)% 16.47% 14.51%
</TABLE>
*The Russell 2000 Index is a widely recognized,
unmanaged index of small cap common stock prices.
- INTERNATIONAL PORTFOLIO
Total return through foreign
stocks The objective of the International Portfolio is to
provide total return on assets by investing
primarily in equity securities 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.
The portfolio may not achieve its investment
objective when it takes temporary defensive
positions.
The Adviser utilizes a "bottom up" approach (an
analysis of the individual company's business
fundamentals and practices as opposed to an
analysis of the economy in general) to evaluate
companies as opposed to examining general economic
conditions in foreign countries.
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 determined custody arrangements are
reasonable.
Form 5830
14
<PAGE> 16
International Portfolio 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.
Foreign Securities markets are not always open on
the same days or at the same times as the U.S.
markets. As a result, the values of foreign
securities might change on days or at times when
you cannot redeem your shares.
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. 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. 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.
The bar chart and table shown below provide an
indication of the risks of investing in the
International Portfolio by showing changes in the
portfolio's performance for full calendar years
since its inception on May 1, 1993 and by showing
how the portfolio's average annual returns for one
year, five year and since inception compare to
those of a broad-based securities market index.
How the portfolio has performed in the past is not
necessarily an indication of how the portfolio
will perform in the future. Sales loads are not
reflected in the chart. If they were reflected,
returns would be less than those shown.
Form 5830
15
<PAGE> 17
[GRAPH]
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
1994 9.59
---- ----
<S> <C>
1995 11.89
1996 13.95
1997 1.24
1998 -2.71
1999 62.59
</TABLE>
During the period shown in the bar chart, the
highest return for a quarter was 56.66% (quarter
ending December 31, 1999) and the lowest return
for a quarter was (15.25)% (quarter ending
September 30, 1998). The year-to-date return as of
September 30, 2000 was (10.07)%.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS SINCE
(FOR THE PERIODS ENDING PAST ONE PAST FIVE INCEPTION
DECEMBER 31, 1999) YEAR YEARS (5/93)
<S> <C> <C> <C> <C>
International Portfolio 54.56% 14.16% 16.34%
MSCI EAFE Index* 18.23% 7.54% 7.65%
</TABLE>
*The MSCI EAFE Index is the Morgan Stanley Capital
International Europe, Asia, Far East Index, a
widely recognized, unmanaged index of
international stock prices.
- S&P 500 INDEX PORTFOLIO
The objective of the S&P 500 Index Portfolio is
total return approximating that of the Standard &
Poor's 500 Index ("S&P 500(R)") including
reinvestment of dividends, at a risk level
consistent with that of the S&P 500(R). It seeks
this objective by investing at least 65% of its
assets in:
- common stocks, or derivative securities
thereof including futures contracts, currently
listed among the stocks in the S&P 500(R).
The balance of the portfolios assets will be
invested in:
- Standard & Poor's Depositary Receipts(R)
("SPDRs(R)"),
- S&P 500(R) stock index futures contracts
hedged by investing in securities issued or
guaranteed by the U.S. government, its
agencies or instrumentalities,
investment-grade corporate bonds and money
market instruments, but primarily as a hedging
technique for future contracts, and/or
- common stocks and other securities that need
not be included among the 500 stocks in the
S&P 500(R).
Form 5830
16
<PAGE> 18
This strategy is intended to replicate the
performance of the S&P 500(R). However, portfolio
expenses reduce the portfolio's ability to exactly
track the S&P 500(R). There can be no assurance
that the portfolio's investments will have the
desired effect.
The portfolio will attempt to achieve a
correlation between its performance and that of
the S&P 500(R) of at least 0.95 on a monthly
basis, without taking into account expenses. A
correlation of 1.00 would indicate perfect
correlation, which would be achieved when the
portfolio's net asset value, including the value
of its dividend and capital gains distributions,
increases or decreases in exact proportion to
changes in the S&P 500(R). The portfolio's ability
to correlate its performance with the S&P 500(R)
may be affected by, among other things, changes in
securities markets, the manner in which the S&P
500(R) is calculated by Standard & Poor's and the
timing of purchases and redemptions. If the
Adviser is unable to correlate the portfolio's
performance with that of the S&P 500(R), it is
anticipated that the Adviser will liquidate and
purchase securities necessary to bring the
performance back into correlation.
The S&P 500 Index Portfolio may invest up to 5% of
its assets in SPDRs(R); provided, however, that
the portfolio reserves the right to increase the
percentage of assets it may invest in SPDRs(R) to
10% to the extent that such an increase would be
permitted by applicable law. SPDRs(R) are units of
beneficial interest in a unit investment trust,
representing proportionate undivided interests in
a portfolio of securities in substantially the
same weighting as the component common stocks of
the S&P 500(R).
The value of S&P 500(R) stock index futures
contracts is tied directly to the fluctuations of
the S&P 500(R). The portfolio's ability to use
futures contracts as a substitute for maintaining
a fully-invested market position in the 500 stocks
comprising the S&P 500(R) obligates the portfolio
to hedge its position by delivering a specific
dollar amount equal to the difference between the
value of the S&P 500(R) at the time the contract
was made and the closing of the contract. The
futures contracts can result in a high degree of
leverage so that a relatively small decline in the
S&P 500(R) could result in a substantial loss to
the portfolio, including part or all of the margin
deposits required on the contracts. The portfolio
seeks to offset that risk by maintaining
investments in U.S. government obligations,
investment-grade corporate bonds and money market
instruments. The income from these fixed income
investments and money market instruments tends to
offset the costs of the futures contracts.
Primary risks: As with all investments, the value
of the investment is subject to price fluctuation
and may, as a result, be worth more or less than
the price paid for the security. Because the
Adviser intends for the performance of the
portfolio to correlate to the performance of the
S&P 500(R), when that index experiences periods of
poor performance as compared to other investments,
the portfolio will also experience poor
performance. The S&P 500(R) is comprised of
securities in several industry
Form 5830
17
<PAGE> 19
sectors. If a particular sector or specific
industry represented in a sector experiences poor
performance, the S&P 500(R) and the portfolio may
also experience poor performance.
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.
Since the portfolio's inception date is December
15, 1999, and the portfolio is less than one
calendar year old, the portfolio has no reportable
performance for purposes of prospectus disclosure.
ADDITIONAL STRATEGIES AND RISK FACTORS
- DIVERSIFICATION/CONCENTRATION
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 domestic banks.
- CREDIT AND MARKET RISKS
"Credit Risk" is the
ability of an issuer to
pay its debts. "Market Risk"
measures the volatility of
a security's price in a
fluctuating market. 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, 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.
Form 5830
18
<PAGE> 20
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. 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 debt securities held by a portfolio
will not affect income derived from those
securities unless the issuer defaults on its
interest payments.
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.
- QUALITY OF MONEY MARKET PORTFOLIO INVESTMENTS
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.
- FOREIGN SECURITIES
Up to 20% may be invested in
other countries. The Income, Income & Growth, Growth, Core Growth
Small Cap and S&P 500 Index 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
with values expressed in foreign currency. The
Money Market Portfolio may invest up to 50% of its
assets in such securities, provided they have
values expressed in U.S. dollars and are held in
custody in the United States. Normally all of
International Portfolio assets will be invested in
foreign securities at all times. The Adviser does
not anticipate investing over 5% of the S&P 500
Index Portfolio's assets in foreign securities.
Such foreign investments would be made or
maintained usually in the event of an acquisition
by a foreign corporation of a company listed on
the S&P 500(R). Based on the stock performance,
the Adviser may decide to maintain the holding
rather than sell the stock. If the retained
holding performs as anticipated, the return may
tend to offset the costs of the futures contracts
and may offset the operating
Form 5830
19
<PAGE> 21
expenses of the portfolio and cause a closer
correlation of the portfolios performance to that
of the S&P 500(R) itself.
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 Portfolio, foreign
investments will not normally constitute a
substantial portion of ONE Fund assets. However,
the Adviser may 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 any portfolio's assets may
be invested in foreign currency hedging
transactions. Hedging transactions and their
associated risks are more fully described in the
Statement of Additional Information.
- RESTRICTED AND ILLIQUID SECURITIES
Restricted securities are securities in which a
portfolio may otherwise invest pursuant to its
investment objective and policies, but which are
subject to restrictions on resale under federal
securities law. Under criteria established by the
Board of Directors, certain restricted securities
are deemed to be liquid. The Directors consider
the following criteria in determining the
liquidity of restricted securities:
- the frequency of trades and quotes for the
security;
Form 5830
20
<PAGE> 22
- the number of dealers willing to purchase or
sell the security, and the number of other
potential buyers;
- dealer undertakings to make a market in the
security; and the nature of the security; and
- the nature of the marketplace trades.
Each portfolio, except the Money Market Portfolio,
may invest up to 15% of its assets in restricted
or illiquid securities. The Money Market Portfolio
may invest up to 5% of its assets in restricted or
illiquid securities.
ONE FUND MANAGEMENT
- BOARD OF DIRECTORS, INVESTMENT ADVISER AND
SUB-ADVISERS
The Directors are elected by
the shareholders and are
responsible for
overall management. The Adviser manages the investment and
reinvestment of ONE Fund assets, subject to the
supervision of The Board of Directors. The Board
of Directors is responsible for ONE Fund's overall
management and direction. The Board approves all
significant agreements including those with the
Adviser, the Core Growth Portfolio's subadviser
Pilgrim Baxter & Associates, Ltd.("PBA"), the
International Portfolio's sub-adviser Federated
Global Investment Management Corp. (FGIM), ONE
Fund's principal underwriter ("ONEQ"), its
custodians (State Street Bank for the
International Portfolio and Firstar Bank for the
other portfolios), and its transfer agent and fund
accounting agent, American Data Services, Inc.
("ADS"). Board members are elected by the
shareholders for three-year terms. Shareholder
meetings are normally 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.
For managing ONE Fund's assets, the Adviser, which
has its principal place of business at One
Financial Way, Cincinnati, Ohio 45242, receives a
quarterly management fee 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, 0.65% for
the Small Cap Portfolio, 0.90% for the
International Portfolio, 0.95% for the Core Growth
Portfolio and 0.40% for the S&P 500 Index
Portfolio. The Adviser is now waiving 0.15% of the
fees to which it is entitled from the Money
Market, Income, Income & Growth, Growth and Small
Cap Portfolios, but it may cease those waivers, in
whole or in part, without prior notice. During ONE
Fund's most recent fiscal year, July 1, 1999 to
June 30, 2000, the aggregate fee received for each
portfolio as a percentage of average net assets
was: 0.15% for the Money Market Portfolio, 0.35%
for the Income, Income & Growth and Growth
Portfolios, 0.50% for the Small Cap Portfolio,
0.90% for the International Portfolio, and 0.95%
for the Core Growth Portfolio. The S&P 500 Index
Portfolio did not start operations until December
15, 1999. The Adviser and its predecessor entity
have been investment advisers since 1969. The
Adviser currently manages $1.75 billion in assets,
including the assets of ONE Fund.
Form 5830
21
<PAGE> 23
The Adviser contracts with PBA for the management
of the Core Growth Portfolio and FGIM for the
management of the International Portfolio.
Sub-adviser for the Core
Growth Portfolio PBA manages the assets of the Core Growth
Portfolio under the Adviser's supervision. PBA is
located at 824 Duportail Road in Wayne,
Pennsylvania. Its controlling shareholder is
United Asset Management Corp. located in Boston,
Massachusetts. With its predecessors, PBA has been
an investment adviser since 1982 and it manages
the PBHG mutual funds. The Adviser pays PBA, for
its services as sub-adviser, a fee at an annual
rate of 0.65% of the average daily net asset value
of the first $50 million of Core Growth Portfolio
assets, 0.60% of the next $100 million and 0.50%
of portfolio assets in excess of $150 million.
Sub-adviser for the
International Portfolio FGIM manages the assets of the International
Portfolio under the Adviser's supervision. FGIM is
located at 175 Water Street, New York, New York.
FGIM is an indirect wholly-owned subsidiary of
Federated Investors, a leading mutual fund
advisory firm, and has been an investment adviser
since 1995. The Adviser pays FGIM for its services
as sub-adviser, fees at an annual rate of 0.45% of
the first $200 million, and .040% of the average
daily assets in excess of $200 million of the
International Portfolio.
- THE ADVISER'S INVESTMENT STYLE
The Adviser'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.
The Adviser's and sub-advisers' 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 the Adviser'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, the Adviser
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 the Adviser to
Form 5830
22
<PAGE> 24
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.
The Adviser uses sell
disciplines. The value investing approach is used by the
Adviser both to determine securities to be
acquired and those to be sold.
- ONE FUND'S PORTFOLIO MANAGERS
The individuals primarily responsible for the
day-to-day management of ONE Fund's portfolios are
Christopher Carlson, Jed Martin, Michael Boedeker,
Stephen Komrska, Bret Parrish, Alexandre de
Bethmann, Henry Frantzen and Jeffrey Wrona.
Christopher Carlson is president of the Adviser
and vice president and senior investment officer
of ONLI. He oversees the management of the Money
Market, Income, Income & Growth, Growth, Small Cap
and S&P 500 Index Portfolios. He has a bachelor's
degree in psychology from the University of
Richmond and a master of business administration
degree in finance from the University of
Cincinnati. He has been an investment officer of
ONLI since 1993 and previously had 12 years of
experience in developing commercial real estate.
Jed Martin, a vice president of the Adviser, has
managed the Money Market Portfolio since 1996. He
is a chartered financial analyst with a bachelor's
degree in mechanical engineering from the
University of Kentucky and a master of business
administration degree in finance from Indiana
University. He has been an investment analyst and
portfolio manager for ONLI since 1985.
Michael Boedeker, a vice president of the Adviser,
has managed the Income Portfolio from its
inception. 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 is currently vice president
and senior investment officer of ONLI. He was vice
president of fixed income securities for ONLI from
1989 to 1999, 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 five
years.
Stephen Komrska, a vice president of the Adviser,
has managed the Income & Growth, Small Cap and
Growth Portfolios since 1999. He is an investment
officer of ONLI and has managed equity securities
for ONLI and the Adviser since 1997. For six years
before that, he was a fixed income analyst and
high yield bond portfolio manager for Ohio
Casualty Insurance Company. Mr. Komrska is a
chartered financial analyst with a bachelor of
business administration degree in finance and
marketing from the University of Michigan.
Bret Parrish has managed the S&P 500 Index
portfolio since May 2000. He is a vice president
of the Adviser and an investment officer of ONLI.
Prior to May 2000, he had been a fixed income
portfolio manager for the Ohio Casualty Group. For
two years before that he was in a financial
management training program for Ohio Casualty
while also teaching
Form 5830
23
<PAGE> 25
finance courses at Miami University. Mr. Parrish
is a chartered financial analyst with a bachelor
of arts degree in economics from Dennison
University and a master of business administration
degree in finance from Miami University.
Jeffrey Wrona has managed the Core Growth
Portfolio since 1999. He is also the portfolio
manager of the PBHG Growth II portfolio,
co-manager of the PBHG Technology & Communications
Fund and has managed other small and mid cap
portfolios for PBA since 1997. Prior to that he
was a senior portfolio manager at Munder Capital
Management for seven years, and before that he was
a securities analyst for Drexel Burnham Lambert
and a design engineer for Ford Motor Company. Mr.
Wrona is a chartered financial analyst. He has a
bachelor's degree in engineering and a master of
business administration from the University of
Michigan.
The portfolio managers of the International
Portfolio are Alexandre de Bethmann, Henry
Frantzen, John Quartarolo and Stephen Auth.
Alexandre de Bethmann has been the International
Portfolio's co-manager since October 1999. Mr. de
Bethmann joined FGIM in 1995 as a Senior Portfolio
Manager and a Vice President. Mr. de Bethmann
served as Assistant Vice President/Portfolio
Manager for Japanese and Korean equities at the
College Retirement Equities Fund from 1994 to
1995. Mr. de Bethmann received his M.B.A. in
Finance from Duke University. Henry Frantzen, the
chief investment officer, international, of FGIM,
co-manages the International Portfolio. He joined
FGIM as its executive vice president when it was
established in 1995. For four years prior to that,
he served as chief investment officer of
international securities at Brown Brothers
Harriman & Co. and for three years before that he
was the executive vice president of equities at
Oppenheimer Management Corporation. He is a
financial analyst fellow.
John Quartarolo has been an assistant vice
president of FGIM since January 2000. He joined
FGIM as a senior investment analyst in December
1998. For three years before that, he was an
assistant vice president -- global securities
research & economics for Merrill Lynch, and for
three years prior to that he was a ratings analyst
for Standard & Poor's. Mr. Quartarolo is a
chartered financial analyst. He has a bachelor of
business administration degree and a master of
business administration degree from Hofstra
University.
Stephen Auth joined FGIM in May 2000 as senior
vice president & director of global portfolio
management. For fifteen years prior to that, he
was employed by Prudential Investments where he
served the last nine of those years as a portfolio
manager and was also senior managing director. Mr.
Auth is a chartered financial analyst. He has a
bachelor's degree from Princeton University and a
master of business administration degree from
Harvard University.
- FUND SERVICES
Firstar Bank, 425 Walnut Street, Cincinnati, Ohio
45202, is the custodian for all ONE Fund assets
except those of the International Portfolio. The
assets of the International Portfolio are in the
custody of
Form 5830
24
<PAGE> 26
State Street Bank, 801 Pennsylvania Street, Kansas
City, Missouri 64105. For assets held outside the
United States, State Street Bank enters into
subcustodial agreements, subject to approval by
the Board of Directors. ADS, 150 Motor Parkway,
Suite 109, Hauppauge, New York 11788, serves as
ONE Fund's transfer agent and its agent for
bookkeeping, dividend disbursing and certain
shareholder services.
SHAREHOLDER INFORMATION
- BUYING SHARES
ONE Fund's shares are continuously offered through
its principal underwriter, ONEQ, and through other
securities dealers that execute a distribution
agreement with ONEQ.
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 ONEQ 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 4:00 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.
Because some portfolios may invest in securities
of other countries and the markets in those
countries may not be open on the same days or at
the same times as the U.S. markets, the value of
those portfolios' assets may change on days or at
times when shareholders are unable to redeem
shares.
ONE Fund's shares are offered at the public
offering price. This is the next calculated 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.
Form 5830
25
<PAGE> 27
- SALES CHARGES
THE SALES CHARGE DOES NOT APPLY TO THE MONEY
MARKET PORTFOLIO.
<TABLE>
<CAPTION>
INCOME PORTFOLIO OTHER PORTFOLIOS
------------------------------------ ------------------------------------
SALES CHARGE AS A % OF: SALES CHARGE AS A % OF:
OFFERING NET AMOUNT DEALER OFFERING NET AMOUNT DEALER
AMOUNT OF 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.
** ONEQ will pay a dealer concession of 0.50% to securities dealers who initiate
and are responsible for any purchase of $1 million or more.
- 12b-1 FEES
Qualified dealers are paid a continuing
shareholder service fee of 0.25% annually (0.15%
for the Money Market Portfolio) from the Fund's
12b-1 Distribution Plan 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. Because these fees are
paid out of ONE Fund's assets on an on-going
basis, over time these fees will increase the cost
of your investment and may cost you more than
paying other types of sales charges.
- SALES CONTESTS
Periodically, ONE Fund may conduct sales contests
to encourage higher production among the
registered representatives of broker-dealers that
have the authority to sell ONE Fund shares. These
contests may be restricted to registered
representatives of certain broker-dealers, or open
to all eligible firms, in the discretion of ONE
Fund management. Such contests will only be
conducted in accordance with the laws, rules and
regulations of applicable federal, state and other
regulators.
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 public
offering price. Your registered representative can
help you to take advantage of any of the following
methods of reducing the sales charge if
Form 5830
26
<PAGE> 28
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 products underwritten by ONEQ
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.
- COMBINED PURCHASES
Combining your 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
Available to 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 Income
Portfolio.)
A "qualified group" is one that (a) has been in
existence more than six months (unless it is a
tax-qualified plan), (b) has a purpose other than
Form 5830
27
<PAGE> 29
acquiring mutual fund shares, and (c) satisfies
uniform criteria enabling ONEQ to realize
economies of scale in its costs of distributing
shares. A qualified group must have at least six
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
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
Redeeming other 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.
No sales charge is imposed on ONE Fund shares
purchased by:
- institutional investors (including banks,
trust companies and thrift institutions) for
their own account or for the benefit of any
trust having at least $1,000,000 in assets;
- fee-based registered investment advisers that
do not receive any part of a sales charge for
the sale of the shares; or
- pension or retirement plans, deferred
compensation plans and employee benefit plans
that have at least $1,000,000 in assets and
the trusts used to fund those plans.
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 ADS. Any of
the following features
Form 5830
28
<PAGE> 30
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
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
Investing 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 with no sales
charge. To use this service, the value of your
account in the paying portfolio must be at least
$5,000.
- TRANSFERRING
Among the seven 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 the Adviser, in its or
their discretion, believes that the portfolio
might otherwise be damaged.
- 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." Initiate, change or discontinue
automatic redemptions of your shares as
provided under "Automatically."
- Change your address on our records.
Telephone transaction requests received after 4:00
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
Form 5830
29
<PAGE> 31
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 eight 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.
- CHECK WRITING
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 Firstar Bank. Firstar Bank will charge $25
for any check that is not honored because of an
insufficient Money Market Portfolio account
balance. Firstar Bank also charges $22 to stop
payment of a check. 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 three 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 ONEQ'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 three 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 two years of
purchase with no initial sales charge, of
investments of $1 million or more as described
under "Sales Charges.")
Form 5830
30
<PAGE> 32
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.
- 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.
- BY TELEPHONE
As provided under "Telephone Transactions", 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)
sent by wire to your bank account. Checks will
normally be mailed three business days, and no
more than seven 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. Firstar Bank will deduct
a fee (presently $13) 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.
Form 5830
31
<PAGE> 33
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). Distributions, whether received in
cash or reinvested in additional share of ONE
Fund, may be subject to federal income tax.
ONE Fund shareholders are taxed on distributed
income and capital gains. 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.
An exchange of shares from a ONE Fund portfolio to
another ONE Fund portfolio will be treated as a
sale and a purchase, and any gain on the
transaction may be subject to federal income tax.
Money Market and Income
Portfolio dividends are
accrued daily and paid
monthly. For the Money Market 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 two 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, Core Growth, Small Cap,
International and S&P 500 Index Portfolio
shareholders. Any net realized capital gains for
all portfolios will be distributed annually.
However, ONE Fund's Board of Directors may declare
such dividends at other intervals.
Form 5830
32
<PAGE> 34
ONE FUND, INC.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the ONE Fund's
portfolios' financial performance for the past five years (or any shorter period
of existence for particular portfolios). Certain information reflects financial
results for a single share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the portfolio
(assuming reinvestment of all dividends and distributions). This information has
been audited by KPMG LLP, whose report, along with the ONE Fund's financial
statements, are incorporated by reference.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
----------------------------------------------
YEARS ENDED JUNE 30,
----------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income............................ 0.05 0.04 0.05 0.05 0.05
Less distributions:
Dividends from net investment income............. (0.05) (0.04) (0.05) (0.05) (0.05)
------ ------ ------ ------ ------
Net asset value, end of period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return....................................... 4.98% 4.44% 4.87% 4.77% 5.18%
Ratios and supplemental data:
Ratio net of fees waived or reimbursed by adviser
(a):
Expenses......................................... 0.94% 0.88% 0.88% 0.80% 0.57%
Net investment income............................ 4.83% 4.36% 4.81% 4.71% 5.14%
Ratios assuming no fees waived or reimbursed by
adviser:
Expenses......................................... 1.08% 1.03% 1.03% 1.04% 0.87%
Net assets at end of period (millions)............. $ 14.9 $ 16.8 $ 16.4 $ 14.4 $ 15.8
</TABLE>
---------------
(a) The adviser has elected to waive management fees equal to 0.15% of average
net assets for the Money Market Portfolio, but it may cease that waiver, in
whole or in part, without prior notice.
Form 5830
33
<PAGE> 35
<TABLE>
<CAPTION>
INCOME PORTFOLIO
----------------------------------------------
YEARS ENDED JUNE 30,
----------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period............... $ 9.69 $ 9.99 $ 9.75 $ 9.59 $ 9.78
Income from investment operations:
Net investment income............................ 0.57 0.57 0.59 0.61 0.63
Net realized & unrealized gain (loss) on
investments................................... (0.41) (0.30) 0.24 0.16 (0.19)
------ ------ ------ ------ ------
Total income (loss) from investment
operations.................................. 0.16 0.27 0.83 0.77 0.44
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income............. (0.57) (0.57) (0.59) (0.61) (0.63)
Distributions from net realized capital gains.... 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total distributions........................... (0.57) (0.57) (0.59) (0.61) (0.63)
------ ------ ------ ------ ------
Net asset value, end of period..................... $ 9.28 $ 9.69 $ 9.99 $ 9.75 $ 9.59
====== ====== ====== ====== ======
Total return....................................... 1.75% 2.65% 8.56% 8.26% 4.61%
Ratios and supplemental data:
Ratio net of fees waived or reimbursed by adviser
(a):
Expenses......................................... 1.51% 1.40% 1.39% 1.21% 0.97%
Net investment income............................ 6.01% 5.70% 5.91% 6.29% 6.50%
Ratios assuming no fees waived or reimbursed by
adviser:
Expenses......................................... 1.66% 1.55% 1.54% 1.51% 1.22%
Portfolio turnover rate............................ 10% 4% 40% 10% 9%
Net assets at end of period (millions)............. $ 5.8 $ 6.4 $ 6.9 $ 6.6 $ 7.0
</TABLE>
---------------
(a) The adviser has elected to waive management fees equal to 0.15% of average
net assets for the Income Portfolio, but it may cease that waiver, in whole
or in part, without prior notice.
Form 5830
34
<PAGE> 36
<TABLE>
<CAPTION>
INCOME & GROWTH PORTFOLIO
--------------------------------------------------
YEARS ENDED JUNE 30,
--------------------------------------------------
2000 1999 1998 1997 1996
---------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........... $15.51 $15.85 $14.89 $12.78 $11.57
Income from investment operations:
Net investment income........................ 0.14 0.35 0.42 0.38 0.38
Net realized & unrealized gain on
investments............................... 1.64 0.33 1.73 2.39 1.27
------ ------ ------ ------ ------
Total income from investment operations... 1.78 0.68 2.15 2.77 1.65
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income......... (0.14) (0.35) (0.42) (0.38) (0.37)
Distributions from net realized capital
gains..................................... (1.83) (0.67) (0.77) (0.28) (0.07)
------ ------ ------ ------ ------
Total distributions....................... (1.97) (1.02) (1.19) (0.66) (0.44)
------ ------ ------ ------ ------
Net asset value, end of period................. $15.32 $15.51 $15.85 $14.89 $12.78
====== ====== ====== ====== ======
Total return................................... 12.58% 4.73% 14.77% 22.34% 14.50%
Ratios and supplemental data:
Ratio net of fees waived or reimbursed by
adviser (a):
Expenses..................................... 1.35% 1.30% 1.20% 1.12% 0.89%
Net investment income........................ 0.91% 2.33% 2.65% 2.77% 3.10%
Ratios assuming no fees waived or reimbursed by
adviser:
Expenses..................................... 1.50% 1.45% 1.35% 1.31% 1.14%
Portfolio turnover rate........................ 64% 49% 39% 14% 7%
Net assets at end of period (millions)......... $ 12.6 $ 13.3 $ 16.1 $ 13.1 $ 10.8
</TABLE>
---------------
(a) The adviser has elected to waive management fees equal to 0.15% of average
net assets for the Income & Growth Portfolio, but it may cease that waiver,
in whole or in part, without prior notice.
Form 5830
35
<PAGE> 37
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
----------------------------------------------
YEARS ENDED JUNE 30,
----------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period............. $17.14 $18.68 $17.52 $15.47 $13.03
Income (loss) from investment operations:
Net investment income (loss)................... (0.12) (0.02) 0.00 0.07 0.14
Net realized & unrealized gain (loss) on
investments................................. 5.26 (0.12) 2.41 2.73 2.72
------ ------ ------ ------ ------
Total income (loss) from investment
operations................................ 5.14 (0.14) 2.41 2.80 2.86
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income........... 0.00 0.00 0.00 (0.07) (0.14)
Distributions in excess of net investment
income...................................... 0.00 0.00 (0.06) 0.00 0.00
Distributions from net realized capital
gains....................................... (1.76) (1.40) (1.19) (0.68) (0.28)
------ ------ ------ ------ ------
Total distributions......................... (1.76) (1.40) (1.25) (0.75) (0.42)
------ ------ ------ ------ ------
Net asset value, end of period................... $20.52 $17.14 $18.68 $17.52 $15.47
====== ====== ====== ====== ======
Total return..................................... 31.56% (0.32)% 14.13% 18.68% 22.22%
Ratios and supplemental data:
Ratio net of fees waived or reimbursed by adviser
(a):
Expenses....................................... 1.36% 1.36% 1.24% 1.13% 0.90%
Net investment income (loss)................... (0.66)% (0.13)% 0.02% 0.43% 0.99%
Ratios assuming no fees waived or reimbursed by
adviser:
Expenses....................................... 1.51% 1.51% 1.39% 1.32% 1.15%
Portfolio turnover rate.......................... 66% 53% 40% 27% 22%
Net assets at end of period (millions)........... $ 12.3 $ 10.9 $ 14.2 $ 13.3 $ 11.8
</TABLE>
---------------
(a) The adviser has elected to waive management fees equal to 0.15% of average
net assets for the Growth Portfolio, but it may cease that waiver, in whole
or in part, without prior notice.
Form 5830
36
<PAGE> 38
<TABLE>
<CAPTION>
CORE GROWTH PORTFOLIO
---------------------------------------------
YEARS ENDED JUNE 30, NOVEMBER 1, 1996
-------------------------- TO
2000 1999 1998 JUNE 30, 1997
------ ------ ------ ----------------
<S> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period............... $12.13 $10.60 $ 9.86 $10.00
Income (loss) from investment operations:
Net investment loss.............................. (0.30) (0.18) (0.16) (0.08)
Net realized & unrealized gain (loss) on
investments................................... 11.86 1.71 0.90 (0.06)
------ ------ ------ ------
Total income (loss) from investment
operations.................................. 11.56 1.53 0.74 (0.14)
------ ------ ------ ------
Less distributions:
Distributions from net realized capital gains.... (2.91) 0.00 0.00 0.00
------ ------ ------ ------
Net asset value, end of period..................... $20.78 $12.13 $10.60 $ 9.86
====== ====== ====== ======
Total return....................................... 102.02% 14.43% 7.51% (1.40)%(b)
Ratios and supplemental data:
Ratio net of fees waived or reimbursed by adviser
(c):
Expenses......................................... 2.00% 1.98% 2.06% 1.35% (a)
Net investment loss.............................. (1.82)% (1.81)% (1.65)% (0.87)%(a)
Ratios assuming no fees waived or reimbursed by
adviser:
Expenses......................................... 2.00% 2.42% 2.12% 1.40% (a)
Portfolio turnover rate............................ 247% 148% 116% 80%
Net assets at end of period (millions)............. $ 8.9 $ 4.6 $ 5.3 $ 5.5
</TABLE>
---------------
(a) Annualized
(b) Calculated on an aggregate basis (not annualized).
(c) The adviser has elected to reimburse certain operating expenses of the Core
Growth Portfolio, but it may cease that waiver, in whole or in part, without
prior written notice.
Form 5830
37
<PAGE> 39
<TABLE>
<CAPTION>
SMALL CAP PORTFOLIO
------------------------------------------------
YEARS ENDED JUNE 30,
------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........... $10.52 $13.32 $13.30 $12.82 $10.63
Income (loss) from investment operations:
Net investment income (loss)................. (0.09) 0.02 0.06 0.11 0.26
Net realized & unrealized gain (loss) on
investments............................... 0.65 (2.09) 1.30 1.67 2.26
------ ------ ------ ------ ------
Total income (loss) from investment
operations.............................. 0.56 (2.07) 1.36 1.78 2.52
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income......... 0.00 (0.02) (0.06) (0.11) (0.25)
Distributions in excess of net investment
income.................................... 0.00 (0.03) 0.00 0.00 0.00
Distributions from net realized capital
gains..................................... 0.00 (0.68) (1.28) (1.19) (0.08)
------ ------ ------ ------ ------
Total distributions....................... 0.00 (0.73) (1.34) (1.30) (0.33)
------ ------ ------ ------ ------
Net asset value, end of period................. $11.08 $10.52 $13.32 $13.30 $12.82
====== ====== ====== ====== ======
Total return................................... 5.32% (15.54)% 10.56% 14.82% 24.10%
Ratios and supplemental data:
Ratio net of fees waived or reimbursed by
adviser (a):
Expenses..................................... 1.74% 1.74% 1.67% 1.35% 0.94%
Net investment income........................ (0.86)% 0.23% 0.47% 0.89% 2.21%
Ratios assuming no fees waived or reimbursed by
adviser:
Expenses..................................... 2.17% 2.07% 1.82% 1.62% 1.27%
Portfolio turnover rate........................ 111% 48% 77% 34% 34%
Net assets at end of period (millions)......... $ 3.8 $ 3.8 $ 5.8 $ 5.2 $ 4.5
</TABLE>
---------------
(a) The adviser has elected to waive management fees equal to 0.15% of average
net assets for the Small Cap Portfolio, but it may cease that waiver, in
whole or in part, without prior notice. In addition, the adviser has
reimbursed certain operating expenses.
Form 5830
38
<PAGE> 40
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
-----------------------------------------------
YEARS ENDED JUNE 30,
-----------------------------------------------
2000 1999 1998 1997 1996
------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period............. $10.82 $ 12.92 $15.45 $14.47 $12.89
Income (loss) from investment operations:
Net investment income (loss)................... (0.22) (0.04) 0.12 0.14 0.10
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions................................ 7.52 (1.74) (0.63) 1.92 2.24
------ ------- ------ ------ ------
Total income (loss) from investment
operations................................ 7.30 (1.78) (0.51) 2.06 2.34
------ ------- ------ ------ ------
Less distributions:
Dividends from net investment income........... 0.00 0.00 (0.12) (0.15) (0.39)
Distributions from net realized capital gains
and foreign currency transactions........... 0.00 (0.32) (1.90) (0.93) (0.37)
------ ------- ------ ------ ------
Total distributions......................... 0.00 (0.32) (2.02) (1.08) (0.76)
------ ------- ------ ------ ------
Net asset value, end of period................... $18.12 $ 10.82 $12.92 $15.45 $14.47
====== ======= ====== ====== ======
Total return..................................... 67.47% (13.90)% (4.84)% 14.76% 18.65%
Ratios and supplemental data:
Ratios net of fees reimbursed by adviser (a):
Expenses....................................... 2.04% 2.13% 2.10% 1.87% 1.72%
Net investment income (loss)................... (1.31)% (0.32)% 0.85% 0.99% 0.70%
Ratios assuming no fees reimbursed by adviser:
Expenses....................................... 2.42% 2.56% 2.20% 1.98% 1.72%
Portfolio turnover rate.......................... 234% 217% 12% 9% 20%
Net assets at end of period (millions)........... $ 14.6 $ 6.9 $ 14.6 $ 19.3 $ 15.1
</TABLE>
---------------
(a) The adviser has elected to reimburse certain operating expenses of the
International Portfolio, but it may cease that waiver, in whole or in part,
without prior written notice.
Form 5830
39
<PAGE> 41
<TABLE>
<CAPTION>
S&P 500 INDEX PORTFOLIO (d)
---------------------------
DECEMBER 15, 1999
TO
JUNE 30, 2000
---------------------------
<S> <C>
Per share data:
Net asset value, beginning of period........................ $10.00
Income from investment operations:
Net investment income..................................... 0.03
Net realized and unrealized gain on investment and futures
contracts.............................................. 0.32
------
Total income from investment operations................ 0.35
------
Less distributions:
Net investment income..................................... (0.03)
------
Net asset value, end of period.............................. $10.32
======
Total return................................................ 3.49%(b)
Ratios and supplemental data:
Ratios net of fees reimbursed by adviser (c):
Expenses.................................................. 1.59%(a)
Net investment income..................................... 0.56%(a)
Ratio assuming no fees waived or reimbursed by adviser:
Expenses.................................................. 1.61%(a)
Portfolio turnover rate..................................... 247%
Net assets at end of period (millions)...................... $ 5.5
</TABLE>
---------------
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(c) The adviser has elected to reimburse certain operating expenses of the S&P
500 Index Portfolio, but it may cease that waiver, in whole or in part,
without prior written notice.
(d) Commenced operations December 15, 1999.
Form 5830
40
<PAGE> 42
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 43
ONE FUND, INC.
One Financial Way
Cincinnati, Ohio 45242
Telephone 1-800-578-8078
STATEMENT OF ADDITIONAL INFORMATION
November 1, 2000
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus of ONE Fund, Inc. ("ONE Fund") dated
November 1, 2000.
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 Contents
---- --------
<S> <C>
3 ONE Fund
3 ONE Fund Performance
Current Yield of Money Market Portfolio
Current Yield of Income and Income & Growth Portfolios
Total Return
6 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
Convertible Securities
Zero-Coupon and Pay-in-Kind Debt Securities
Securities Lending
Warrants
When-Issued and Delayed Delivery Transactions
Borrowing Money
17 Management of ONE Fund
Directors and Officers of ONE Fund
Compensation of Directors
Shareholders' Meetings
Controlling Persons and Principal Shareholders
Investment Advisory and Other Services
22 Brokerage Allocation
</TABLE>
<PAGE> 44
<TABLE>
<S> <C>
23 Purchase and Redemption of Shares
Reducing the Sales Charge
25 Tax Status
26 Underwriters
26 Experts
26 Legal Counsel
26 The S&P 500
28 Appendix
Debt Security Ratings
32 Financial Statements
</TABLE>
2
<PAGE> 45
ONE FUND
ONE Fund is an open-end diversified management investment company which
presently consists of 8 separate portfolios - Money Market Portfolio, Income
Portfolio, Income & Growth Portfolio, Growth Portfolio, Core Growth, Small Cap
Portfolio, International Portfolio, and S&P 500 Index 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, the Small Cap Portfolio in
November 1994, the Core Growth Portfolio in November 1996, and the S&P 500 Index
Portfolio in December 1999.
The investment and reinvestment of ONE Fund assets other than International and
Core Growth Portfolio assets is directed by ONE Fund's investment adviser, Ohio
National Investments, Inc. (the "Adviser"), a wholly-owned Ohio corporation and
subsidiary of The Ohio National Life Insurance Company ("ONLI") also an Ohio
corporation. 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 One Financial Way, Cincinnati,
Ohio 45242. The investment and reinvestment of Core Growth Portfolio assets is
managed by Pilgrim Baxter & Associates, Ltd. ("PBA") as sub-adviser. The
principal business address of PBA is 825 Duportail Road, Wayne, Pennsylvania
19087. The investment and reinvestment of the International Portfolio's assets
is managed by Federated Global Investment Management ("FGIM") as sub-adviser.
The principal business address of FGIM is 175 Water Street, New York, New York
10038.
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, Russell
3000 Growth 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, Wilshire 5000 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
3
<PAGE> 46
the methods of calculating current yields and total return, and states ONE
Fund's policy with respect to each portfolio's turnover rate.
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 INCOME, AND INCOME & GROWTH PORTFOLIOS
Current yield for these two 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.
4
<PAGE> 47
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).
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, 2000, are as follows:
<TABLE>
<CAPTION>
Aggregate
One Avg. Annual From Five Year From Inception
Year Five Year Inception Aggregate Inception Date
---- --------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Money Market 4.98% 4.87% 4.93% 23.48% 42.20% 8/18/92
Income (1.29)% 4.49% 4.97% 31.27% 47.88% 8/18/92
Income & Growth 6.76% 12.43% 11.97% 92.67% 156.61% 8/18/92
Growth 24.98% 15.89% 15.17% 118.49% 217.82% 8/18/92
Core Growth 91.92% n/a 26.58% n/a 160.52% 11/01/96
Small Cap (0.06)% 6.09% 6.77% 13.93% 44.93% 11/01/94
International 59.10% 12.66% 14.82% 86.38% 167.34% 05/01/93
S&P 500 Index n/a n/a (3.61)% n/a (2.28)% 12/15/99
</TABLE>
(*)Non-annualized.
5
<PAGE> 48
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, 2000 (assuming
a hypothetical initial investment of $10,000 and payment of the maximum
applicable sales charge) were as follows:
<TABLE>
<CAPTION>
One Five From Inception
Year Year Inception Date
<S> <C> <C> <C> <C>
Money Market 10,498 12,671 14,220 8/18/92
Income 19,032 12,460 14,915 8/18/92
Income & Growth 10,381 17,974 24,385 8/18/92
Growth 12,499 20,617 30,230 8/18/92
Core Growth 19,190 N/A 23,260 11/01/96
Small Cap 10,009 13,312 14,501 11/01/94
International 15,909 18,159 27,715 5/01/93
S&P 500 Index N/A N/A 9,831 12/15/99
</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.
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.
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 10% for the last fiscal
year, and 4% for the fiscal year ended June 30, 1999.
Income & Growth Portfolio - The rate of portfolio turnover will vary from
time to time but is not expected to exceed 50% annually. It was 64% for
the last fiscal year, and 49% for the fiscal year ended June 30, 1999.
6
<PAGE> 49
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 66% for the last
fiscal year, and 53% for the fiscal year ended June 30, 1999.
Core Growth Portfolio - This portfolio will sometimes engage in short-term
trading and its turnover will tend to rise during periods of economic
turbulence. Under normal market conditions, the annual portfolio turnover
rate is expected to be between 100% and 300%. The rate was 247% for the
last fiscal year, and 148% for the fiscal year ended June 30, 1999. The
increase in portfolio turnover was due to a reallocation of the
portfolio's assets.
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 111% for the last fiscal year, and 48% for the fiscal year
ended June 30, 1999.
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 total
return. 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 234% for
the last fiscal year, and 217% for the fiscal year ended June 30, 1999.
The increase in portfolio turnover was due to a change in subadviser and
the subsequent reallocation of the Portfolio's assets.
Securities of the S&P 500 Index Portfolio will not be actively traded. Although
it will often purchase fixed-income securities with relatively short
maturities, those transactions are not expected to generate substantial
brokerage commissions. The annual turnover rate is not normally expected to
exceed 100%.
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.
7
<PAGE> 50
One of ONE Fund's fundamental restrictions is that it may not issue senior
securities, except to the extent that the borrowing of money is 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
except the International Portfolio 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. 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. 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 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);
8
<PAGE> 51
(Nonfundamental)
10. invest more than 15% 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. invest in securities of foreign issuers except that (a) each of the
Income, Income & Growth, Growth, Core Growth, Small Cap and S&P 500
Index 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;
9
<PAGE> 52
14. 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 Portfolio 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).
The following are the fundamental investment policies related to the
International Portfolio
1. The portfolio will not issue senior securities, except that the
portfolio may borrow money directly or through reverse repurchase
agreements in amounts not in excess of one-third of the value of its total
assets; provided that, while borrowings and reverse repurchase agreements
outstanding exceed 5% of the portfolio's total assets, any such borrowings
will be repaid before additional investments are made.
2. The portfolio will not purchase securities if, as a result of such
purchase, 25% or more of the portfolio's total assets would be invested in
any one industry. However, the portfolio may at any time invest 25% or more
of its total assets in cash or cash items and securities issued and/or
guaranteed by the U.S. government, its agencies or instrumentalities.
3. The portfolio will not purchase or sell real estate, although it
may invest in securities of companies whose business involves the purchase
or sale of real estate or in securities secured by real estate or interests
in real estate.
4. The portfolio will not lend any of its assets, except the
portfolio's securities, up to one-third of its total assets. This shall not
prevent the portfolio from purchasing or holding corporate or U.S.
government bonds, debentures, notes, certificates of indebtedness or other
debt securities of an issuer, entering into repurchase agreements, or
engaging in other transactions which are permitted by the portfolio's
investment objectives and policies.
5. The portfolio will not underwrite any issue of securities, except
as the portfolio may be deemed to be an underwriter under the Securities
Act of 1933 in connection with the sale of securities in accordance with
its investment objectives, policies, and limitations.
6. With respect to 75% of its total assets, the portfolio will not
purchase the securities of any one issuer (other than cash, cash items, or
securities issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer. Also, the portfolio will not
purchase more than 10% of any class of the outstanding voting securities of
any one issuer. For these purposes, the portfolio considers common stock
and all preferred stock of an issuer each as a single class, regardless of
priorities, series, designations, or other differences.
7. The portfolio will not purchase any securities on margin, but it
may obtain such short-term credits as are necessary for clearance of
transactions. The deposit or payment by the portfolio of initial or
variation margin in connection with financial futures contracts or related
options transactions is not considered the purchase of a security on
margin.
8. The portfolio will not purchase or sell commodities, except that
the portfolio may purchase and sell financial futures contracts and related
options.
9. The portfolio will not pledge, mortgage or hypothecate any assets
except to secure permitted borrowings. In those cases, the portfolio may
pledge, mortgage or hypothecate assets having a market value not exceeding
the lesser of the dollar amounts borrowed or 15% of the value of its total
assets at the time of borrowing.
10. The portfolio will not sell securities short unless during the
time the short position is open, the portfolio owns an equal amount of the
securities sold or securities readily and freely convertible into or
exchangeable, without payment of additional consideration, for securities
of the same issue as, and equal in amount to, the securities sold short;
and not more than 10% of the portfolio's net assets (taken at current
value) is held as collateral for such sales at any one time.
11. The portfolio will not invest more than 15% of its net assets in
illiquid securities, including, among others, repurchase agreements
providing for the settlement more than seven days after notice, and certain
restricted securities not determined by the Board of Directors to be
liquid.
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 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 the International Portfolio 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 (Hong Kong,
Shanghai and Shenzhen Exchanges), Czech Republic, Egypt, Greece, 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.
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 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.
10
<PAGE> 53
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.
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 or Sub-adviser to present minimal
credit risks in accordance with criteria established by ONE Fund's Board of
Directors. The Adviser or Sub-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
11
<PAGE> 54
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 repurchase 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.
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.
12
<PAGE> 55
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.
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
13
<PAGE> 56
(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.
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.
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
14
<PAGE> 57
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 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 limit 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.
15
<PAGE> 58
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.
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.
16
<PAGE> 59
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 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.
CONVERTIBLE SECURITIES
Convertible securities include a variety of instruments that can be exchanged
for or converted into common stock, including convertible bonds or debentures,
convertible preferred stock, units consisting of usable bonds and warrants, and
securities that cap or otherwise limit returns to the security holder. Examples
of these include dividend enhanced convertible stocks or debt exchangeable for
common stock (DECS), liquid yield option notes (LYONS), preferred equity
redemption cumulative stock (PERCS), preferred redeemable increased dividend
securities (PRIDES) and zero coupon convertible securities.
As with all fixed-income securities, various market forces influence the market
value of convertible securities, including changes in the level of interest
rates. As the level of interest rates increases, the market value of convertible
securities may decline and, conversely, as interest rates decline, the market
value of convertible securities may increase. The unique investment
characteristic of convertible securities, the right to be exchanged for the
issuer's common stock, causes the market value of convertible securities to
increase when the underlying common stock increases. However, since securities
priced fluctuate, there can be no assurance of capital appreciation, and most
convertible securities will not reflect quite as much capital appreciation as
their underlying common stocks. When the underlying common stock is experiencing
a decline, the value of the convertible security tends to decline to a level
approximating the yield-to-maturity basis of straight nonconvertible debt of
similar quality, often call "investment value," and may not experience the same
decline as the underlying common stocks.
Many convertible securities sell at a premium over their conversion values
(i.e., the number of shares of common stock to be received upon conversion
multiplied by the current market price of the stock). This premium represents
the price investors are willing to pay for the privilege of purchasing a
fixed-income security with a possibility of capital appreciation due to the
conversion privilege. If this appreciation potential is not realized, the
premium may not be recovered.
ZERO-COUPON AND PAY-IN-KIND DEBT SECURITIES
Zero-coupon securities (or "step-ups") in which a portfolio may invest are debt
obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior to
maturity. Pay-in-kind securities make periodic interest payments in the form of
additional securities (as opposed to cash). Zero-coupon and pay-in-kind
securities usually trade at a deep discount from their face or par value and are
subject to greater market value fluctuations from changing interest rates than
debt obligations of comparable maturities which make current distributions of
interest. As a result, the net asset value of shares of a portfolio investing in
zero-coupon and pay-in-kind securities may fluctuate over a greater range than
shares of other mutual funds investing in securities making current
distributions of interest and having similar maturities.
SECURITIES LENDING
A portfolio may lend its portfolio securities, provided: (1) the loan is secured
continuously by collateral consisting of U.S. Government securities, cash or
cash equivalents adjusted daily to have market value at least equal to the
current market value of the securities loaned; (2) the portfolio may at any time
call the loan and regain the securities loaned; (3) a portfolio will receive any
interest or dividend paid on the loaned securities; and (4) the aggregate market
value of any portfolio's securities loaned bill not at any time exceed one-third
(or such other limit as the Board of Directors may establish) of the total
assets of the portfolio. In addition, it is anticipated that a portfolio may
share with the borrower some of the income received on the collateral for the
loan or that the portfolio will be paid a premium for the loan.
Before a portfolio enters into a loan, the Adviser or sub-adviser considers all
relevant facts and circumstances, including the creditworthiness of the
borrower. The risks in lending portfolio securities, as with other extensions of
credit, consist of possible delay in recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially. Although
voting rights or rights to consent with respect to the loaned securities pass to
the borrower, a portfolio retains the right to call the loans at any time on
reasonable notice, and it will do so in order that the securities may be voted
by a portfolio if the holders of such securities are asked to vote upon or
consent to matters materially affecting the investment.
WARRANTS
Warrants basically are options to purchase common stock at a specific price
(usually at a premium above the market value of the optioned common stock at
issuance) valid for a specified period of time. Warrants may have a life ranging
from less than a year to twenty years or may be perpetual. However, warrants
have expiration dates after which they are worthless. In addition, if the market
price of the common stock does not exceed the warrant's exercise price during
the life of the warrant, the warrant will expire as worthless. Warrants have no
voting rights, pay no dividends, and have no rights with respect to the assets
of the corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage increase
or decrease in the market price of the optioned common stock.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for a portfolio. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the portfolio
sufficient to make payment for the securities to be purchased are segregated on
the portfolio's records at the trade date. These assets are marked to market
daily and are maintained until the transaction has been settled. No portfolio
will engage in when-issued and delayed delivery transactions to an extent that
would cause the segregation of more than 20% of the total value of its assets.
BORROWING MONEY
The portfolios will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in excess of 5%
of the value of a portfolio's total assets. In addition, certain portfolios may
enter into reverse repurchase agreements and otherwise borrow up to one-third of
the value of the portfolio's total assets, including the amount borrowed, in
order to meet redemption requests without immediately selling portfolio
securities. This latter practice is not for investment leverage but solely to
facilitate management of a portfolio by enabling it to meet redemption requests
when the liquidation of portfolio instruments would be inconvenient or
disadvantageous.
Interest paid on borrowed funds will not be available for investment and will
reduce net income. A portfolio will liquidate any such borrowings as soon as
possible and may not purchase any portfolio securities while the borrowings are
outstanding. However, during the period any reverse repurchase agreements are
outstanding, but only to the extent necessary to assure completion of the
reverse repurchase agreements, the purchase of portfolio securities will be
limited to money market instruments maturing on or before the expiration date of
the reverse repurchase agreements.
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 Corporate Vice President, Counsel
One Financial Way Director and Secretary, ONLI; Secretary
Cincinnati, Ohio of the Adviser and Ohio National Equities
Inc.; Secretary and Director of ONF.
James E. Bushman Director President & CEO, Cast-Fab
3040 Forrer Street Technologies, Inc.
Cincinnati, Ohio
George E. Castrucci Director Director of ONF; Retired; Formerly
8355 Old Stable Road President and Chief Operating
Cincinnati, Ohio Officer of Great American
Communications Co. and Chairman and Chief
Executive Officer of Great
American Broadcasting Co.; Director
of Benchmark Savings Bank; Director of
Baldwin Piano & Organ Co.
Ross Love Director President & CEO, Blue Chip Broadcasting,
615 Windings Way Ltd.; Trustee, Health Alliance of Greater
Cincinnati, Ohio Cincinnati; Director, Partnership for a
Drug Free America (Chairman of African-
American Task Force); Advisory Board,
Syracuse University School of Management;
Director of ONF; Director, Association of
National Advertisers; Until 1996 was Vice
President of Advertising, Procter & Gamble Co.
John J. Palmer* President and Executive Vice President,
One Financial Way Director Strategic Initiatives, ONLI;
Cincinnati, Ohio President and Director of ONF;
President and Director of ONLI's
broker-dealers; Prior to March
1997 was Senior Vice President
of Life Insurance Company of
Virginia.
</TABLE>
17
<PAGE> 60
<TABLE>
<S> <C> <C>
George M. Vredeveld Director Professor of Economics, University of
University of Cincinnati Cincinnati; Director of Center for
P.O. Box 210223 Economic Education; Private
Cincinnati, Ohio Consultant; Director of Benchmark
Savings Bank.
Thomas A. Barefield Vice President Sr. Vice President, Institutional
One Financial Way Sales, ONLI; Vice President of ONF;
Cincinnati, Ohio Sr. Vice President of ONEQ.
Prior to December 1997, Senior Vice
President, Life Insurance Company
Michael A. Boedeker Vice President Vice President, Senior Investment
One Financial Way Officer, ONLI; Vice President
Cincinnati, Ohio and Director of the Adviser;
Vice President of ONF.
Christopher A. Carlson Vice President Executive Vice President, ONLI;
One Financial Way President and Director of the
Cincinnati, Ohio Adviser; Vice President of ONF.
Dennis R. Taney Treasurer Mutual Funds Financial Operations
One Financial Way Director, ONLI; Treasurer of
Cincinnati, Ohio the Adviser; Treasurer of ONF
Yvonne L. Gross Compliance Director Compliance Director, ONF. From 1998
One Financial Way & Assistant Treasurer to 2000 was an Internal Marketing
Cincinnati, Ohio Representative, Institutional Sales,
ONLI. Prior to 1998 was a registered
representative with H.J. Mayers,
Inc. and Service Consultant with
Delaware Investments, Inc.
Marcus L. Collins Assistant Secretary Senior Attorney, ONLI. Prior
One Financial Way to 1999 was counsel to Countrywide
Cincinnati, Ohio Financial Services, Inc. (1998) and
legal contract employee for the U.S.
Department of Justice (1991-1998)
</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, PBA or FGIM were compensated as
follows during the fiscal year ended June 30, 2000:
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
Name of Director from ONE Fund from Fund Complex*
---------------- ---------------------- ------------------
<S> <C> <C>
George E. Castrucci $ 3,750 $ 8,800
Ross Love 4,400 11,000
George M. Vredeveld 4,800 11,200
James E. Bushman 1,450 3,200
</TABLE>
18
<PAGE> 61
*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.
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. The Adviser is also 100% owned by
ONLI.
As of September 30, 2000, 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 8,177,679 $ 8,177,679 54.8%
Income 511,248 $ 4,746,055 81.5%
Income & Growth 348,523 $ 5,339,381 42.5%
Growth 240,532 $ 4,935,717 40.0%
Core Growth 250,100 $ 5,197,078 58.6%
Small Cap 204,606 $ 2,267,033 59.9%
International 196,573 $ 3,561,899 24.8%
S&P 500 Index 490,512 $ 5,062,087 91.4%
</TABLE>
In addition, as of that date, Bradley Warnamurde, c/o ONLI, One Financial Way,
Cincinnati, Ohio 45242 owned 75,070.728 shares of the International Portfolio
having a total net asset value of $1,246,924.79 and representing 9.486% 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
19
<PAGE> 62
program by placing the orders for the purchase and sale of securities or, in the
case of the International Portfolio, delegates that implementation to FGIM.
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
agreements with Firstar Bank and Investors Fiduciary Trust Company, and the
agency agreement with American Data Services, Inc.), 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 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 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
assets, 0.25% of the next $150 million, and 0.2% of assets over $250 million;
(c) for assets held in the Small Cap Portfolio, the fee is at an annual rate of
0.65% of the first $100 million of assets, 0.55% of the next $150 million, and
0.45% of assets over $250 million; (d) for assets held in the International
Portfolio, the fee is at an annual rate of 0.9% of assets in the portfolio, and
(e) for assets held in the Core Growth Portfolio, the fee is at an annual rate
of 0.95% of the first $150 million of assets and 0.8% of assets over $150
million and (f) for the assets held in the S&P 500 Index Portfolio, the fee is
at an annual rate of 0.40% of the first $100 million of assets, 0.35% of the
next $150 million, and 0.33% of net assets over $250 million.
Under the Investment Advisory Agreement, ONE Fund authorizes the Adviser to
retain sub-advisers for the Core Growth and International Portfolios, subject to
the approval of ONE Fund's Board of Directors. The Adviser has entered into a
Sub-Advisory Agreement with PBA to manage the investment and reinvestment of
Core Growth Portfolio assets, subject to the supervision of the Adviser. As
compensation for its services, PBA receives from the Adviser fees at the annual
rate of 0.65% of the first $50 million, 0.60% of the next $100 million, and
0.50% of the average daily net assets of that portfolio in excess of $150
million during the quarter for which the fee is paid. The Adviser has entered
into a Sub-Advisory Agreement with FGIM to manage the investment and
reinvestment of International Portfolio assets, subject to the supervision of
the Adviser. As compensation for its services, FGIM receives from the Adviser
fees at the annual rate of 0.45% of the first $200 million, and 0.40% of the
average daily net assets in excess of $200 million 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) and to
the Adviser as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2000 Earned Waived Net Fees
-------- ----------- ----------
Money Market $ 48,748 ($ 24,374) $ 24,374
Income 31,275 ( 9,408) 21,867
Income & Growth 62,987 ( 18,889) 44,098
Growth 56,747 ( 16,917) 39,830
Core Growth 62,935 0 62,935
Small Cap 23,231 ( 5,569) 17,662
International 104,919 0 104,919
S&P 500 Index 11,760 0 11,760
--------- ---------- ----------
$ 402,602 ($ 75,157) $ 327,445
1999 Earned Waived Net Fees
-------- --------- ----------
Money Market $ 50,298 ($ 25,149) $ 25,149
Income 33,132 ( 9,973) 23,159
Income & Growth 69,239 ( 20,784) 48,455
Growth 56,667 ( 17,042) 39,625
Core Growth 40,776 0 40,776
Small Cap 27,654 ( 6,482) 21,172
International 88,376 0 88,376
--------- --------- ----------
$ 366,142 ($ 79,430) $ 286,712
1998 Earned Waived Net Fees
-------- --------- ----------
Money Market $ 45,452 ($ 22,726) $ 22,726
Income 33,928 ( 10,178) 23,750
Income & Growth 73,633 ( 22,090) 51,543
Growth 71,522 ( 21,457) 50,065
Core Growth 51,878 0 51,878
Small Cap 38,468 ( 8,886) 29,582
International 152,991 0 152,991
--------- --------- ----------
$ 467,872 ($ 85,342) $ 382,535
</TABLE>
20
<PAGE> 63
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 1%, on an annualized basis, of the portfolio's average daily net
asset value, the Adviser will pay such expenses. During the last fiscal year,
the Adviser reimbursed the International Portfolio $45,937, and the Small cap
Portfolio $9,818 and the S&P 500 Index Portfolio $553 under these 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 and the Service Agreement were approved by a
vote of ONE Fund's Board of Directors on January 24, 1996, and the shareholders
on March 28, 1996. The Sub-Advisory Agreement for the International Portfolio
was approved by a vote of ONE Fund's Board of Directors on December 7, 1998 and
the shareholders on April 5, 1999. The Investment Advisory Agreement, the
Service Agreement and the Sub-Advisory Agreement for the Core Growth Portfolio
were approved by the Board of Directors on August 22, 1996 and by the
shareholders of the Core Growth Portfolio on October 31, 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 foregoing agreements were approved by the Board of Directors for
continuance on August 29, 1999.
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 Agreements may be terminated, without penalty, by the
21
<PAGE> 64
Adviser or the sub-adviser (PBA or FGIM) 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 primarily a compensation plan to compensate
broker-dealers that sell ONE Fund shares (the "Selling Dealers") for shareholder
services and for sales. The basic compensation 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. No interested person of
ONE Fund other than the Selling Dealers (and ONLI s a parent of a Selling
Dealer) 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.
BROKERAGE ALLOCATION
The Adviser buys and sells the portfolio securities for all the portfolios,
other than the Core Growth, and International Portfolios, and selects the
brokers to handle such transactions. The sub-advisers (PBA and FGIM) select the
brokers and dealers that execute the transactions for the portfolios managed by
them. It is the intention of the Adviser and each of the sub-advisers to place
orders for the purchase and sale of securities with the 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 and
sub-advisers 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
and sub-advisers consider a number of factors including the quality, efficiency
of execution and value of 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 or sub-adviser
may use a broker whose commission in effecting a securities transaction is in
excess of that of some other broker if the Adviser or sub-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. In
effecting a transaction for one portfolio, a broker may also offer services of
benefit to other portfolios managed by the Adviser or sub-adviser, or to the
benefit of its affiliates.
Generally, it is not possible to place a dollar value on research and related
services provided by brokers to the Adviser or a sub-adviser. However, receipt
of such services may tend to reduce the expenses of the Adviser or a
sub-adviser. Research, statistical and similar information furnished by brokers
may be of incidental assistance to ONLI, ONF or other clients or affiliates of
the Adviser or the sub-advisers and conversely, transaction costs paid by ONLI,
ONF or other clients or affiliates of the Adviser or the sub-advisers may
generate information which is beneficial to ONE Fund.
Consistent with these polices, the sub-advisers may, with the Board of
Directors' approval and subject to its review, direct portfolio transactions to
be executed by a broker affiliated with the sub-adviser 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.
22
<PAGE> 65
For each of the fiscal years ended June 30, the following brokerage commission
amounts were paid by each portfolio:
<TABLE>
<CAPTION>
2000 1999 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Money Market None None None None
Income None None None None
Income & Growth $113,485 $183,841 $ 4,194 $ 6,954
Growth 95,337 164,070 6,150 14,710
Core Growth 194,698 37,513 7,700 5,362
Small Cap 111,590 144,190 6,253 6,888
International 133,786 123,546 17,067 23,484
S&P 500 Index 1,449
-------- -------- ------- -------
Total $650,345 $653,166 $41,364 $57,398
</TABLE>
The increase in brokerage commissions paid in 1999 was due to a realignment of
the portfolios' assets.
During the fiscal year ended June 30, 2000, 100% of such commissions were paid
to brokers who furnished statistical data and research information to the
Adviser, PBA or FGIM.
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.
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.
23
<PAGE> 66
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 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.
24
<PAGE> 67
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 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.
25
<PAGE> 68
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
Ohio National Equities, Inc., One Financial Way, Cincinnati, Ohio 45242, a
wholly-owned subsidiary of ONLI, has served as principal underwriter for ONE
Fund shares since March 26, 1997. ONE Fund shares are offered by the registered
representatives of another wholly-owned subsidiary of ONLI, 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. The only compensation the
Underwriter receives is pursuant to the Portfolios' 12b-1 plan.
EXPERTS
The financial statements of ONE Fund as of June 30, 2000 and for the periods
then ended are incorporated by reference into in this Statement of Additional
Information and the Financial Highlights have been incorporated by reference in
the prospectus dated November 1, 2000 and have been incorporated by reference
herein and in the prospectus in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference in this
Statement of Additional Information, and upon the authority of said firm as
experts in accounting and auditing. KPMG LLP's business address is Two
Nationwide Plaza, Columbus, Ohio 43215.
TRANSFER AGENT
ADS, 150 Motor Parkway, Suite 109, Hauppauge, New York 11788, serves as ONE
Fund's transfer agent and its agent for bookkeeping, dividend disbursing and
certain shareholder services.
CUSTODIAN
Firstar Bank, 425 Walnut Street, Cincinnati, Ohio 45202, is the custodian for
all ONE Fund assets except those of the International Portfolio. The assets of
the International Portfolio are in the custody of State Street Bank, 801
Pennsylvania 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.
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 Corporate Vice President, Counsel and Secretary 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.
THE S&P 500
The S&P 500 is a widely publicized index that tracks 500 companies traded on
the New York and American Stock Exchanges and in the over-the-counter market.
It is weighted by market value so that each company's stock influences the S&P
500 in proportions to its relative market capitalization. Most of the stocks in
the S&P 500 are issued by companies that are among the 500 largest in the
United States in terms of aggregate market value. However, for diversification
purposes, some stocks of smaller companies are included in the S&P 500.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)" and "Standard & Poor's 500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by
the Advisor. The S&P 500 Index Portfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor's ("S&P") and S&P makes no representation regarding
the advisability of investing in the S&P 500 Index Portfolio. S&P makes no
representation or warranty, express or implied, to the owners of the Portfolio
or any member of the public regarding the advisability of investing in
securities generally or in the Portfolio particularly or the ability of the S&P
500 Index to track general stock market performance.
26
<PAGE> 69
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.
28
<PAGE> 70
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.
29
<PAGE> 71
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.
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.
30
<PAGE> 72
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.
31
<PAGE> 73
ONE FUND, INC.
FORM N-1A
PART C
OTHER INFORMATION
<PAGE> 74
FINANCIAL STATEMENTS AND EXHIBITS
The following audited financial statements are incorporated by reference in Part
B of this registration statement:
Statements of Assets and Liabilities as of June 30, 2000
Statements of Operations for the year ended June 30, 2000
Statements of Changes in Net Assets for the Year Ended June 30, 2000
Schedule of Investments at June 30, 2000 - - Money Market Portfolio
Schedule of Investments at June 30, 2000 - - Income Portfolio
Schedule of Investments at June 30, 2000 - - Income & Growth Portfolio
Schedule of Investments at June 30, 2000 - - Growth Portfolio
Schedule of Investments at June 30, 2000 - - Small Cap Portfolio
Schedule of Investments at June 30, 2000 - - International Portfolio
Schedule of Investments at June 30, 2000 - - Core Growth Portfolio
Schedule of Investments at June 30, 2000 - - S & P 500 Index Portfolio
Notes to Financial Statements as of June 30, 2000
Independent Auditors' Report of KPMG LLP dated August 16, 2000
The following audited financial information is included in Part A of this
registration statement:
Financial Highlights (for the years ended June 30, 2000)
Written consents of the following persons:
Ronald L. Benedict, Esq. as Legal Counsel to the Registrant
Jones & Blouch L.L.P. as Legal Counsel to the Registrant
KPMG LLP as Independent Certified Public Accountants for
the Registrant
Exhibits:
<PAGE> 75
All other relevant exhibits, which have previously been filed with the
Commission and are incorporated herein by reference, are as follows:
(a) Articles of Incorporation of the Registrant as filed in the Maryland
State Department of Assessments and Taxation on April 24, 1992, were
filed as Exhibit (1) of the Registrant's Form N-1A on May 18, 1992.
(a)(1) Articles of Amendment of the Registrant as filed in the Maryland State
Department of Assessments and Taxation on July 28, 1992, were filed as
Exhibit (1)(b) under Pre-effective Amendment No. 2 to the Registrant's
Form N-1A on July 27, 1992.
(a)(2) Articles Supplementary of the Registrant as filed in the Maryland
State Department of Assessments and Taxation on December 30, 1992 were
filed as Exhibit (1)(c) of the Registrant's Form N-1A, Post-effective
Amendment No. 1, on February 16, 1993.
(a)(3) Articles Supplementary of the Registrant as filed in the Maryland
State Department of Assessments and Taxation on September 29, 1994,
were filed as Exhibit (1)(d) of the Registrant's Form N-1A,
Post-effective Amendment no. 6, on May 4, 1995.
(a)(4) Articles Supplementary of the Registrant as filed in the Maryland
State Department of Assessments and Taxation on September 16,
1996 were filed as Exhibit (1)(e) of the Registrant's Form N-1A,
Post-effective Amendment no. 9 on November 12, 1996.
(b) By-laws of the Registrant as amended by the Board of Directors on
December 10, 1992 were filed as Exhibit (2) of the Registrant's Form
N-1A, Post-effective Amendment No. 1, on February 16, 1993.
(c) Specimen copies of certificated securities of the Money Market,
Income, Income & Growth and Growth Portfolios were filed as Exhibit
(4) of the Registrant's Form N-1A on May 18, 1992.
(c)(1) Specimen copy of certificated securities of the International
Portfolio were filed as Exhibit (4)(a) of the Registrant's Form N-1A,
Post-effective Amendment No. 2, on February 26, 1993.
(c)(2) Specimen copies of certificated securities of the Tax-Free Income,
Small Cap and Global Contrarian Portfolios were filed as Exhibit
(4)(b) of the Registrant's Form N-1A, Post-effective Amendment No. 5
on September 1, 1994.
(c)(3) Specimen copy of certificated securities of the Core Growth Portfolio
was filed as Exhibit (4)(c) of the Registrant's Form N-1A,
Post-effective Amendment no. 9 on November 12, 1996.
(d) Investment Advisory Agreement between the Registrant and Ohio National
Investments, Inc., dated May 1, 1996, was filed as Exhibit (5) of the
Registrant's Form N-1A, Post-effective Amendment No. 8 on August 21,
1996.
<PAGE> 76
(d)(1) Sub-Advisory Agreement (for the International and Global Contrarian
Portfolios) between Ohio National National Investments, Inc. and
Societe Generale Asset Management Corp., dated May 1, 1996, was filed
as Exhibit (5)(a) of the Registrant's Form N-1A, Post-effective
Amendment No. 8 on August 21, 1996.
(d)(2) Sub-Advisory Agreement (for the Core Growth Portfolio) between Ohio
National Investments, Inc. and Pilgrim Baxter & Associates, Ltd.,
dated November 1, 1996, was filed as Exhibit (5)(b) of the
Registrant's Form N-1A, Post-effective Amendment no. 9 on
November 12, 1996.
(d)(3)(1) Schedule A, amended October 31, 1996, to the Investment Advisory
Agreement between the Registrant and Ohio National Investments, Inc.,
dated May 1, 1996, was filed as Exhibit (5)(b)(1) of the Registrant's
form N-1A, Post-effective Amendment no. 9 on November 12, 1996.
(e) Principal Underwriting Agreement between the Registrant and Ohio
National Equities, Inc. was filed as Exhibit (6) of the Registrant's
Form N-1A, Post-effective Amendment No. 10, on April 30, 1997.
(g) Custodian Agreement dated May 12, 1992, between the Registrant and The
Provident Bank was filed as Exhibit (8) of the Registrant's Form N-1A
on May 18, 1992.
(g)(1) Custody Agreement (for the International Portfolio) between the
Registrant and Investors Fiduciary Trust Company was filed as Exhibit
(8)(a) of the Registrant's Form N-1A, Post-effective Amendment No. 3
on April 29, 1993.
(h)(1) Agency Agreement dated May 12, 1992, between the Registrant and The
Provident Bank was filed as Exhibit (9)(a) of the Registrant's Form
N-1A on May 18, 1992.
(h)(2) Repurchase Transactions, Terms and Conditions (master agreement) dated
May 12, 1992, between the Registrant and The Provident Bank was filed
as Exhibit (9)(b) of the Registrant's Form N-1A on May 18, 1992.
(h)(3) Service Agreement among the Registrant, Ohio National Investments,
Inc. and The Ohio National Life Insurance Company, dated May 1, 1996,
was filed as Exhibit (9)(c) of the Registrant's Form N-1A,
Post-effective Amendment No. 8, on August 21, 1996.
(h)(4) Joint Insured Agreement among the Registrant, Ohio National Fund, Inc.
and Ohio National Investments, Inc., dated May 1, 1996, was filed as
Exhibit (9)(d) of the Registrant's Form N-1A, Post-effective Amendment
No. 8, on August 21, 1996..
(h)(5) Engagement Letter of KPMG Peat Marwick as independent auditors for the
Registrant was filed as Exhibit (9)(e) of the Registrant's Form N-1A
on May 18, 1992.
(h)(6) Services Agreement (for the International Portfolio) between the
Registrant and Interactive Data Corporation was filed as Exhibit
(9)(f) of the Registrant's Form N-1A, Post-effective Amendment No. 4,
on September 2, 1993.
(i) Opinion and Consent of Ronald L. Benedict, Esq. was filed as Exhibit
(10) of the Registrant's Form N-1A on May 18, 1992.
(i)(1) Opinion and Consent of Ronald L. Benedict, Esq., as to the shares of
the Registrant's International Portfolio, was filed as Exhibit (10)(a)
of the Registrant's Form N-1A, Post-effective Amendment No. 2, on
February 26, 1993.
(i)(2) Opinion and consent of Ronald L. Benedict, Esq., as to the shares of
the Registrant's Tax-Free Income, Small Cap and Global Contrarian
Portfolios, was filed as Exhibit (10)(b) of the Registrant's Form
N-1A, Post-effective Amendment no. 6, on May 4, 1995.
(i)(3) Opinion and consent of Ronald L. Benedict, Esq., as to the shares of
the Registrant's Core Growth Portfolio was filed as Exhibit (10)(c) of
the Registrant's Form N-1A, Post-effective Amendment No. 8, on August
21, 1996.
<PAGE> 77
(l) Investment Letter, dated May 12, 1992, for initial subscription of
capital stock of the Registrant was filed as Exhibit (13) of the
Registrant's Form N-1A on May 18, 1992.
(l)(1) Supplement to Investment Letter, dated July 27, 1992, regarding
initial subscription of capital stock of the Registrant was filed as
Exhibit (13)(b) under Pre-effective Amendment No. 3 to the
Registrant's Form N-1A on August 14, 1992.
(l)(2) Investment Letter for the initial subscription of capital stock of the
Registrant's International Portfolio was filed as Exhibit (13)(c) of
the Registrant's Form N-1A, Post-effective Amendment No. 3 on April
29, 1993.
(l)(3) Investment letter for the initial subscription of capital stock of the
Registrant's Tax-Free Income, Small Cap and Global Contrarian
Portfolios was filed as Exhibit (13)(d) of the Registrant's Form N-1A,
Post-effective Amendment no. 6, on May 4, 1995.
(l)(4) Investment letter for the initial subscription of capital stock of
the Registrant's Core Growth Portfolio was filed as Exhibit (13)(e)
of the Registrant's Form N-1A, Post-effective Amendment no. 9 on
November 12, 1996.
(m) 12b-1 Distribution Plan of Ohio National Equity Fund, Inc. adopted May
12, 1992, was filed as Exhibit (15) of the Registrant's Form N-1A on
May 18, 1992.
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Registrant is an affiliate of The Ohio National Life Insurance Company
("ONLI"). The diagram on page 4A shows all persons under common control with
the Registrant. During 1998, ONLI reorganized to become a stock life insurer
owned by an intermediary corporation, Ohio National Financial Services, Inc.,
which is in turn owned by a mutual holding company, Ohio National Mutual
Holdings, Inc. ONLI owns 100% of the voting securities of each of its
subsidiaries. As of August 12, 1998 ONLI also owned of the voting
securities of Ohio National Fund, Inc. ("ONF") which are held of record in the
variable annuity separate accounts of ONLI. The remaining 8.4% of the voting
securities of ONF are held of record by ONLI's wholly-owned subsidiary, Ohio
National Life Assurance Corporation ("ONLAC") in the latter's variable life
insurance separate account. ONLI owns 100% of the voting securities of the
Registrant's investment adviser, Ohio National Investments, Inc. (the
"Adviser") and 100% of the voting securities of the Registrant's principal
underwriter, Ohio National Equities, Inc. ("ONEQ"). ONLI presently owns
of the voting securities of the Registrant.
NUMBER OF HOLDERS OF SECURITIES
As of September 30, 2000, the securities of the Registrant were held as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Money Market Portfolio 753
Income Portfolio 140
Income & Growth Portfolio 763
Growth Portfolio 995
Core Growth Portfolio 369
Small Cap Portfolio 461
International Portfolio 1,126
</TABLE>
<PAGE> 78
OHIO NATIONAL MUTUAL HOLDINGS, INC.
A MUTUAL INSURANCE HOLDING COMPANY INCORPORATED UNDER THE LAWS OF OHIO
------------------------
OHIO NATIONAL FINANCIAL SERVICES, INC.
AN INTERMEDIATE INSURANCE HOLDING COMPANY INCORPORATED UNDER THE LAWS OF OHIO
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY/CINCINNATI
A STOCK LIFE INSURANCE COMPANY INCORPORATED UNDER THE LAWS OF OHIO
--------------------------------------------------------------------------------
<S> <C>
------------------------------- -----------------------------
ENTERPRISE PARK, INC. OHIO NATIONAL EQUITIES INC.
A GEORGIA CORPORATION A BROKER/DEALER
REAL ESTATE DEVELOPMENT COMPANY CAPITALIZED BY ONLI @ $30,000
CAPITALIZED BY ONLI $50,000
------------------------------- --------------------------------
Pres. & Dir. M. Stohler Chm. & Dir. D. O'Maley
V.P. & Dir. R. Dolan Pres. & Dir. J. Palmer
Secy. & Dir. J. Fischer VP & Dir. T. Backus
Treas. & Dir. J. Sander VP & Dir. J. Miller
V.P. C. Carlson Sr. VP T. Barefield
Secretary & Dir. R. Benedict
VP Operations,
Treasurer &
Compliance Officer B. Turner
------------------------------- --------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY/CINCINNATI
A STOCK LIFE INSURANCE COMPANY INCORPORATED UNDER THE LAWS OF OHIO
-------------------------------------------------------------------------------------------------------------------
S E P A R A T E A C C O U N T S
--------------------------------
A B C D E F
--------------------------------
<S> <C> <C>
------------------------------- ------------------------------ -------------------------------------
OHIO NATIONAL INVESTMENTS, INC. THE O.N. EQUITY SALES COMPANY OHIO NATIONAL LIFE
ASSURANCE CORPORATION
AN INVESTMENT ADVISER AN OHIO CORPORATION AN OHIO CORPORATION
CAPITALIZED BY ONLI @ $10,000 A BROKER/DEALER A STOCK LIFE INSURANCE COMPANY
CAPITALIZED BY ONLI @ $790,000 CAPITALIZED BY ONLI @ $32,000,000
INCORPORATED UNDER THE LAWS OF OHIO
------------------------------- ------------------------------ ------------------------------------
Chm. & Dir. D. O'Maley Chm./Pres/.CEO & Dir. D. O'Maley
Pres. & Dir. C. Carlson Sr. VP & Dir. R. Dolan
Pres. & Dir. J. Palmer Sr. VP & Dir. J. Palmer
VP & Dir. M. Boedeker Sr. VP & Dir. S. Summers
V.P. & Dir. D. Twarogowski Sr. VP & Dir. T. Barefield
VP & Dir. M. Stohler Sr. VP A. Bowen
Secy. & Dir. M. Haverkamp Sr. Vice Pres. D. Cook
Dir. D. O'Maley Sr. Vice Pres. G. Smith
VP Operations, Treas. R. Broadwell
Dir. J. Palmer Treasurer & Vice President M. Boedeker
Compliance Officer B. Turner Vice President D. Twarogowski
Treasurer D. Taney Vice President T. Backus
Vice President G. Pearson
Secretary R. Benedict Vice President M. Stohler
Vice President J. Houser
VP J. Martin Secy. R. Benedict
VP T. Olson
VP S. Komrska Asst. Secy. J. Fischer
Asst. Actuary K. Flischel
------------------------------- ------------------------------ -------------------------------------
SEPARATE ACCOUNT
-------------------------------------
R
---
<CAPTION>
-= Advisor to Advisor to =-
--------------------------------------------------------
<S> <C> <C>
------------------ -------------------------------- --------------------------------
ONE FUND, INC. O.N. INVESTMENT MANAGEMENT CO. OHIO NATIONAL FUND
A MARYLAND CORPORATION AN OHIO CORPORATION A MARYLAND CORPORATION
AN OPEN END DIVERSIFIED A FINANCIAL ADVISORY SERVICE AN OPEN END DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY CAPITALIZED BY ONESCO @ $145,000 MANAGEMENT INVESTMENT COMPANY
----------------------------- -------------------------------- --------------------------------
Pres. & Dir. J. Palmer Pres. & Dir. J. Palmer Pres. & Dir. J. Palmer
Vice. Pres. M. Boedeker ----- Vice President M. Boedeker
Vice Pres. C. Carlson VP & Dir. G. Smith Vice President T. Barefield
Vice Pres. T. Barefield Vice President C. Carlson
Treasurer D. Taney Treasurer D. Taney
Secy. & Dir. R. Benedict --------Secy. & Dir. R. Benedict
Director R. Love Treasurer D. Taney Director R. Love
Director J. Bushman Director J. Bushman
Director G. Vredeveld Secretary M. Haverkamp Director G. Vredeveld
Sr. VP T. Barefield
--------------------------------- -------------------------------- ---------------------------------
</TABLE>
<PAGE> 79
INDEMNIFICATION
Under Section 2-418 of the Maryland General Corporation Law, with respect to any
proceedings against a present or former director, officer, agent or employee (a
"corporate representative") of the Registrant (a Maryland corporation), except a
proceeding brought by or on behalf of the Registrant, the Registrant may
indemnify the corporate representative against expenses, including attorneys'
fees, and judgments, fines, penalties, and amounts paid in settlement, if such
expenses were actually and reasonably incurred by the corporate representative
in connection with the proceedings, if: (i) he or she acted in good faith; (ii)
in the case of conduct in his or her official capacity he or she reasonably
believed that his or her conduct was in the best interests of the Registrant,
and in all other cases he or she reasonably believed that his or her conduct was
not opposed to the best interests of the Registrant; and (iii) with respect to
any criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful. The Registrant is also authorized under Section 2-418 of
the Maryland General Corporation Law to indemnify a corporate representative
under certain circumstances against reasonable expenses incurred in connection
with the defense of a suit or action by or in the right of the Registrant except
where the corporate representative has been adjudged liable to the Registrant.
Under Article 11 of the Registrant's By-laws, directors and officers of
Registrant are entitled to indemnification by the Registrant to the fullest
extent permitted under Maryland law and the Investment Company Act of 1940.
Reference is made to Article 11 of Registrant's By-laws and Section 2-418 of the
Maryland General Corporation Law.
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Adviser is engaged in providing investment management services to the
Registrant and to ONF. The Adviser is also authorized to provide such services
to others. The Adviser has not engaged in any other business of a substantial
nature during the past two fiscal years. The Adviser succeeded its predecessor,
O.N. Investment Management Company ("ONIMCO") as investment adviser to the
Registrant and ONF on May 1, 1996. The names of each director and officer
of the Adviser and the business of a substantial nature of each during the past
two fiscal years are as follows:
<TABLE>
<CAPTION>
Position with Business of a Substantial
Name the Adviser Nature During Past Two Years
---- ------------- ----------------------------
<S> <C> <C>
Michael A. Boedeker Director and Vice President, Senior Investment Officer
Vice President of ONLI; Vice President of ONLAC;
Vice President of Registrant;
Vice President of ONF; until 1997 was
Director and Vice President of ONIMCO.
Michael D. Stohler Director and Vice President, Mortgages and Real
Vice President Estate of ONLI; Vice President of ONLAC.
Christopher A. Carlson Director and Vice President, Senior Investment Officer
Vice President of ONLI; until 1999 was Investment Officer
of ONLI.
Jed R. Martin Vice President Investment Officer of ONLI
Stephen J. Komrska Vice President Investment Officer of ONLI
</TABLE>
<PAGE> 80
<TABLE>
<S> <C> <C>
Ronald L. Benedict Secretary Corporate Vice President, Counsel
and Secretary of ONLI; Director and
Secretary of Registrant; Director and
Secretary of ONF; Director and Secretary
of ONEQ; Secretary of ONLAC; until 1997
was Secretary of ONIMCO.
Dennis R. Taney Treasurer Mutual Fund Financial Operations
Director of ONLI; Treasurer
of Registrant; Treasurer of ONF;
until 1997 was Treasurer of ONIMCO.
</TABLE>
Business and Other Connections of FGIM.
Federated Global Investment Management Corp. ("FGIM") provides investment
management services to the International portfolio of the Registrant and to the
International and International Small Company portfolios of ONF. FGIM is
registered under the Investment Advisers Act (file no 801-49470) and its Form
ADV, containing details of the business and other connections of FGIM, its
officers and directors, is incorporated herein by reference.
<PAGE> 81
BUSINESS AND OTHER CONNECTIONS OF PBA
Pilgrim Baxter & Associates, Ltd. ("PBA") provides investment management
services to the Core Growth Portfolios of the Registrant and of ONF. PBA is
registered under the Investment Advisers Act (File no. 801-48872) and its Form
ADV, containing details of the business and other connections of FGIM, its
officers and directors, is incorporated herein by reference.
PRINCIPAL UNDERWRITERS
The principal underwriter, ONEQ, also acts as the principal underwriter of
variable annuity contracts issued by ONLI pursuant to Ohio National Variable
Accounts A (File No. 811-1978), B (File No. 811-1979) and D (File No. 811-8642).
ONEQ, is also the principal underwriter of variable life insurance contracts
issued by ONLAC pursuant to Ohio National Variable Account R (File No.
811-4320).
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
------------------ --------------------- ---------------------
<S> <C> <C>
David B. O'Maley Director and Chairman None
John J. Palmer Director, President and Director and President
Chief Executive Officer
James I. Miller II Director and Vice President None
Trudy K. Backus Director and Vice President None
Thomas A. Barefield Senior Vice President Vice President
Ronald L. Benedict Director and Secretary Director and Secretary
</TABLE>
<PAGE> 82
<TABLE>
<S> <C> <C>
Barbara Turner Operations Vice President None
Treasurer
Compliance and Financial
Operations Officer
</TABLE>
* The principal business address of each of the foregoing individuals is One
Financial Way, Cincinnati, Ohio 45242.
No commissions or compensation have been received, directly or indirectly,
during the Registrant's last fiscal year, by any principal underwriter that is
not an affiliated person of the Registrant or an affiliated person of such an
affiliated person.
LOCATION OF ACCOUNTS AND RECORDS
The books and records required under Section 31(a) and Rules thereunder are
maintained and in the possession of the following persons:
(a) Journals and other records of original entry:
For those portfolios other than the International
Portfolio:
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
and
American Data Services, Inc. ("ADS")
24 West Carver Street
Huntington, NY 11743
For the International Portfolio:
State Street Bank ("State Street")
127 West Tenth Street
Kansas City, Missouri 64105
(b) General and auxiliary ledgers:
ADS and State Street
(c) Securities records for portfolio securities:
ADS and State Street
<PAGE> 83
(d) Corporate charter (Articles of Incorporation), By-Laws and
Minute Books:
Ronald L. Benedict, Secretary
ONE Fund, Inc.
One Financial Way
Cincinnati, Ohio 45242
(e) Records of brokerage orders:
The Adviser
(f) Records of other portfolio transactions:
The Adviser
(g) Records of options:
The Adviser
(h) Records of trial balances:
ADS and State Street
(i) Quarterly records of allocation of brokerage orders and
commissions:
The Adviser
(j) Records identifying persons or group authorizing portfolio
transactions:
The Adviser
(k) Files of advisory materials
The Adviser
MANAGEMENT SERVICES
Not Applicable
UNDERTAKINGS
Not Applicable
<PAGE> 84
SIGNATURES
Pursuant to the requirements of the Securities Act of l933 and the Investment
Company Act of l940, ONE Fund, Inc. certifies that it meets all of the
requirements for effectiveness of this registration statement under Rule 485(b)
and has duly caused this post-effective amendment to its registration statement
to be signed on its behalf by the ned thereunto duly authorized in the City
of Cincinnati and the State of Ohio on the 23rd day of October, 2000.
ONE FUND, INC.
By /s/ John J. Palmer
------------------------------
John J. Palmer, President
Attest /s/ Ronald L. Benedict
-----------------------
Ronald L. Benedict, Secretary
Pursuant to the requirements of the Securities Act of l933, this post-effective
amendment to its registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
John J. Palmer President and Director October 23, 2000
----------------------- (Principal Executive Officer)
John J. Palmer
/s/ Dennis R. Taney Treasurer (Principal Financial October 23, 2000
----------------------- and Accounting Officer)
Dennis R. Taney
/s/ Ronald L. Benedict Director October 23, 2000
-----------------------
Ronald L. Benedict
/s/ George E. Castrucci Director October 23, 2000
-----------------------
George E. Castrucci
/s/ Ross Love Director October 23, 2000
-----------------------
Ross Love
/s/ George M. Vredeveld Director October 23, 2000
-----------------------
George M. Vredeveld
<PAGE> 85
INDEX OF CONSENTS AND EXHIBITS
Page Number in
Exhibit Sequential Numbering
Number Description System Where Located
------- ----------- --------------------
Consent of Ronald L. Benedict, Esq.
Consent of Jones & Blouch L.L.P.
Consent of KPMG LLP
<PAGE> 86
[OHIO NATIONAL FINANCIAL SERVICES LETTERHEAD]
October 23, 2000
The Board of Directors
ONE Fund, Inc.
One Financial Way
Cincinnati, Ohio 45242
Re: ONE Fund, Inc. Registration Statement
File Nos. 33-47811 and 811-6675
Post-effective Amendment No. 14
Gentlemen:
The undersigned hereby consents to the use of my name under the caption of
"Legal Counsel" in the registration statement on Form N-1A of the above
captioned registrant.
Sincerely,
/s/ Ronald L. Benedict
---------------------------
Ronald L. Benedict
Secretary and Legal Counsel
RLB/nh
<PAGE> 87
Jones & Blouch L.L.P.
Suite 405-West
1025 Thomas Jefferson St., N.W.
Washington, DC 20007
(202) 223-3500
October 23, 2000
ONE Fund, Inc.
One Financial Way
Cincinnati, OH 45201
Dear Sirs:
We hereby consent to the reference to this firm under the caption
"Legal Counsel" in the Statement of Additional Information included in
Post-Effective Amendment No. 14 under the Securities Act of 1933 to the
Registration Statement for ONE Fund, Inc. to be filed with the Securities and
Exchange Commission, File No. 33-47811.
Very truly yours,
/s/ Jones & Blouch L.L.P.
--------------------------
Jones & Blouch L.L.P.
<PAGE> 88
INDEPENDENT AUDITORS' CONSENT
To Board of Directors of
ONE Fund, Inc.:
We consent to the use of our report for the ONE Fund, Inc. dated August 16,
2000, incorporated by reference herein, and to the use our name under the
headings "Financial Highlights" in the Prospectus and "Experts" in the
Statement of Additional Information in Post-Effective Amendment No. 14 to
File No. 33-47811.
/s/ KPMG, LLP
Columbus, Ohio
October 27, 2000
