SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
One Group[RegTM] Mutual Funds
1111 Polaris Parkway
Columbus, Ohio 43271
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(Name of Registrant as specified in its Charter)
Jessica K. Ditullio, Esq.
Bank One Corporation
1111 Polaris Parkway
Columbus, Ohio 43271
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and 0-11.
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which transaction applies: N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total Fee paid: N/A
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid: N/A
2) Form, schedule or Registration statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
ONE GROUP[RegTM] HIGH YIELD BOND FUND
ONE GROUP[RegTM] INCOME BOND FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 26, 2003
Notice is hereby given that a Special Meeting of the Shareholders
("Special Meeting") of One Group High Yield Bond Fund (the "High Yield Bond
Fund") and One Group Income Bond Fund (the "Income Bond Fund"), each a separate
series of One Group[RegTM] Mutual Funds (the "Trust"), will be held at 10:00
a.m. (Eastern Time) on February 26, 2003 at the Trust's offices, 1111 Polaris
Parkway, Suite 2-J, Columbus, Ohio 43271, for the following purposes:
1. To approve a new Sub-Investment Advisory Agreement between Banc One
Investment Advisors Corporation and Banc One High Yield Partners,
LLC with respect to the High Yield Bond Fund effective upon
termination of the current Sub-Investment Advisory Agreement.
2. To approve a new Sub-Investment Advisory Agreement between Banc One
Investment Advisors Corporation and Banc One High Yield Partners,
LLC with respect to the Income Bond Fund effective upon termination
of the current Sub-Investment Advisory Agreement.
3. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
The proposals referred to above are discussed in the Proxy Statement
attached to this Notice. Each Shareholder is invited to attend the Special
Meeting in person.
Shareholders of record at the close of business on December 13, 2002 (the
"Shareholders") are entitled to notice of, and to vote at, this Special Meeting
or any adjournment thereof.
By Order of the Trustees
/s/ MARK A. BEESON
MARK A. BEESON
President
January 10, 2003
YOUR VOTE IS IMPORTANT. YOU CAN HELP THE FUND AVOID THE NECESSITY AND EXPENSE
OF SENDING FOLLOW-UP LETTERS TO ENSURE A QUORUM BY PROMPTLY:
1. VOTING ON-LINE,
2. VOTING BY CALLING TOLL-FREE, OR
3. MARKING, SIGNING, DATING AND RETURNING THE ENCLOSED PROXY. (THE
ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES).
IF YOU ARE UNABLE TO ATTEND THE SPECIAL MEETING, PLEASE VOTE BY ONE OF THESE
THREE METHODS SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE SPECIAL
MEETING.
ONE GROUP[RegTM] HIGH YIELD BOND FUND
ONE GROUP[RegTM] INCOME BOND FUND
1111 Polaris Parkway
Columbus, Ohio 43271
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 26, 2003
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Trustees (the
"Trustees") of One Group[RegTM] Mutual Funds (the "Trust") on behalf of One
Group High Yield Bond Fund (the "High Yield Bond Fund") and One Group Income
Bond Fund (the "Income Bond Fund"). The proxy is revocable at any time before it
is voted by sending written notice of the revocation or a subsequently executed
proxy to the Trust at the above address or by appearing personally and electing
to vote on February 26, 2003 at the Special Meeting of Shareholders of the High
Yield Bond Fund and the Income Bond Fund (collectively, the "Funds") at 10:00
a.m. (Eastern Time) at 1111 Polaris Parkway, Suite 2-J, Columbus, Ohio 43271
(such meeting and any adjournment thereof is referred to herein as the "Special
Meeting"). The cost of preparing and mailing the Notice of Special Meeting, the
proxy card, this proxy statement and any additional proxy material has been or
is to be borne jointly by Banc One Investment Advisors Corporation and Banc One
High Yield Partners, LLC. Proxy solicitations will be made primarily by mail,
but may also be made by telephone, internet, or personal interview conducted by
certain officers or employees of the Trust or One Group Administrative Services,
Inc. (the Trust's administrator pursuant to a Management and Administration
Agreement between One Group Administrative Services, Inc. and the Trust). In the
event that the Shareholder signs and returns the proxy ballot, but does not
indicate a choice as to any of the items on the proxy ballot, the proxy
attorneys will vote those Shares in favor of such proposal(s).
Only Shareholders of record at the close of business on December 13, 2002
will be entitled to vote at the Special Meeting. On December 13, 2002, the High
Yield Bond Fund had 86,343,163.453 shares outstanding and the Income Bond Fund
had 170,906,405.437 shares outstanding. Each Share of each Fund is entitled to
one vote, with each fractional share being entitled to a proportionate
fractional vote on each matter to be acted upon at the Special Meeting. This
proxy statement and the enclosed proxy card will be sent to Shareholders of
record on or about January 10, 2003.
One Group Mutual Funds' Declaration of Trust and Code of Regulations do
not provide for annual shareholder meetings, and no such meetings are planned
for 2003. Proposals that shareholders would like to have included in a proxy
statement for any future meeting must be received by One Group Mutual Funds
within a reasonable period of time prior to printing and mailing proxy material
for such meeting.
For purposes of determining the presence of a quorum and counting votes on
the matters presented, Shares represented by abstentions and "broker non-votes"
will be
counted as present, but not as votes cast, at the Special Meeting. Under the
Investment Company Act of 1940, as amended (the "1940 Act"), the affirmative
vote necessary to approve the matter under consideration may be determined with
reference to a percentage of votes present at the Special Meeting, which would
have the effect of treating abstentions and non-votes as if they were votes
against the proposal.
COPIES OF THE FUNDS' ANNUAL REPORT DATED JUNE 30, 2002 ARE AVAILABLE UPON
REQUEST FROM ONE GROUP ADMINISTRATIVE SERVICES, INC. AND MAY BE OBTAINED WITHOUT
CHARGE BY WRITING 1111 POLARIS PARKWAY, P.O. BOX 710211, COLUMBUS, OHIO
43271-02111 OR BY CALLING 1-800-480-4111.
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SUMMARY OF PROPOSALS
Description of Proposals Funds Solicited
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1. To approve a new Sub-Investment Advisory Agreement High Yield Bond Fund
between Banc One Investment Advisors Corporation and
Banc One High Yield Partners, LLC with respect to the
High Yield Bond Fund effective upon termination of the
current Sub-Investment Advisory Agreement.
2. To approve a new Sub-Investment Advisory Agreement Income Bond Fund
between Banc One Investment Advisors Corporation and
Banc One High Yield Partners, LLC with respect to the
Income Bond Fund effective upon termination of the
current Sub-Investment Advisory Agreement.
3. To transact such other business as may properly come Both Funds
before the Special Meeting.
Each Fund votes separately. Approval of each of the Proposals requires the
affirmative vote of the lesser of: (a) 67% or more of the outstanding Shares of
the applicable Fund present at the Special Meeting, if the holders of more than
50% of the outstanding Shares are present or represented by proxy, or (b) more
than 50% of the outstanding Shares of the applicable Fund.
BACKGROUND INFORMATION FOR PROPOSAL 1 AND PROPOSAL 2
Investment Advisory Agreement with Banc One Investment Advisors. Banc One
Investment Advisors Corporation ("Banc One Investment Advisors") serves as
investment advisor to the Funds pursuant to an investment advisory agreement
dated January 11, 1993 (the "Investment Advisory Agreement"). The Investment
Advisory Agreement will continue in effect as to the Funds from year to year, if
such continuance is approved at least annually by the Trust's Board of Trustees
or by vote of a majority of the outstanding shares of the High Yield Bond Fund
and the Income Bond Fund and, in either case, by a majority of the Trustees who
are not interested persons as defined in the 1940 Act, by vote cast in person at
a meeting called for such purpose. The Trust's Board of Trustees renewed the
Investment Advisory Agreement at their quarterly meeting on August 15, 2002. The
Investment Advisory Agreement may be terminated without penalty as to either
Fund at any time on 60 days' written notice by the Trustees, by vote of a
majority of the outstanding shares of that Fund, or by Banc One Investment
Advisors. The Investment Advisory Agreement also terminates automatically in the
event of any assignment, as defined in the 1940 Act.
Under the Investment Advisory Agreement, Banc One Investment Advisors
makes the day-to-day investment decisions for the Funds and continuously
reviews, supervises and administers the Funds' investment programs. As
consideration for its
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services, Banc One Investment Advisors is entitled to a fee at the annual rate
of seventy-five one-hundredths of one percent (.75%) of the High Yield Bond
Fund's daily net assets and sixty one-hundredths of one percent (.60%) of the
Income Bond Fund's daily net assets. For the period beginning November 1, 2002
and ending October 31, 2003, Banc One Investment Advisors and the Fund's
administrator, One Group Administrative Services, Inc. have contractually agreed
to waive fees and/or reimburse expenses to limit total annual fund operating
expenses to 1.15% for Class A shares, 1.80% for Class B shares, 1.80% for Class
C shares, and .90% for Class I shares of the High Yield Bond Fund and to .92%
for Class A shares, 1.57% for Class B shares, 1.57% for Class C shares, and .67%
for Class I shares of the Income Bond Fund. For the fiscal year ended June 30,
2002, the High Yield Bond Fund and the Income Bond Fund paid investment advisory
fees to Banc One Investment Advisors equal to $2,818,000 and $5,975,000,
respectively after taking into account fee waivers/reimbursements.
Banc One Investment Advisors has full responsibility for providing
investment advisory services to the High Yield Bond Fund and the Income Bond
Fund. However, Banc One Investment Advisors has discharged this responsibility
in part through retention of Banc One High Yield Partners, LLC ("Banc One High
Yield Partners") as sub-advisor under Investment Sub-Advisory Agreements between
Banc One Investment Advisors and Banc One High Yield Partners (collectively, the
"Current Sub-Investment Advisory Agreements"). The Current Sub-Investment
Advisory Agreements were renewed through August 31, 2003 at the Board's regular
quarterly meeting on August 15, 2002. Banc One Investment Advisors is solely
responsible for paying sub-advisory fees to Banc One High Yield Partners at its
own expense. As described below in detail, the Current Sub-Investment Advisory
Agreements may be deemed to terminate due to a change in control of one of the
owners of Banc One High Yield Partners. Approval of the Proposal 1 and Proposal
2 will allow the continuation of Banc One High Yield Partners' appointment as
sub-advisor for the High Yield Bond Fund and the Income Bond Fund.
Termination of Current Sub-Investment Advisory Agreements. As required by
the 1940 Act, each of the Current Sub-Investment Advisory Agreements contain a
provision providing for their automatic termination in the event of an
"assignment." Under the 1940 Act, a change in control of an investment advisor
(including a sub-advisor) results in an assignment and termination of the
investment advisor's investment advisory agreements. As described below, one of
the members of Banc One High Yield Partners will undergo a change in control
upon consummation of a proposed transaction. Such a change in control could be
deemed to result in the assignment of, and therefore the termination of, the
Current Sub-Investment Advisory Agreements. To avoid any uncertainty about the
status of the Current Sub-Investment Advisory Agreements, the Board of Trustees
of One Group Mutual Funds believes that it is in the best interests of the High
Yield Bond Fund and the Income Bond Fund to obtain shareholder approval of new
Sub-Investment Advisory Agreements (the "New
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Sub-Investment Advisory Agreements"). AS DISCUSSED BELOW, NEITHER BANC ONE HIGH
YIELD PARTNERS NOR THE PERSONNEL RESPONSIBLE FOR PROVIDING SUB-ADVISORY SERVICES
TO THE FUNDS, NOR THE SERVICES PROVIDED TO THE FUNDS, WILL CHANGE DUE TO THE
PROPOSED TRANSACTION. EACH OF THE PROPOSED NEW SUB-INVESTMENT ADVISORY
AGREEMENTS CONTAIN TERMS SUBSTANTIALLY THE SAME TO THOSE IN THE CURRENT
SUB-INVESTMENT ADVISORY AGREEMENTS.
Summary of the Proposed Transaction. Banc One Investment Advisors, an
indirect wholly-owned subsidiary of Bank One Corporation, owns 51% of the equity
interest in Banc One High Yield Partners, and Pacholder Associates, Inc.,
located at 8044 Montgomery Road, Suite 480, Cincinnati, Ohio, owns the remaining
49%. Currently, Asher O. and Sylvia A. Pacholder (the "Pacholders") own
approximately 60% of the shares of Pacholder Associates, Inc. The remainder of
Pacholder Associates, Inc. is owned by William J. Morgan, President of Pacholder
Associates, Inc, and other employees of Pacholder Associates, Inc. The
Pacholders propose to withdraw as shareholders of Pacholder Associates, Inc. in
a transaction that will result in the redemption of their shares, the issuance
of new shares to William J. Morgan and other employees of Pacholder Associates,
Inc., and the issuance of a convertible note to Bank One Corporation (the
"Proposed Transaction"). The note would be immediately convertible by Bank One
Corporation into up to approximately 40% of the total outstanding common shares
of Pacholder Associates, Inc. on a fully diluted basis. Bank One Corporation
also would receive an option to acquire all of the outstanding shares of
Pacholder Associates, Inc. that is exercisable after five years. In connection
with the Proposed Transaction, the Pacholders would resign all positions held
with Pacholder Associates, Inc., including their positions as members of the
company's board of directors.
The 1940 Act provides a rebuttable presumption that the direct or indirect
owner of more than 25% of the outstanding shares of an entity controls that
entity. Because Pacholder Associates, Inc. may be deemed to control Banc One
High Yield Partners, the change in control of Pacholder Associates, Inc. may be
deemed to result in a change in control of Banc One High Yield Partners. Based
largely on this presumption, Banc One Investment Advisors has advised the Funds'
Board of Trustees that it believes that consummation of the Proposed Transaction
may cause an assignment of the Current Sub-Investment Advisory Agreements. To
avoid any uncertainty about the status of the Current Sub-Investment Advisory
Agreements, the Funds' Board of Trustees believes that it is prudent and in the
best interest of the Funds to obtain shareholder approval of New Sub-Investment
Advisory Agreements. Approval of New Sub-Investment Advisory Agreements is a
condition precedent to the closing of the Proposed Transaction. As a result, the
Proposed Transaction will not be consummated unless this condition is waived or
deferred by Bank One Corporation.
THE PROPOSED TRANSACTION WOULD NOT RESULT IN ANY CHANGE TO BANC ONE HIGH
YIELD PARTNERS' PERSONNEL, DAY-TO-DAY MANAGEMENT OF THE FUNDS OR FINANCIAL
5
CONDITION. BANC ONE HIGH YIELD PARTNERS' BOARD OF MANAGERS WOULD RETAIN ITS
EXISTING COMPOSITION, AS SET FORTH IN INFORMATION ABOUT BANC ONE HIGH YIELD
PARTNERS, LLC.
Basis for Approval of the New Sub-Investment Advisory Agreements. In
reviewing Banc One High Yield Partners and the New Sub-Investment Advisory
Agreements, the Funds' Board of Trustees, including the independent Trustees,
considered the best interests of Shareholders of the Funds and took into account
all factors they deemed relevant. The Trustees considered the experience,
research methodology and portfolio management staffing provided by Banc One High
Yield Partners in managing high yield assets. The Trustees also considered
performance in the context of other high yield bond funds. Finally, the Trustees
considered whether the Proposed Transaction would have a material impact on Banc
One High Yield Partners' services to the Funds and concluded that it would not,
given that there will be no change in Banc One High Yield Partner's portfolio
management staff. Based on these factors, the Trustees unanimously approved the
proposed New Sub-Investment Advisory Agreements.
PROPOSAL (1) -- APPROVAL OF A NEW SUB-INVESTMENT ADVISORY
AGREEMENT FOR THE HIGH YIELD BOND FUND BETWEEN BANC ONE
INVESTMENT ADVISORS AND BANC ONE HIGH YIELD PARTNERS
Banc One High Yield Partners currently provides sub-advisory services to
the High Yield Bond Fund pursuant to a Current Sub-Investment Advisory
Agreement, dated as of August 20, 1998 between Banc One Investment Advisors and
Banc One High Yield Partners. On May 16, 2002, the Trustees of the Trust,
including a majority of the Trustees who are not interested persons of the Trust
or Banc One High Yield Partners, as defined in the 1940 Act, unanimously
approved on behalf of the High Yield Bond Fund the form of a New Sub-Investment
Advisory Agreement between Banc One Investment Advisors and Banc One High Yield
Partners. (A copy of this form of the proposed New Sub-Investment Advisory
Agreement between Banc One Investment Advisors and Banc One High Yield Partners
is included as Exhibit A to this proxy statement). Under the New Sub-Investment
Advisory Agreement, Banc One High Yield Partners would continue to serve as
Sub-Advisor to the High Yield Bond Fund.
The Current and New Sub-Investment Advisory Contracts
EXCEPT FOR RENEWAL AND EFFECTIVE DATES AND A PROVISION REQUIRING BANC ONE
HIGH YIELD PARTNERS TO CONTRACTUALLY WAIVE FEES, THE CURRENT AND NEW
SUB-INVESTMENT ADVISORY AGREEMENTS ARE THE SAME IN ALL MATERIAL RESPECTS. In
connection with both agreements, Banc One Investment Advisors retains full
responsibility for providing investment advisory services to the High Yield Bond
Fund. Under both agreements, Banc One Investment Advisors discharges this
responsibility in part through retention of Banc One High Yield Partners, at
Banc One Investment Advisors' sole expense. Subject always to the instructions
and supervision
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of Banc One Investment Advisors, Banc One High Yield Partners provides a
continuous investment program for the High Yield Bond Fund, including investment
research and management with respect to all of the Fund's assets. Banc One High
Yield Partners places all orders for purchases and sales of the High Yield Bond
Fund's securities. Banc One High Yield Partners bears the same expenses
expressly stated to be payable by it under both agreements.
As full compensation for the services provided and expenses assumed under
both the current and new agreement, Banc One Investment Advisors is obligated to
pay Banc One High Yield Partners a fee, computed daily and paid monthly, at an
annual rate of seventy one-hundredths of one percent (.70%) of the High Yield
Bond Fund's average daily net assets. Under the New Sub-Investment Advisory
Agreement, Banc One High Yield Partners agrees to waive a portion of the
sub-advisory fee equal to the percentage of the investment advisory fee waived
by Banc One Investment Advisors under the Investment Advisory Agreement. Banc
One Investment Advisors bears the sole responsibility for the payment of Banc
One High Yield Partners' fee under both the Current and New Sub-Investment
Advisory Agreements. For the fiscal year ended June 30, 2002, Banc One
Investment Advisors paid Banc One High Yield Partners $1,972,790 for its
services under the Current Sub-Investment Advisory Agreement for the High Yield
Bond Fund, after taking into account fee waivers/ reimbursements.
Both the Current and the New Sub-Investment Advisory Agreements continue
for successive one-year terms, provided that such continuation is specifically
approved at least annually by a vote of a majority of the Trustees, or by the
vote of a majority of the outstanding Shares of the Fund, and, in either case,
by a majority of the Trustees who are not interested persons as defined in the
1940 Act, by vote cast in person at a meeting called for such purpose. Both
agreements also terminate automatically in the event of their assignment, as
defined in the 1940 Act or upon termination of the Investment Advisory
Agreement.
If the New Sub-Investment Advisory Agreement is approved by the
shareholders of the High Yield Bond Fund, it will become effective upon
termination of the Current Sub-Investment Advisory Agreement in accordance with
its terms, which would occur upon consummation of the Proposed Transaction. If
the Proposed Transaction is not consummated, the Current Sub-Investment Advisory
Agreement will remain in effect until otherwise terminated.
The Trustees recommend that the Shareholders of the High Yield Bond Fund
vote to approve the proposed New Sub-Investment Advisory Agreement, thereby
continuing the appointment of Banc One High Yield Partners as the Sub-Advisor to
the High Yield Bond Fund. Approval by Shareholders of the New Sub-Investment
Advisory Agreement will not result in an increase in the contractual rate of any
advisory or sub-investment advisory fees payable by the Fund, but will result in
the continued payment of the sub-investment advisory fees by Banc One Investment
7
Advisors to Banc One High Yield Partners. Such sub-investment advisory fees are
borne solely by Banc One Investment Advisors and not by the Fund.
In the event that holders of a majority of the outstanding Shares of the
Fund vote in the negative with respect to the proposed New Sub-Investment
Advisory Agreement, the Current Sub-Investment Advisory Agreement will remain in
effect until terminated in accordance with its terms and the Trustees will
consider such further action as they may determine to be in the best interests
of the Fund's Shareholders.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE FUND
VOTE TO APPROVE THE PROPOSED NEW SUB-INVESTMENT ADVISORY AGREEMENT.
PROPOSAL (2) -- APPROVAL OF A NEW SUB-INVESTMENT ADVISORY
AGREEMENT FOR THE INCOME BOND FUND BETWEEN BANC ONE
INVESTMENT ADVISORS AND BANC ONE HIGH YIELD PARTNERS
Banc One High Yield Partners currently provides sub-advisory services to
the Income Bond Fund pursuant to a Current Sub-Investment Advisory Agreement,
dated as of November 19, 1999 between Banc One Investment Advisors and Banc One
High Yield Partners. The Current Sub-Investment Advisory Agreement was approved
by the Income Bond Fund's shareholders on November 19, 2000. On May 16, 2002,
the Trustees of the Trust, including a majority of the Trustees who are not
interested persons of the Trust or Banc One High Yield Partners, as defined in
the 1940 Act, unanimously approved on behalf of the Income Bond Fund the form of
a new Sub-Investment Advisory Agreement (the "New Sub-Investment Advisory
Agreement") between Banc One Investment Advisors and Banc One High Yield
Partners. (A copy of this form of this proposed New Sub-Investment Advisory
Agreement between Banc One Investment Advisors and Banc One High Yield Partners
is included as Exhibit B to this proxy statement). Under the New Sub-Investment
Advisory Agreement, Banc One High Yield Partners would continue to serve as
Sub-Advisor to the Income Bond Fund.
The Current and New Sub-Investment Advisory Contracts
EXCEPT FOR RENEWAL AND EFFECTIVE DATES, THE CURRENT AND NEW SUB-INVESTMENT
ADVISORY AGREEMENTS ARE THE SAME IN ALL MATERIAL RESPECTS. In connection with
both agreements, Banc One Investment Advisors retains full responsibility for
providing investment advisory services to the Income Bond Fund. Under both
agreements, Banc One Investment Advisors discharges this responsibility in part
through retention of Banc One High Yield Partners, at Banc One Investment
Advisors' sole expense to manage those assets of the Fund that are designated
from time to time by Banc One Investment Advisors for investment in corporate
fixed-income securities and instruments rated below investment grade or unrated
corporate fixed-income securities and instruments of similar quality
(collectively, "High Yield Assets"). (Currently, up to 30% of the Fund's total
assets may be invested in High Yield Assets). Banc One
8
Investment Advisors is required to oversee the activities of Banc One High
Yield Partners as well as designating the assets of the Income Bond Fund to be
managed by Banc One High Yield Partners.
Under both agreements, Banc One High Yield Partners, in accordance with
the Fund's objective, policies and restrictions, and subject to the general
supervision of the Trustees and Banc One Investment Advisors, is required to
manage the day-to-day investment activities for those assets designated as
eligible for investment in High Yield Assets by Banc One Investment Advisors
(the "High Yield Portfolio"). Both agreements require Banc One High Yield
Partners to make investment decisions concerning, and place all orders for,
purchases and sales of the High Yield Portfolio's securities and maintain the
High Yield Portfolio's records relating to such purchases and sales. Banc One
High Yield Partners bears the same expenses expressly stated to be payable by it
under both agreements.
As full compensation for the services provided and expenses assumed under
both the current and new agreements, Banc One Investment Advisors is obligated
to pay Banc One High Yield Partners a fee, computed daily and paid monthly, at
an annual rate of sixty one-hundredths of one percent (.60%) of the High Yield
Portfolio's average daily net assets. Under both agreements, Banc One High Yield
Partners agrees to waive a portion of the sub-advisory fee in an amount equal to
the percentage of the advisory fee waived by Banc One Investment Advisors under
the Investment Advisory Agreement. Banc One Investment Advisors bears the sole
responsibility for the payment of this fee to Banc One High Yield Partners. For
the fiscal year ended June 30, 2002. Banc One Investment Advisors paid Banc One
High Yield Partners $184,228 for its services under the Current Sub-Investment
Advisory Agreement for the Income Bond Fund, after taking into account fee
waivers/reimbursements.
Both the Current and the New Sub-Investment Advisory Agreements continue
for successive one-year terms, provided that such continuation is specifically
approved at least annually by a vote of a majority of the Trustees, or by the
vote of a majority of the outstanding Shares of the Fund, and, in either case,
by a majority of the Trustees who are not interested persons as defined in the
1940 Act, by vote cast in person at a meeting called for such purpose. Both
agreements also terminate automatically in the event of their assignment, as
defined in the 1940 Act or upon termination of the Investment Advisory
Agreement.
If the New Sub-Investment Advisory Agreement is approved by the
shareholders of the Income Bond Fund, it will become effective upon termination
of the Current Sub-Investment Advisory Agreement in accordance with its terms,
which would occur upon consummation of the Proposed Transaction. If the Proposed
Transaction is not consummated, the Current Sub-Investment Advisory Agreement
will remain in effect until otherwise terminated.
9
The Trustees recommend that the Shareholders of the Income Bond Fund vote
to approve the proposed New Sub-Investment Advisory Agreement, thereby
continuing the appointment of Banc One High Yield Partners as the Sub-Advisor to
the Income Bond Fund. Approval by Shareholders of the New Sub-Investment
Advisory Agreement will not result in an increase in the contractual rate of any
advisory or sub-investment advisory fees payable by the Fund, but will result in
the payment of the sub-investment advisory fees by Banc One Investment Advisors
to Banc One High Yield Partners. Such sub-investment advisory fees are borne
solely by Banc One Investment Advisors and not by the Fund.
In the event that holders of a majority of the outstanding Shares of the
Fund vote in the negative with respect to the proposed New Sub-Investment
Advisory Agreement, the Current Sub-Investment Advisory Agreement will remain in
effect until terminated in accordance with its terms and the Trustees will
consider such further action as they may determine to be in the best interests
of the Fund's Shareholders.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE FUND
VOTE TO APPROVE THE PROPOSED NEW SUB-INVESTMENT ADVISORY AGREEMENT.
Information About Banc One High Yield Partners, LLC
Banc One High Yield Partners, (1111 Polaris Parkway, P.O. Box 710211,
Columbus, Ohio 43271-0211) is a registered investment advisor formed in June,
1998 to provide investment advisory services related to high yield investments
to the High Yield Bond Fund and other advisory clients. Banc One High Yield
Partners is controlled by Banc One Investment Advisors and Pacholder Associates,
Inc., (8044 Montgomery Road, Suite 382, Cincinnati, Ohio 45236). As of December
31, 2002, Banc One High Yield Partners managed approximately $980 million in
assets. Banc One High Yield Partners has provided sub-advisory services to the
High Yield Bond Fund since the High Yield Bond Fund's inception in November,
1998 and to the Income Bond Fund since November, 1999.
The name, address, and principal occupation of each of the principal
executive officers and each member of the board of managers of Banc One High
Yield Partners are as follows:
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Position(s) held with
Name and Address Banc One High Yield Partners Principal Occupation
- ---------------- ---------------------------- --------------------
Mark A. Beeson ................... Manager, Chairman and Chief President, One Group Mutual
Banc One Investment Executive Officer Funds; Chief Financial Officer,
Advisors Corporation Banc One Investment Management
1111 Polaris Parkway Group; Senior Managing Director,
Columbus, Ohio 43271 Banc One Investment Advisors
Corporation; Chief Executive
Officer and President, One Group
Administrative Services, Inc.; Chief
Executive Officer and President,
One Group Dealer Services, Inc.;
and President, One Group Asset
Management (Ireland) Limited
William J. Morgan ................ Manager and Vice President President, Treasurer and Director,
Pacholder Associates, Inc. -- Portfolio Manager Pacholder Associates, Inc., a
8044 Montgomery Road, registered investment advisor
Suite #382
Cincinnati, Ohio 45236
James P. Shanahan, Jr. ........... Manager Executive Vice President and
Pacholder Associates, Inc. General Counsel, Pacholder
8044 Montgomery Road, Associates, Inc., a registered
Suite #382 investment advisor
Cincinnati, Ohio 45236
Gary J. Madich, CFA .............. Manager Senior Managing Director, Banc
Banc One Investment One Investment Advisors
Advisors Corporation Corporation
1111 Polaris Parkway
Columbus, Ohio 43271
Richard R. Jandrain, III ......... Manager Senior Managing Director, Banc
Banc One Investment One Investment Advisors
Advisors Corporation Corporation
1111 Polaris Parkway
Columbus, Ohio 43271
INFORMATION ABOUT THE INVESTMENT ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, Columbus, Ohio 43271)
is a direct, wholly-owned subsidiary of Bank One, National Association (Ohio),
(100 East Broad Street, Columbus, Ohio 43215), a national banking association.
Bank One, National Association is a direct, wholly-owned subsidiary of Bank One
Corporation (1 Bank One Plaza, Chicago Illinois 60670), a bank holding company
incorporated in the state of Delaware. The name, address, and principal
occupation of each of the principal executive officer and directors of Banc One
Investment Advisors are as follows:
11
Name, Address and Positions held Principal Occupation(s) other than
with Banc One Investment Advisors Positions with Banc One Investment Advisors
- --------------------------------- -------------------------------------------
David J. Kundert ....................... Executive Vice President, Bank One Corporation
Banc One Investment Advisors Corporation
1111 Polaris Parkway
Columbus, Ohio 43271
Director, Chairman, President and Chief
Executive Officer
Peter W. Atwater ....................... President and Chief Executive Office, Private Client
Banc One Investment Management Group Services
1111 Polaris Parkway
Columbus, Ohio 43271
Director
Mark A. Beeson ......................... President, One Group Mutual Funds; Chief Financial
Banc One Investment Advisors Corporation Officer, Banc One Investment Management Group;
1111 Polaris Parkway Chief Executive Officer and President, One Group
Columbus, Ohio 43271 Administrative Services, Inc.; Chief Executive Officer
Director and Senior Managing Director and President, One Group Dealer Services, Inc.; and
President, One Group Asset Management (Ireland)
Limited
Gary J. Madich ......................... NA
Banc One Investment Advisors Corporation
1111 Polaris Parkway
Columbus, Ohio 43271
Director and Senior Managing Director
Richard R. Jandrain III ................ NA
Banc One Investment Advisors Corporation
1111 Polaris Parkway
Columbus, Ohio 43271
Director and Senior Managing Director
John Abunassar ......................... NA
Banc One Investment Advisors Corporation
1111 Polaris Parkway
Columbus, Ohio 43271
Director and Senior Managing Director
INFORMATION ABOUT THE ADMINISTRATOR AND THE DISTRIBUTOR
One Group Administrative Services, Inc. (1111 Polaris Parkway, Columbus,
Ohio 43271-1235) is the Funds' Administrator. For the fiscal year ended June 30,
2002, the High Yield Bond Fund and the Income Bond Fund paid $719,501 and
$2,257,881, respectively to One Group Administrative Services, Inc. for
administration services. One Group Dealer Services, Inc. (1111 Polaris Parkway,
Columbus, Ohio 43271-1235) is the Funds' Distributor. For the fiscal year ended
June 30, 2002, the High Yield Bond Fund and the Income Bond Fund paid $47,373.59
and $45,223.70, respectively to One Group Dealer Services, Inc. for distribution
services. Both One Group Administrative Services, Inc. and One Group Dealer
Services, Inc. are wholly-owned subsidiaries of Bank One Corporation and will
continue to provide services after the New Sub-Investment Advisory Agreements
are approved.
12
ADDITIONAL INFORMATION
Trustees and Officers of the Funds
None of the trustees of the Income Bond Fund or the High Yield Bond Fund
hold positions with, or have an interest in Banc One Investment Advisors or Banc
One High Yield Partners, or in a person controlling, controlled by or under
common control with Banc One Investment Advisors or Banc One High Yield
Partners. Officers of the Trust who are also employees of Bank One Corporation
subsidiaries also own shares of Bank One Corporation stock and/or options to
purchase such stock directly or through 401k or other compensation plans.
Officers of the Trust hold various offices for certain Bank One Corporation
subsidiaries including Banc One Investment Advisors and Banc One High Yield
Partners as set forth below.
Position(s) with Bank One Corporation
Subsidiaries including Banc One Investment
Name and Title of Fund Officer Advisors and Banc One High Yield Partners
- ------------------------------ -----------------------------------------
Mark A. Beeson, President ............................. Chief Financial Officer, Banc One Investment
Management Group; Senior Managing Director,
Banc One Investment Advisors; Manager,
Chairman and Chief Executive Officer, Banc One
High Yield Partners; Chief Executive Officer and
President, One Group Administrative Services,
Inc.; and Chief Executive Officer and President,
One Group Dealer Services, Inc.; and President,
One Group Asset Management (Ireland) Limited.
Robert L. Young, Vice President and Treasurer ......... Chief Operating Officer and Vice President,
Mutual Fund Administration, One Group
Administrative Services, Inc.; Chief Operating
Officer and Vice President, One Group Dealer
Services, Inc.; and Vice President, One Group
Asset Management (Ireland) Limited.
Beverly J. Langley, Vice President .................... Senior Compliance Director, Banc One
Investment Advisors and Vice President --
Compliance, Banc One High Yield Partners.
Michael V. Wible, Secretary ........................... First Vice President and Counsel, Bank One
Corporation and Secretary, Banc One Investment
Advisors.
Gary R. Young, Assistant Treasurer and
Assistant Secretary ................................. Director, Mutual Fund Financial Administration,
One Group Administrative Services, Inc. and
Treasurer, One Group Asset Management (Ireland)
Limited.
Jessica K. Ditullio, Assistant Secretary .............. First Vice President and Counsel, Bank One
Corporation and Assistant Secretary, Banc One
High Yield Partners.
Nancy E. Fields, Assistant Secretary .................. Director, Mutual Fund Administration, One Group
Administrative Services, Inc. and Senior Project
Manager, Mutual Funds, One Group Dealer
Services, Inc.
13
Owners
The following list indicates the ownership of the Shareholders who, to the
best knowledge of the Trust, were the owners of more than 5% of the outstanding
Shares of the applicable Fund on December 13, 2002:
Name and Address Fund Percentage of Ownership
- ---------------- ---- -----------------------
Strafe & Co. .................. High Yield Bond Fund 36.80%
BOIA One Group Operations
1111 Polaris Parkway
PO Box 711234
Columbus, OH 43271-0001
The One Group Investor
Growth & Income Fund .......... High Yield Bond Fund 15.66%
c/o Gary Young
1111 Polaris Parkway Suite 2G
PO Box 711235 OH1-1235
Columbus, OH 43240-2050
The One Group Investor
Balanced Fund ................. High Yield Bond Fund 13.23%
c/o Gary Young
1111 Polaris Parkway Suite 2G
PO Box 711235 OH1-1235
Columbus, OH 43240-2050
The One Group Investor
Growth Fund ................... High Yield Bond Fund 5.07%
c/o Gary Young
1111 Polaris Parkway Suite 2G
PO Box 711235 OH1-1235
Columbus, OH 43240-2050
Strafe & Co. .................. Income Bond Fund 77.84%
BOIA One Group Operations
1111 Polaris Parkway
PO Box 711234
Columbus, OH 43271-0001
The One Group Investor
Growth & Income Fund .......... Income Bond Fund 5.03%
c/o Gary Young
1111 Polaris Parkway Suite 2G
PO Box 711235 OH1-1235
Columbus, OH 43240-2050
The One Group Investor
Balanced Fund ................. Income Bond Fund 6.59%
c/o Gary Young
1111 Polaris Parkway Suite 2G
PO Box 711235 OH1-1235
Columbus, OH 43240-2050
As a group, the Officers and Trustees of the Fund own less than 1% of the
outstanding Shares of either the High Yield Bond Fund or the Income Bond Fund.
14
Affiliated Brokers and Subcustodian
For the fiscal year ended June 30, 2002, the Fund did not pay brokerage
commissions to affiliated brokers. Bank One Trust Company, National Association,
a national banking association located at 100 East Broad Street, Columbus, Ohio
43215 serves as subcustodian in connection with the securities lending
activities of the High Yield Bond Fund and the Income Bond Fund. Bank One Trust
Company, National Association is a direct, wholly-owned subsidiary of Bank One
Corporation. For the fiscal year ended June 30, 2002, the High Yield Bond Fund
and the Income Bond Fund paid $98,747.18 and $169,532.32, respectively to Bank
One Trust Company, National Association. Bank One Trust Company, National
Association will continue to provide subcustodial services after the New
Sub-Investment Advisory Agreements are approved.
Adjournment for Lack of Quorum
If at the time any session of the Special Meeting is called to order, a
quorum is not present, in person or by proxy, the persons named as proxies may
vote those proxies that have been received to adjourn the Special Meeting to a
later date. In the event that a quorum is present but sufficient votes in favor
of one or more of the proposals have not been received, the persons named as
proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies with respect to any such proposal. All such
adjournments will require the affirmative vote of a majority of the Shares
present in person or by proxy at the session of the Special Meeting to be
adjourned. The persons named as proxies will vote those proxies that they are
entitled to vote in favor of the proposal, in favor of such an adjournment, and
will vote those proxies required to be voted against the proposal, against any
such adjournment.
Dated: January 10, 2003
IF YOU DO NOT EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE VOTE BY USING
ONE OF THE FOLLOWING THREE METHODS:
1. VOTE ON-LINE BY USING THE ENCLOSED INSTRUCTIONS;
2. VOTE BY CALLING TOLL FREE USING THE ENCLOSED INSTRUCTIONS; OR
3. MARK, DATE AND SIGN YOUR PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY. FOR YOUR
CONVENIENCE, NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
15
Exhibit A
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of , 2003 by and between BANC ONE INVESTMENT
ADVISORS CORPORATION, an Ohio corporation with its principal office in Columbus,
Ohio (hereinafter called the "Investment Adviser") and BANC ONE HIGH YIELD
PARTNERS, LLC, an investment adviser with its principal office in Columbus, Ohio
(hereinafter called the "Sub-Adviser").
WHEREAS, the Investment Adviser serves as the Investment Adviser to One
Group High Yield Bond Fund (the "Fund") of One Group Mutual Funds (the "Trust"),
a Massachusetts business trust and an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, the Sub-Adviser was previously appointed as sub-adviser for the
Fund pursuant to a Sub-Investment Advisory Agreement, dated as of August 20,
1998, between the Investment Adviser and the Sub-Adviser (the "Original
Agreement")
WHEREAS, the Sub-Adviser is an Ohio limited liability company that is
owned 51% by the Investment Adviser and 49% by Pacholder Associates, Inc.
("Pacholder");
WHEREAS, the majority shareholders of Pacholder ("Pacholder Shareholders")
sold their shares in Pacholder thereby effecting a change in control of
Pacholder and of the Sub-Adviser;
WHEREAS, as a result of such change in control of the Sub-Adviser, the
Original Agreement was deemed to be assigned and therefore terminated and a
majority of the shareholders of the Fund were required to approve this Agreement
and the appointment of the Sub-Adviser for the Fund;
WHEREAS, on , 200 , a majority of the shareholders of the Fund
approved this Agreement and the appointment of the Sub-Adviser; and
WHEREAS, the Investment Adviser desires to continue to retain the
Sub-Adviser to provide investment sub-advisory services to the Trust with regard
to the Fund and the Sub-Adviser is willing and believes it possesses legal
authority to make available such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. Retention. The Investment Adviser hereby retains the Sub-Adviser to
provide certain sub-investment advisory services herein set forth to it with
regard to the Fund for the period and on the terms set forth in this Agreement.
The Sub-Adviser accepts such retention and agrees to furnish the services herein
set forth for the compensation herein provided.
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2. Delivery of Documents. The Investment Adviser has furnished the
Sub-Adviser with copies properly certified or authenticated of each of the
following documents:
(a) the Trust's Amended and Restated Declaration of Trust, as
filed with the Secretary of State of the Commonwealth of
Massachusetts on March 5, 1999, and all amendments thereto or
restatements thereof (such Declaration, as presently in effect and
as it shall from time to time be amended or restated, is herein
called the "Declaration of Trust");
(b) the Trust's Code of Regulations and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing
the appointment of the Sub-Adviser and approving this Agreement;
(d) the Trust's original Notification of Registration on Form
N-8A under the 1940 Act as filed with the Securities and Exchange
Commission on February 20, 1985 and all amendments thereto;
(e) the Trust's current Registration Statement on Form N-lA
under the Securities Act of 1933, as amended ("1933 Act"), and under
the 1940 Act as filed with the Securities and Exchange Commission
and all amendments thereto; and
(f) the Trust's most recent prospectus and Statement of
Additional Information relating to the Fund (such prospectus and
Statement of Additional Information, as presently in effect, and all
amendments and supplements thereto are herein collectively called
the "Prospectus").
The Investment Adviser will promptly furnish the Sub-Adviser with copies
of all amendments of or supplements to the foregoing documents.
3. Management. Subject always to the instructions and supervision of the
Investment Adviser and the Trust's Board of Trustees, the Sub-Adviser will
provide a continuous investment program for the Fund, including investment
research and management with respect to all securities and investments and cash
equivalents in the Fund. The Sub-Adviser will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Trust with respect to the Fund and will place all purchase and sale orders on
behalf of the Trust with respect to the Fund. The Sub-Adviser will provide the
services under this Agreement in accordance with the Fund's investment
objective, policies and restrictions as stated in the Prospectus and resolutions
of the Trust's Board of Trustees. The Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for
which it has investment responsibilities;
A-2
(b) will comply in all material respects with all applicable
Rules and Regulations of the Securities and Exchange Commission and
in addition will conduct its activities under this Agreement in
accordance with any applicable regulations pertaining to the
investment advisory activities of the Sub-Adviser;
(c) will not make loans to any person to purchase or carry
units of beneficial interest ("Shares") in the Fund or make loans to
the Trust;
(d) will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with
any broker or dealer. In placing orders with brokers and dealers,
the Sub-Adviser will attempt to obtain prompt execution of orders in
an effective manner at the most favorable price. Consistent with
this obligation, when the execution and price offered by two or more
brokers or dealers are comparable, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Sub-Adviser with research advice
and other services. In no instance will portfolio securities be
purchased from or sold to One Group Dealer Services, Inc., the
Investment Adviser, the Sub-Adviser or any affiliated person of
either the Trust, One Group Dealer Services, Inc., the Investment
Adviser, or the Sub-Adviser, except to the extent permitted by the
1940 Act;
(e) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Fund
and prior, present or potential shareholders, and will not use such
records and information for any purpose other than in the
performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Trust,
which approval shall not be unreasonably withheld. The foregoing
shall not apply to any information that is publicly available when
provided or thereafter becomes publicly available other than through
a breach of this Agreement, or that is required or requested to be
disclosed by the Securities and Exchange Commission or any other
regulatory examiner of the Sub-Adviser, any auditor of the parties
hereto, by judicial or administrative process or otherwise by
applicable law or regulation. Nothing herein shall restrict the
Sub-Adviser's ability to publish information regarding the
performance of accounts under its management; and
(f) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment
recommendations for the Fund, the Sub-Adviser's personnel will not
inquire or take into consideration whether the issuers of securities
proposed for purchase or sale for the Fund's account are customers
of the Investment Adviser, the Sub-Adviser or the parents or
subsidiaries or affiliates of the Investment Adviser or Sub-Adviser.
In dealing with such customers, the Sub-Adviser and its parent,
subsidiaries,
A-3
and affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust.
4. Services Not Exclusive. The investment advisory services furnished by
the Sub-Adviser hereunder are not to be deemed exclusive. Except to the extent
necessary to perform the Sub-Adviser's obligations under this Agreement, nothing
herein shall be deemed to limit or restrict the right of the Sub-Adviser, or any
subsidiary or affiliate of the Sub-Adviser, or any employee of the Sub-Adviser,
to engage in any other business, whether of a similar or dissimilar nature, or
to render services of any kind to any other person.
5. Books and Records. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
The Sub-Adviser further agrees to preserve for the periods prescribed by Rule
3la-2 under the 1940 Act all records which it maintains for the Fund that are
required to be maintained by Rule 3la-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions, if
any) purchased for the Trust. The Trust and the Investment Adviser will be
responsible for all of their respective expenses and liabilities.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the Sub-Adviser and
the Sub-Adviser will accept as full compensation therefor a fee computed daily
and paid monthly in arrears on the first business day of each month at an annual
rate of seventy one-hundredths of one percent (0.70%) of the Fund's average
daily net assets. (The Sub-Adviser agrees to waive a portion of the sub-advisory
fee equal to the percentage of the investment advisory fee waived by the
Investment Adviser under the Investment Advisory Agreement between the Trust and
the Investment Adviser.)
If the fee payable to the Sub-Adviser pursuant to this Section 7 begins to
accrue before the end of any month or if this Agreement terminates before the
end of any month, the fee for the period from such date to the end of such month
or from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs. For purposes of
calculating fees, the value of the Trust's net assets shall be computed in the
manner specified in the Prospectus and the Trust's Declaration of Trust for the
computation of the value of the Trust's net assets in connection with the
determination of the net asset value of the Trust's shares. Payment of said
compensation shall be the sole responsibility of the Investment Adviser and
shall in no way be an obligation of the Fund or of the Trust.
A-4
8. Limitation of Liability. The Sub-Adviser shall not be liable for any
error of judgment or mistake of law or fact or for any loss suffered by the
Trust or the Investment Adviser in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Sub-Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. Duration and Termination. This Agreement will become effective as of
the date first written above, provided that it shall have been approved by vote
of a majority of the outstanding voting securities of the Fund, in accordance
with the requirements under the 1940 Act, and, unless sooner terminated as
provided herein, shall continue in effect until [Date no more than 2 years from
execution].
Thereafter, if not terminated, this Agreement shall continue in effect for
successive periods of twelve months each ending on of each year, provided
such continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Trust's Board of Trustees who are not parties
to this Agreement or interested persons of the Trust, the Sub-Adviser, or the
Investment Adviser, cast in person at a meeting called for the purpose of voting
on such approval, and (b) by the vote of a majority of the Trust's Board of
Trustees or by the vote of a majority of the outstanding voting securities of
the Fund. Notwithstanding the foregoing, this Agreement may be terminated at any
time on sixty days' written notice, without the payment of any penalty, by the
Trust (by vote of the Trust's Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund), by the Investment Adviser or by the
Sub-Adviser. This Agreement will immediately terminate in the event of its
assignment and upon termination of the Investment Advisory Agreement between the
Trust and the Investment Advisor. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meaning of such terms in the 1940 Act.)
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
A-5
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by the laws
of the Commonwealth of Massachusetts.
The names "One Group Mutual Funds" and "Trustees of One Group Mutual
Funds" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under an Amended and
Restated Declaration of Trust dated as of February 18, 1999 to which reference
is hereby made and a copy of which is on file at the office of the Secretary of
State of the Commonwealth of Massachusetts and elsewhere as required by law, and
to any and all amendments thereto so filed or hereafter filed. The obligations
of "One Group Mutual Funds" entered into in the name or on behalf thereof by any
of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
A-6
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
BANC ONE INVESTMENT ADVISORS CORPORATION
By: ______________________________________
Name: ____________________________________
BANC ONE HIGH YIELD PARTNERS, LLC
By: ______________________________________
Name: ____________________________________
One Group Mutual Funds hereby acknowledges
and agrees to the provisions of paragraph
3(e) of this Agreement.
ONE GROUP MUTUAL FUND
By: ______________________________________
Title: President
-----------------------------------
A-7
EXHIBIT B
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of , 2003 by and between BANC ONE INVESTMENT
ADVISORS CORPORATION, an Ohio corporation with its principal office in Columbus,
Ohio (hereinafter called the "Investment Adviser") and BANC ONE HIGH YIELD
PARTNERS, LLC, an investment adviser with its principal office in Columbus, Ohio
(hereinafter called the "Sub-Adviser").
WHEREAS, the Investment Adviser serves as the Investment Adviser to One
Group[RegTM] Income Bond Fund (the "Fund") of One Group[RegTM] Mutual Funds (the
"Trust"), a Massachusetts business trust and an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, the Sub-Adviser was previously appointed as sub-adviser for the
Fund pursuant to a Sub-Investment Advisory Agreement, dated as of November 19,
1999, between the Investment Adviser and the Sub-Adviser (the "Original
Agreement")
WHEREAS, the Sub-Adviser is an Ohio limited liability company that is
owned 51% by the Investment Adviser and 49% by Pacholder Associates, Inc.
("Pacholder");
WHEREAS, the majority shareholders of Pacholder ("Pacholder Shareholders")
sold their shares in Pacholder thereby effecting a change in control of
Pacholder and of the Sub-Adviser;
WHEREAS, as a result of such change in control of the Sub-Adviser, the
Original Agreement was deemed to be assigned and therefore terminated and a
majority of the shareholders of the Fund were required to approve this Agreement
and the appointment of the Sub-Adviser for the Fund;
WHEREAS, on , 200 , a majority of the shareholders of the Fund
approved this Agreement and the appointment of the Sub-Adviser; and
WHEREAS, the Investment Adviser desires to continue to retain the
Sub-Adviser to provide investment sub-advisory services to the Fund with regard
to corporate fixed-income securities and instruments which are rated below
investment grade or unrated corporate fixed-income securities of similar quality
(collectively, "High Yield Assets") and the Sub-Adviser is willing and believes
it possesses legal authority to make available such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. Retention. The Investment Adviser hereby retains the Sub-Adviser to
provide certain sub-investment advisory services set forth herein to it with
regard to
B-1
investments by the Fund in High Yield Assets for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such retention and agrees to
furnish the services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Investment Adviser has furnished the
Sub-Adviser with copies properly certified or authenticated of each of the
following documents:
(a) the Trust's Amended and Restated Declaration of Trust, as
filed with the Secretary of State of the Commonwealth of
Massachusetts on March 5, 1999, and all amendments thereto or
restatements thereof (such Declaration, as presently in effect and
as it shall from time to time be amended or restated, is herein
called the "Declaration of Trust"):
(b) the Trust's Code of Regulations and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing
the appointment of the Sub-Adviser and approving this Agreement;
(d) the Trust's original Notification of Registration on Form
N-8A under the 1940 Act as filed with the Securities and Exchange
Commission on February 20, 1985 and all amendments thereto;
(e) the Trust's current Registration Statement on Form N-1A
under the Securities Act of 1933, as amended ("1933 Act"), and under
the 1940 Act as filed with the Securities and Exchange Commission
and all amendments thereto; and
(f) the Trust's most recent prospectus and Statement of
Additional Information relating to the Fund (such prospectus and
Statement of Additional Information, as presently in effect, and all
amendments and supplements thereto are herein collectively called
the "Prospectus").
The Investment Adviser will promptly furnish the Sub-Adviser with copies
of all amendments of or supplements to the foregoing documents.
3. Management. Subject always to the instructions and supervision of the
Investment Adviser and the Trust's Board of Trustees, the Sub-Adviser will
provide a continuous investment program for High Yield Assets with respect to
those assets of the Fund that are designated by the Investment Adviser for
investment in High Yield Assets from time to time (the "Portfolio"), including
investment research and management with respect to all securities and
investments constituting High Yield Assets and cash equivalents related thereto.
Subject to any restrictions, instructions, or guidelines provided by either the
Fund or the Investment Adviser, the Sub-Adviser will determine from time to time
what High Yield Assets will be purchased, retained or sold by the Trust with
respect to the Portfolio and will place all purchase and sale orders on behalf
of the Fund with respect to the Portfolio. The Sub-Adviser will
B-2
provide the services under this Agreement in accordance with the Fund's
investment objective, policies and restrictions as stated in the Prospectus and
resolutions of the Trust's Board of Trustees. The Sub-Adviser further agrees
that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for
which it has investment responsibilities;
(b) will comply in all material respects with all applicable
Rules and Regulations of the Securities and Exchange Commission and
in addition will conduct its activities under this Agreement in
accordance with any applicable regulations pertaining to the
investment advisory activities of the Sub-Adviser;
(c) will not make loans to any person to purchase or carry
units of beneficial interest ("Shares") in the Fund or make loans to
the Trust;
(d) will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with
any broker or dealer. In placing orders with brokers and dealers,
the Sub-Adviser will attempt to obtain prompt execution of orders in
an effective manner at the most favorable price. Consistent with
this obligation, when the execution and price offered by two or more
brokers or dealers are comparable, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Sub-Adviser with research advice
and other services. In no instance will portfolio securities be
purchased from or sold to One Group Dealer Services, Inc., the
Investment Adviser, the Sub-Adviser or any affiliated person of
either the Trust, One Group Dealer Services, Inc., the Investment
Adviser, or the Sub-Adviser, except to the extent permitted by the
1940 Act;
(e) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Fund
and prior, present or potential shareholders, and will not use such
records and information for any purpose other than in the
performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Trust,
which approval shall not be unreasonably withheld. The foregoing
shall not apply to any information that is publicly available when
provided or thereafter becomes publicly available other than through
a breach of this Agreement, or that is required or requested to be
disclosed by the Securities and Exchange Commission or any other
regulatory examiner of the Sub-Adviser, any auditor of the parties
hereto, by judicial or administrative process or otherwise by
applicable law or regulation. Nothing herein shall restrict the
Sub-Adviser's ability to publish information regarding the
performance of accounts under its management; and
B-3
(f) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment
recommendations for the Fund, the Sub-Adviser's personnel will not
inquire or take into consideration whether the issuers of securities
proposed for purchase or sale for the Fund's account are customers
of the Investment Adviser, the Sub-Adviser or the parents or
subsidiaries or affiliates of the Investment Adviser or Sub-Adviser.
In dealing with such customers, the Sub-Adviser and its parent,
subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the
Trust.
4. Services Not Exclusive. The investment advisory services furnished by
the Sub-Adviser hereunder are not to be deemed exclusive. Except to the extent
necessary to perform the Sub-Adviser's obligations under this Agreement, nothing
herein shall be deemed to limit or restrict the right of the Sub-Adviser, or any
subsidiary or affiliate of the Sub-Adviser, or any employee of the Sub-Adviser,
to engage in any other business, whether of a similar or dissimilar nature, or
to render services of any kind to any other person.
5. Books and Records. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request;
provided, however, that the Sub-Adviser may retain copies of any or all such
records. The Sub-Adviser further agrees to preserve for the periods prescribed
by Rule 3la-2 under the 1940 Act all records which it maintains for the Fund
that are required to be maintained by Rule 3la-2 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions, if
any) purchased for the Trust. The Trust and the Investment Adviser will be
responsible for all of their respective expenses and liabilities.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the Sub-Adviser and
the Sub-Adviser will accept as full compensation therefor a fee computed daily
and paid monthly in arrears on the first business day of each month at an annual
rate of sixty one-hundredths of one percent (.60%) of the Portfolio's average
daily net assets. The Sub-Adviser agrees to waive a portion of the sub-advisory
fee equal to the percentage of the investment advisory fee waived by the
Investment Adviser under the Investment Advisory Agreement between the Trust and
the Investment Adviser.
If the fee payable to the Sub-Adviser pursuant to this Section 7 begins to
accrue before the end of any month or if this Agreement terminates before the
end of any month, the fee for the period from such date to the end of such month
or from the
B-4
beginning of such month to the date of termination, as the case may be, shall be
prorated according to the proportion which such period bears to the full month
in which such effectiveness or termination occurs. For purposes of calculating
fees, the value of the Portfolio's assets shall be computed in the manner
specified in the Prospectus and the Trust's Declaration of Trust for the
computation of the value of the Trust's net assets in connection with the
determination of the net asset value of the Trust's shares. Payment of said
compensation shall be the sole responsibility of the Investment Adviser and
shall in no way be an obligation of the Fund or of the Trust.
8. Limitation of Liability. The Sub-Adviser shall not be liable for any
error of judgment or mistake of law or fact or for any loss suffered by the
Trust or the Investment Adviser in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Sub-Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. Duration and Termination. This Agreement will become effective as of
the date first written above, provided that it shall have been approved by vote
of a majority of the outstanding voting securities of the Fund, in accordance
with the requirements under the 1940 Act, and, unless sooner terminated as
provided herein, shall continue in effect until [Date no more than 2 years from
execution]. Thereafter, if not terminated, this Agreement shall continue in
effect for successive periods of twelve months each ending on of each year,
provided such continuance is specifically approved at least annually (a) by the
vote of a majority of those members of the Trust's Board of Trustees who are not
parties to this Agreement or interested persons of the Trust, the Sub-Adviser,
or the Investment Adviser, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the vote of a majority of the Trust's Board
of Trustees or by the vote of a majority of the outstanding voting securities of
the Fund. Notwithstanding the foregoing, this Agreement may be terminated at any
time on sixty days' written notice, without the payment of any penalty, by the
Trust (by vote of the Trust's Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund), by the Investment Adviser or by the
Sub-Adviser. This Agreement will immediately terminate in the event of its
assignment and upon termination of the Investment Advisory Agreement between the
Trust and the Investment Adviser. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meaning of such terms in the 1940 Act.)
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
B-5
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by the laws
of the Commonwealth of Massachusetts.
The names 'One Group[RegTM] Mutual Funds' and 'Trustees of One
Group[RegTM] Mutual Funds' refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated February 18, 1999 to which reference is
hereby made and a copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of 'One
Group[RegTM] Mutual Funds' entered into in the name or on behalf thereof by any
of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
B-6
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
BANC ONE INVESTMENT ADVISORS
CORPORATION
By: ____________________________________
Title: _________________________________
BANC ONE HIGH YIELD PARTNERS, LLC
By: ____________________________________
Title: _________________________________
One Group Mutual Funds hereby acknowledges
and agrees to the provisions of paragraph 3(e) of
this Agreement.
ONE GROUP MUTUAL FUNDS
By: ______________________________________
Title: President
-----------------------------------
B-7
[Logo] VOTE TODAY BY MAIL,
ONE 1 GROUP TOUCH-TONE PHONE OR THE INTERNET
INVESTMENTS CALL TOLL-FREE [1-800-690-6903 OR 1-800-454-8683]
OR LOG ON TO [WWW.PROXYWEB.COM OR WWW.ONEGROUP.COM/PROXY]
*** CONTROL NUMBER: 999 999 999 999 99 ***
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON
FEBRUARY 26, 2003
FUND NAME PRINTS HERE THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF
ONE GROUP MUTUAL FUNDS.
The undersigned hereby appoints Gary R. Young and Michael V. Wible, each of them
with full power of substitution as proxies of the undersigned, to vote, as
designated below, at the Special Meeting of Shareholders of One Group High Yield
Bond Fund (the "High Yield Bond Fund") and One Group Income Bond Fund (the
"Income Bond Fund") on February 26, 2003 at 10:00 a.m., Eastern time, and at any
adjournments thereof, all of the units of beneficial interest in the Fund which
the undersigned would be entitled to vote upon the following matter if
personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL (1) AND PROPOSAL (2). IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING. THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSALS ON THE REVERSE SIDE.
Dated: _____________, 2003
PLEASE MARK, SIGN, DATE, AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE. IF YOU HAVE VOTED YOUR PROXY
ONLINE OR BY TELEPHONE, PLEASE DO NOT
RETURN THIS PROXY CARD.
--------------------------------------------
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| |
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Signature of Shareholder(s)
NOTE: Please sign exactly as the name
appears on this card. EACH Joint owner must
sign the proxy. When signing as executor,
administrator, attorney, trustee or guardian
or as custodian for a minor, please give the
FULL title of such. If a corporation, please
give the FULL corporate name and indicate
the signer's office. If a partner, please
sign in the partnership name.
One Group
Please fill in box(es) as shown using black or blue ink or number 2 pencil. [X]
PLEASE DO NOT USE FINE POINT PENS.
FOR AGAINST ABSTAIN
1. (HIGH YIELD BOND FUND SHAREHOLDERS ONLY) [ ] [ ] [ ] 1.
To approve a new Sub-Investment Advisory
Agreement between Banc One Investment
Advisors Corporation and Banc One High
Yield Partners, LLC with respect to the
High Yield Bond Fund effective upon
termination of the current
Sub-Investment Advisory Agreement.
2. (INCOME BOND FUND SHAREHOLDERS ONLY) [ ] [ ] [ ] 2.
To approve a new Sub-Investment Advisory
Agreement between Banc One Investment
Advisors Corporation and Banc One High
Yield Partners, LLC with respect to the
Income Bond Fund effective upon
termination of the current
Sub-Investment Advisory Agreement.
3. To transact such other business as may
properly come before the Special Meeting
or any adjournment thereof.
One Group
ONE GROUP(R) MUTUAL FUNDS
TWO NEW LOW COST WAYS TO VOTE YOUR PROXY INSTANTLY
THEY'RE FAST AND CONVENIENT
As a valued One Group Mutual Funds shareholder, your proxy vote is important to
us. That's why we've made it faster and easier to vote your proxy at your
convenience, 24 hours a day. Help us save time and postage - savings we pass on
to you - by voting on the Internet or by telephone.
Please do not mail the Proxy Card if you vote on-line or by telephone.
VOTE ONLINE
1. Read the enclosed Proxy Statement and have your Proxy Card handy.
2. Go to Web site www.proxyvote.com
3. Enter the 12-digit Control Number found on your Proxy Card.
4. Cast your vote using the east-to-follow instructions.
VOTE BY TOLL-FREE PHONE CALL
1. Read the enclosed Proxy Statement and have your Proxy Card handy.
2. Call toll-free 1-800-454-8683.
3. Enter the 12-digit Control Number found on your Proxy Card.
4. Cast your vote using the easy-to-follow instructions.
ONE GROUP(R) MUTUAL FUNDS
TWO NEW LOW COST WAYS TO VOTE YOUR PROXY INSTANTLY
THEY'RE FAST AND CONVENIENT
As a valued One Group Mutual Funds shareholder, your proxy vote is important to
us. That's why we've made it faster and easier to vote your proxy at your
convenience, 24 hours a day. Help us save time and postage - savings we pass on
to you - by voting on the Internet or by telephone.
Please do not mail the Proxy Card if you vote on-line or by telephone.
VOTE ONLINE
1. Read the enclosed Proxy Statement and have your Proxy Card handy.
2. Go to Web site www.onegroup.com/proxy
3. Enter the 14-digit Control Number found on your Proxy Card.
4. Cast your vote using the east-to-follow instructions.
VOTE BY TOLL-FREE PHONE CALL
1. Read the enclosed Proxy Statement and have your Proxy Card handy.
2. Call toll-free 1-800-690-6903.
3. Enter the 14-digit Control Number found on your Proxy Card.
4. Cast your vote using the easy-to-follow instructions.