INDEPENDENCE
ONE
U.S. GOVERNMENT
SECURITIES
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1993
FEDERATED SECURITIES CORP
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3110412 (12/93)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the first Semi-Annual Report of Independence One U.S.
Government Securities Fund (the "Fund") for the six-month period ended October
31, 1993. It contains complete financial information for the Fund--including the
Investment Review and Portfolio of Investments.
The Fund is a classic way to help your money earn income through the relative
safety of short-term U.S. Treasury notes. Total net assets in the Fund at the
end of the report period stood at $87.1 million. Dividends paid to shareholders
during the period totaled $2.3 million.
Thank you for your confidence in the Fund as a prudent way to put your cash to
work. As always, we welcome your questions, comments, or suggestions.
Sincerely,
Edward C. Gonzales
President
December 15, 1993
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The shares of the Independence One U.S. Government Securities Fund represent
interests in the Fund, which is one of a series of investment portfolios in the
Independence One Mutual Funds, an open-end management investment company. The
investment objective of the Fund is to seek high current income. The Fund
pursues this investment objective by investing in U.S. government securities
which are either issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
Long-term interest rates have remained at record low levels for most of 1993,
with the thirty-year government bond interest rate piercing below the 6% barrier
during the third quarter. It has since returned to levels slightly above 6%.
Total assets in the Fund are approximately $87.1 million. The average maturity
for the Fund as of October 31, 1993 was 4.3 years.
A sluggish economic growth rate is responsible for keeping interest rates at
such low levels. Economic downturns of our trade partners and weakness in
certain manufacturing categories, personal income growth, employment and bank
lending activity continue to keep the economic growth rate to a minimum.
We expect low interest rates to continue through the coming year unless economic
activity increases dramatically, forcing up inflation factors. Economic
indicators released recently seem to be consistent with this premise.
The Fund's investment adviser will continue to monitor economic and market
developments to best serve our shareholders who seek a well-managed fund that
seeks high current income.
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------- --------------------------------------------------------------------------------- --------------
U.S. TREASURY OBLIGATIONS--98.9%
- -------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES
---------------------------------------------------------------------------------
$ 500,000 9.000%, 11/15/93 $ 501,249
---------------------------------------------------------------------------------
500,000 7.625%, 12/31/93 503,745
---------------------------------------------------------------------------------
6,035,000 5.125%, 5/31/94 6,097,221
---------------------------------------------------------------------------------
5,970,000 5.000%, 6/30/94 6,033,401
---------------------------------------------------------------------------------
400,000 8.500%, 6/30/94 413,372
---------------------------------------------------------------------------------
3,245,000 4.250%, 7/31/94 3,264,243
---------------------------------------------------------------------------------
635,000 4.250%, 8/31/94 639,166
---------------------------------------------------------------------------------
530,000 4.000%, 9/30/94 532,316
---------------------------------------------------------------------------------
830,000 4.250%, 10/31/94 835,702
---------------------------------------------------------------------------------
4,500,000 3.875%, 2/28/95 4,508,415
---------------------------------------------------------------------------------
250,000 3.875%, 3/31/95 250,468
---------------------------------------------------------------------------------
850,000 3.875%, 4/30/95 850,791
---------------------------------------------------------------------------------
8,630,000 6.250%, 1/31/97 9,110,001
---------------------------------------------------------------------------------
9,380,000 5.500%, 7/31/97 9,690,666
---------------------------------------------------------------------------------
440,000 5.500%, 9/30/97 454,436
---------------------------------------------------------------------------------
450,000 5.125%, 2/28/98 457,169
---------------------------------------------------------------------------------
300,000 5.125%, 3/31/98 304,593
---------------------------------------------------------------------------------
6,285,000 6.375%, 1/15/99 6,699,370
---------------------------------------------------------------------------------
7,035,000 7.000%, 4/15/99 7,718,661
---------------------------------------------------------------------------------
4,690,000 6.375%, 7/15/99 5,005,074
---------------------------------------------------------------------------------
440,000 6.000%, 10/15/99 461,446
---------------------------------------------------------------------------------
750,000 5.500%, 4/15/2000 769,447
---------------------------------------------------------------------------------
1,500,000 8.750%, 8/15/2000 1,804,215
---------------------------------------------------------------------------------
4,325,000 7.750%, 2/15/2001 4,976,431
---------------------------------------------------------------------------------
12,625,000 6.375%, 8/15/2002 13,481,101
---------------------------------------------------------------------------------
750,000 6.250%, 2/15/2003 792,884
--------------------------------------------------------------------------------- --------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $82,500,401) 86,155,583
--------------------------------------------------------------------------------- --------------
REPURCHASE AGREEMENT--0.3%*
- -------------------------------------------------------------------------------------------------
233,000 Kidder, Peabody & Co., Inc., 2.97%, dated 10/29/93, due 11/1/93 (Note 2B) 233,000
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $82,733,401) $ 86,388,583\
--------------------------------------------------------------------------------- --------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
\ The cost of investments for federal tax purposes amounts to $82,733,401. The
net unrealized appreciation on a federal tax basis amounts to $3,655,182,
which is comprised of $3,738,994 appreciation and $83,812 depreciation at
October 31, 1993.
Note: The categories of investments are shown as a percentage of net assets
($87,128,115) at
October 31, 1993.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities at value (Notes 2A and 2B)
(identified and tax cost: $82,733,401) $ 86,388,583
- --------------------------------------------------------------------------------------------------
Cash 88
- --------------------------------------------------------------------------------------------------
Interest receivable 1,158,722
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 10,400
- --------------------------------------------------------------------------------------------------
Prepaid/deferred expenses (Note 2F) 27,506
- -------------------------------------------------------------------------------------------------- --------------
Total assets 87,585,299
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Dividends payable $ 378,633
- -------------------------------------------------------------------------------------
Accrued expenses 78,551
- ------------------------------------------------------------------------------------- -----------
Total liabilities 457,184
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 8,345,076 shares of beneficial interest outstanding $ 87,128,115
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 83,484,749
- --------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 3,655,182
- --------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (11,816)
- -------------------------------------------------------------------------------------------------- --------------
Total $ 87,128,115
- -------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, ]Offering Price, and Redemption Price Per Share
($87,128,115 / 8,345,076 shares of beneficial interest outstanding) $10.44
- -------------------------------------------------------------------------------------------------- --------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 2,470,000
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 310,710
- --------------------------------------------------------------------------------------
Administrative personnel and services (Note 5) 55,973
- --------------------------------------------------------------------------------------
Trustees' fees 2,025
- --------------------------------------------------------------------------------------
Custodian, transfer, and dividend disbursing agent fees and expenses 41,044
- --------------------------------------------------------------------------------------
Legal fees 502
- --------------------------------------------------------------------------------------
Printing and postage 3,445
- --------------------------------------------------------------------------------------
Auditing fees 6,079
- --------------------------------------------------------------------------------------
Registration fees 17,719
- --------------------------------------------------------------------------------------
Insurance 4,757
- --------------------------------------------------------------------------------------
Miscellaneous 1,922
- -------------------------------------------------------------------------------------- -----------
Total expenses 444,176
- --------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) 310,710
- -------------------------------------------------------------------------------------- -----------
Net expenses 133,466
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 2,336,534
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (11,816)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 1,123,587
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain on investments 1,111,771
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 3,448,305
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
10/31/93 PERIOD ENDED
INCREASE (DECREASE) IN NET ASSETS: (UNAUDITED) 4/30/93*
<S> <C> <C>
- ------------------------------------------------------------------------------- -------------- ----------------
OPERATIONS--
- -------------------------------------------------------------------------------
Net investment income $ 2,336,534 $ 1,408,239
- -------------------------------------------------------------------------------
Net realized loss on investments ($11,816 net loss and $0
respectively, as computed for federal tax purposes) (11,816) --
- -------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 1,123,587 2,531,595
- ------------------------------------------------------------------------------- -------------- ----------------
Change in net assets resulting from operations 3,448,305 3,939,834
- ------------------------------------------------------------------------------- -------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (2,336,534) (1,408,239)
- ------------------------------------------------------------------------------- -------------- ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -------------------------------------------------------------------------------
Proceeds from sale of shares 7,079,734 88,282,503
- -------------------------------------------------------------------------------
Cost of shares redeemed (8,767,868) (3,109,620)
- ------------------------------------------------------------------------------- -------------- ----------------
Change in net assets from Fund share transactions (1,688,134) 85,172,883
- ------------------------------------------------------------------------------- -------------- ----------------
Change in net assets (576,363) 87,704,478
- -------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------
Beginning of period 87,704,478 --
- ------------------------------------------------------------------------------- -------------- ----------------
End of period $ 87,128,115 $ 87,704,478
- ------------------------------------------------------------------------------- -------------- ----------------
</TABLE>
*The period from January 11, 1993 (date of initial public investment) to April
30, 1993.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1994* 1993**
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.31 $ 10.00
- ---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------
Net investment income 0.28 0.33
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.13 0.31
- --------------------------------------------------------------------------------------- --------- ---------
Total from investment operations 0.41 0.64
- ---------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.28) (0.33)
- --------------------------------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 10.44 $ 10.31
- --------------------------------------------------------------------------------------- --------- ---------
TOTAL RETURN*** 3.98%(a) 4.61%(a)
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------
Expenses 0.30%(b) 0.17%(b)
- ---------------------------------------------------------------------------------------
Net investment income 5.26%(b) 5.59%(b)
- ---------------------------------------------------------------------------------------
Expense adjustment (c) 0.70%(b) 0.83%(b)
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 87,128 87,704
- ---------------------------------------------------------------------------------------
Portfolio turnover rate 1% 0%
- ---------------------------------------------------------------------------------------
</TABLE>
* Six months ended October 31, 1993 (unaudited).
** Reflects operations for the period from January 11, 1993 (date of initial
public investment) to April 30, 1993.
*** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses (Note 5).
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated January 9, 1989. The Trust currently consists of four portfolios.
The financial statements included herein are only those of Independence One U.S.
Government Securities Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interest in separate portfolios of
securities. The Investment Shares are not being offered as of October 31, 1993.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are valued at the mean
between the over-the-counter bid and asked prices as furnished by an
independent pricing service. U.S. government obligations maturing in sixty
days or less are valued at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying securities to ensure the existence
of a proper level of collateral.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as brokers/dealers which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Trustees. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
C. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest and discount earned (net of premium) on short-term
obligations, and interest earned on all other debt securities including
original issue discount as required by the Internal Revenue Code, as
amended.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code, as amended, applicable to investment companies and
to distribute to shareholders each year
all of its taxable income, including any net realized gain on investments.
Accordingly, no provision for federal tax is necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. To the extent the Fund
engages in such transactions, it will do so for the purpose of acquiring
portfolio securities consistent with its investment objective and policies
and not for the purpose of investment leverage. When the Fund indicates its
interest in acquiring such portfolio securities, no liability accrues to
the Fund until the trade date of the transaction. When effecting such
transactions, assets of the Fund of a dollar amount sufficient to make
payment for the portfolio securities to be purchased will be segregated on
the Fund's records at the trade date. Securities purchased on a when-issued
or delayed delivery basis do not earn income until the settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS AND DISTRIBUTIONS
The Fund computes its net income daily and, immediately prior to the calculation
of its net asset value at the close of business, declares and records dividends,
excluding capital gains, to shareholders of record, with respect to shares for
which payment in federal funds has been received. Payment of dividends is made
monthly in cash, or in additional shares at the net asset value on the payable
date. Distributions of any net realized capital gains are made at least once
every twelve months. Dividends to shareholders and capital gain distributions,
if any, are recorded on the ex-dividend date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
10/31/93 4/30/93*
<S> <C> <C>
- ------------------------------------------------------------------------------- -------------- ----------------
Shares outstanding, beginning of period 8,506,163 --
- -------------------------------------------------------------------------------
Shares sold 683,796 8,809,732
- -------------------------------------------------------------------------------
Shares redeemed (844,883) (303,569)
- ------------------------------------------------------------------------------- -------------- ----------------
Shares outstanding, end of period 8,345,076 8,506,163
- ------------------------------------------------------------------------------- -------------- ----------------
</TABLE>
* The period from January 11, 1993 (date of initial public investment) to April
30, 1993.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Michigan National Bank, the Fund's investment adviser ("Adviser"), receives for
its services an annual investment advisory fee equal to .70 of 1% of the Fund's
average daily net assets, subject to an undertaking to reimburse the Fund by the
amount that normal operating expenses of the Fund (including the investment
advisory fee, but excluding brokerage commissions, interest, taxes and
extraordinary expenses) exceed 2-1/2% per year on the first $30 million of
average daily net assets of the Fund, 2% per year on the next $70 million of
average daily net assets of the Fund and 1-1/2% per year on any additional net
assets. For the period ended October 31, 1993, Adviser earned an investment
advisory fee of $310,710, all of which was voluntarily waived.
Administrative personnel and services are provided by Federated Administrative
Services ("FAS") at annual rates of .150 of 1% on the first $250 million, .125
of 1% on the next $250 million, .100 of 1% on the next $250 million, and .075 of
1% on assets in excess of $750 million, respectively, of average aggregate daily
net assets of the Independence One Mutual Funds. For the period ended October
31, 1993, FAS earned administrative personnel fees amounting to $55,973.
Expenses of organizing the Fund ($49,664) were borne initially by FAS. The Fund
has agreed to reimburse FAS for the organization expenses borne by FAS during
the five-year period following the date the Trust's portfolio became effective.
During the six months ended October 31, 1993, the Fund paid FAS $1,620 for
organization expenses pursuant to this agreement. Certain Officers of the Fund
are Officers and Directors of FAS.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations) for the
six months ended October 31, 1993 were as follows:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
PURCHASES--
- ---------------------------------------------------------------------------------------------------
U.S. government obligations $ 1,505,449
- --------------------------------------------------------------------------------------------------- -------------
SALES--
- ---------------------------------------------------------------------------------------------------
U.S. government obligations $ 750,000
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Robert E. Baker Edward C. Gonzales
Harold Berry President and Treasurer
Clarence G. Frame Jeffrey W. Sterling
Harry J. Nederlander Vice President and Assistant Treasurer
David L. VanAndel* Jay S. Neuman
Thomas S. Wilson* Secretary
</TABLE>
*Assumed office on December 7, 1993.
Mutual funds are not obligations of or insured by any bank nor are they insured
by the federal government or any of its agencies. Investment in these shares
involves risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
INDEPENDENCE
ONE
MICHIGAN
MUNICIPAL
CASH FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1993
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
1110803 (12/93)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report of Independence One Michigan
Municipal Cash Fund (the "Fund") for the six-month period ended October 31,
1993. It contains complete financial information for the Fund--including the
Investment Review and Portfolio of Investments.
Because taxes can take more of your income than ever, you can take comfort in
knowing that, as a shareholder, you are pursuing dividends free from federal and
state income taxes* through a high-quality, diversified portfolio of municipal
money market securities. At the end of the report period, total net assets in
the Fund stood at $76 million. Double-tax-free dividends paid to shareholders
during the period totaled $771,795.
Thank you for using the Fund to keep your cash earning double-tax-free income,
while you enjoy easy access to your money and a high level of stability. As
always, we welcome your questions, comments, or suggestions.
Sincerely,
Edward C. Gonzales
President
December 15, 1993
* A portion of the Fund's income may be subject to the federal alternative
minimum tax.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The shares of the Independence One Michigan Municipal Cash Fund represent
interests in the Fund, which is one of a series of investment portfolios in the
Independence One Mutual Funds, an open-end, management investment company. The
investment objective of the Fund is to provide stability of income and current
income exempt from federal regular income tax* as well as Michigan state income
tax consistent with the stability of principal. The Fund pursues this investment
objective by investing at least 80% of its assets in a portfolio of Michigan
municipal securities maturing in 397 days or less.
Short-term interest rates have been fairly steady for most of 1993. This trend
in interest rates is reflected in the 7-day average yield for the Fund, which
has ranged from 1.88% on January 31, 1993 to its current yield of 1.97% on
October 31, 1993.** Total net assets in the Fund are approximately $76 million.
The average maturity for the Fund as of October 31, 1993 was 54 days.
The primary reason short-term interest rates have remained steady in 1993 is
that the Federal Reserve Board (the "Fed") elected to leave monetary policy
unchanged. The Fed has been satisfied with the pace of the economy and the
relatively low rate of inflation.
Looking ahead to 1994, we do not expect a significant change in short-term
interest rates. However, as the economy continues to grow, it could trigger a
resurgence in inflation, thereby forcing a tightening in monetary policy and a
subsequent increase in interest rates.
The Fund's investment adviser will continue to monitor economic and market
developments to best serve our shareholders who seek a well-managed fund that
stresses a high degree of safety, liquidity and competitive yields.
* Some portion of the Fund's income may be subject to the federal alternative
minimum tax.
** Past performance is not indicative of future results. Yield will vary.
Although money market funds seek to maintain a stable net asset value of
$1.00 per share, there is no assurance that they will be able to do so. An
investment in the Fund is neither insured nor guaranteed by the U.S.
government.
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S/
AMOUNT ISSUE S&P* VALUE
<S> <C> <C> <C>
- ------------- ------------------------------------------------------------------ --------------- --------------
SHORT-TERM MUNICIPAL SECURITIES--95.9%
- ---------------------------------------------------------------------------------
$ 200,000 Board of Trustees of Western Michigan University General Revenue
Bonds, 2.40% (Series 1993A), 1/15/94 Aaa/AAA $ 200,000
------------------------------------------------------------------
495,000 Britton--Macon Area School, Lenawee & Monroe Counties, MI, 2.50%
TANs, 4/5/94 NR/NR 495,821
------------------------------------------------------------------
2,500,000 Burke County, GA, Development Authority, 2.30% (Oglethorpe Power
Corp.)/(Credit Suisse LOC),
11/8/93 P-1/A-1+ 2,500,000
------------------------------------------------------------------
425,000 City of Grand Rapids, EDC Weekly VRDN (140 Monroe Ltd.
Partnership)/(Old Kent Bank LOC) NR/NR 425,000
------------------------------------------------------------------
1,000,000 Delta County, MI, EDC 2.30% (Mead Paper)/(Union Bank of
Switzerland LOC), 11/4/93 P-1/NR 1,000,000
------------------------------------------------------------------
1,100,000 Delta County, MI, EDC 2.35% (Mead Paper)/(Swiss Bank Corp. LOC),
11/17/93 P-1/NR 1,100,000
------------------------------------------------------------------
1,900,000 Delta County, MI, EDC 2.35% (Mead Paper)/(Swiss Bank Corp. LOC),
11/24/93 P-1/NR 1,900,000
------------------------------------------------------------------
2,040,000 Delta County, MI, EDC 2.50% (Mead Paper)/(Union Bank of
Switzerland LOC), 1/6/94 P-1/NR 2,040,000
------------------------------------------------------------------
1,000,000 Delta County, MI, EDC 2.50% (Mead Paper)/(Swiss Bank LOC), 1/24/94 P-1/NR 1,000,000
------------------------------------------------------------------
1,060,000 Farmington Hills, MI, EDC 3.15% (Marketing Display)/ (Comerica
Bank LOC)/(Subject to AMT), 3/1/94 NR/NR 1,060,000
------------------------------------------------------------------
205,000 Farmington Hills, MI, EDC, Weekly VRDNs
(Brookfield)/(Comerica Bank LOC) NR/A-1 205,000
------------------------------------------------------------------
2,000,000 Grand Rapids, MI, EDC, Weekly VRDNs (Series A 1991)/(Amway Hotel
Corp.)/(Sakura Bank, Ltd. LOC) VMIG1/A-1+ 2,000,000
------------------------------------------------------------------
1,500,000 Grand Rapids, MI, EDC, Weekly VRDNs (Series A 1991)/(Amway Hotel
Corp.)/(Sakura Bank, Ltd. LOC) VMIG1/A-1+ 1,500,000
------------------------------------------------------------------
3,200,000 Huron Valley School District, Oakland & Livingston Counties, MI,
2.70% TANs, 4/5/94 NR/NR 3,203,301
------------------------------------------------------------------
2,000,000 Kalamazoo Public Library, Kalamazoo County, MI, 2.50% TANs, 4/5/94 NR/NR 2,000,410
------------------------------------------------------------------
1,000,000 Kalamazoo, MI, Hospital Finance Authority, 2.40% (Bronson
Methodist Hospital)/(Mitsubishi Bank, Ltd. LOC), 11/10/93 VMIG1/Aa3 1,000,000
------------------------------------------------------------------
800,000 Lakeview Public Schools, Macomb County, MI, 2.45%, TANs, 4/1/94 NR/NR 800,149
------------------------------------------------------------------
700,000 Lapeer County, MI, EDC, Weekly VRDNs (Rochester Gear)/(Comerica
Bank LOC)/(Subject to AMT) NR/NR 700,000
------------------------------------------------------------------
2,500,000 Michigan Higher Education Student Loan, Weekly VRDNs (Series
X11-B)/(AMBAC Insured)
(Subject to AMT) VMIG1/A-1+ 2,500,000
------------------------------------------------------------------
1,000,000 Michigan Higher Education Student Loan, Weekly VRDNs (Series
X11-F)/(AMBAC Insured)/
(Subject to AMT) VMIG1/ AAA 1,000,000
------------------------------------------------------------------
500,000 Michigan Municipal Bond Authority, 2.60% (Equipment & Realty
Property Financing Program)/(FSA Insured), 5/ 1/94 Aaa/AAA 502,430
------------------------------------------------------------------
450,000 Michigan South Central Power Agency Power Supply System, 2.75%,
Revenue Refunding Bonds (MBIA Insured), 11/1/93 Aaa/AAA 450,000
------------------------------------------------------------------
3,000,000 Michigan State, School Loan Notes, 2.49%, 4/29/94 NR/NR 3,011,063
------------------------------------------------------------------
100,000 Michigan State Hospital Finance Authority, Weekly VRDNs/(Comerica
Bank LOC) VMIG1/A-1 100,000
------------------------------------------------------------------
275,000 Michigan State Hospital Finance Authority, 2.50% (Comerica Bank
LOC), 12/8/93 VMIG1/NR 275,000
------------------------------------------------------------------
1,500,000 Michigan State Housing Development Authority, 2.70% (Series
1988)/(Sanwa Bank LOC)/(Subject to AMT), 1/ 12/94 VMIG1/A-1+ 1,500,000
------------------------------------------------------------------
1,000,000 Michigan State Housing Development Authority, 2.75% (Series
1988)/(Sanwa Bank LOC)/(Subject to AMT), 11/ 13/94 VMIG1/A-1+ 1,000,000
------------------------------------------------------------------
550,000 Michigan State Housing Development Authority, 2.70%, SFM Revenue
Bonds, 12/1/93 NR/AA 550,000
------------------------------------------------------------------
300,000 Michigan State Housing Development Authority, 2.70%, SFM Revenue
Bonds, 12/1/93 NR/AA 300,000
------------------------------------------------------------------
85,000 Michigan State Job Development Authority, 2.85% (Brewer Sawmill
Inc.)/(National Bank of Detroit LOC), 4/15/94 NR/NR 85,000
------------------------------------------------------------------
1,400,000 Michigan Strategic Fund Solid Waste Disposal, Weekly VRDNs
(Barclays Bank PLC LOC)/(Subject to AMT) VMIG1/NR 1,400,000
------------------------------------------------------------------
500,000 Michigan Strategic Fund, 2.40% (Scott Paper)/
(Series C)/(Sumitomo Bank, Ltd. LOC)/(Subject to AMT), 11/17/93 VMIG1/NR 500,000
------------------------------------------------------------------
300,000 Michigan Strategic Fund, 2.55% (Series B)/(Scott
Paper)/(Sumitomo Bank, Ltd. LOC)/(Subject to AMT),
11/22/93 VMIG1/NR 300,000
------------------------------------------------------------------
400,000 Michigan Strategic Fund, 2.40% (Scott Paper)/
(Series C), (Sumitomo Bank, Ltd. LOC)/(Subject to AMT), 11/22/93 VMIG1/NR 400,000
------------------------------------------------------------------
1,800,000 Michigan Strategic Fund, 2.45% (Series B)/(Scott
Paper)/(Sumitomo Bank, Ltd. LOC)/(Subject to AMT),
11/23/93 VMIG1/NR 1,800,000
------------------------------------------------------------------
2,000,000 Michigan Strategic Fund, 2.65% (Series B)/(Scott
Paper)/(Sumitomo Bank, Ltd. LOC)/(Subject to AMT),
1/19/94 VMIG1/NR 2,000,000
------------------------------------------------------------------
240,000 Michigan Strategic Fund, 3.00% (Joseph Gesmundo Trust)/(First of
America LOC), 11/15/93 NR/NR 240,000
------------------------------------------------------------------
2,715,000 Michigan Strategic Fund, Weekly VRDNs (General
Motors Corp.) VMIG1/NR 2,715,000
------------------------------------------------------------------
1,600,000 Michigan Strategic Fund Pollution Control Revenue Bonds, Weekly
VRDNs (General Motors Corp.) VMIG1/NR 1,600,000
------------------------------------------------------------------
1,000,000 Michigan Strategic Fund, 2.35% (Dow Chemical Co.), 11/16/93 P-1/NR 1,000,000
------------------------------------------------------------------
500,000 Michigan Strategic Fund, 2.50% (Dow Chemical Co.), 2/ 16/94 P-1/NR 500,000
------------------------------------------------------------------
2,000,000 Michigan Strategic Fund, 2.45% (Series 1987)/(Dow Chemical Co.),
11/18/93 P-1/NR 2,000,000
------------------------------------------------------------------
1,100,000 Michigan Strategic Fund, 2.50% (Dow Chemical Co.), 2/ 16/94 P-1/NR 1,100,000
------------------------------------------------------------------
1,500,000 Michigan Strategic Fund, 2.60% (Series 1987)/(Dow Chemical Co.),
1/11/94 P-1/NR 1,500,000
------------------------------------------------------------------
1,000,000 Michigan Strategic Fund, IDR Weekly VRDNs (Series 1985)/(Allen
Group Project)/(Union Bank of
Switzerland LOC) VMIG1/ AAA 1,000,000
------------------------------------------------------------------
35,000 Michigan Strategic Fund Limited Obligation Revenue Bonds, 2.70% (G
& R Felpausch Co. Project)/(National Bank of Detroit LOC), 11/1/93 NR/NR 35,000
------------------------------------------------------------------
250,000 Michigan Strategic Fund Limited Obligation Revenue Bonds, Weekly
VRDNs (Series B)/(Kay Screen Printing Inc.)/(Comerica Bank
LOC)/(Subject to AMT) NR/NR 250,000
------------------------------------------------------------------
780,000 Michigan Strategic Fund Limited Obligation Revenue Bonds, Weekly
VRDNs (Village Pines Project)/
(National Bank of Detroit LOC) NR/NR 780,000
------------------------------------------------------------------
1,150,000 Michigan Strategic Fund Limited Obligation, Weekly VRDNs (Vail
Rubber 1989)/(Comerica Bank LOC)/(Subject to AMT) VMIG1/NR 1,150,000
------------------------------------------------------------------
605,000 Michigan Strategic Fund Limited Obligation Revenue Bond, Weekly
VRDNs (Mans Project)/(Comerica Bank LOC) NR/NR 605,000
------------------------------------------------------------------
125,000 Michigan Strategic Fund Limited Obligation Revenue Bonds, Weekly
VRDNs (Riverfront Development
Project)/(Old Kent Bank & Trust Co. LOC) NR/NR 125,000
------------------------------------------------------------------
150,000 Michigan Strategic Fund Limited Obligation Revenue Refunding
Bonds, Weekly VRDNs (Series A)/(Riverfront Development Co.)/(Old
Kent Bank & Trust Co. LOC) NR/NR 150,000
------------------------------------------------------------------
650,000 Michigan Strategic Fund, Weekly VRDNs (Sarbeth
Investment)/(Comerica Bank LOC)/(Subject to AMT) VMIG1/NR 650,000
------------------------------------------------------------------
375,000 Michigan Strategic Fund, Weekly VRDNs (Starboard)/ (Comerica Bank
LOC)/(Subject to AMT) NR/NR 375,000
------------------------------------------------------------------
550,000 Michigan Strategic Fund, Weekly VRDNs (Whitehall Ind.)/(Comerica
Bank LOC)/(Subject to AMT) VMIG1/NR 550,000
------------------------------------------------------------------
50,000 Michigan Strategic Fund Limited Obligation Revenue Bonds, Weekly
VRDNs (Michigan & Wayne Disposal Inc.)/(Comerica Bank
LOC)/(Subject to AMT) NR/A-1 50,000
------------------------------------------------------------------
465,000 Michigan Strategic Fund Limited Obligation Revenue Bonds, Weekly
VRDNs (Riverfront Development Co.)/ (Old Kent & Trust Co. LOC) NR/NR 465,000
------------------------------------------------------------------
25,000 Michigan Strategic Fund Limited Obligation Revenue, Weekly VRDNs
(Series F)/(Riverfront Development Co. Project)/(Old Kent Bank &
Trust Co. LOC) NR/NR 25,000
------------------------------------------------------------------
1,500,000 Michigan Strategic Fund Limited Obligation, Weekly VRDNs (Series
1992)/(Pilot Industries, Inc. Project)/ (National Bank of Detroit
LOC)/(Subject to AMT) NR/NR 1,500,000
------------------------------------------------------------------
890,000 Michigan Strategic Fund Limited Obligation Revenue Bonds, Weekly
VRDNs, (Riverfront Development Co.)/ (Old Kent & Trust Co. LOC) NR/NR 890,000
------------------------------------------------------------------
870,000 Michigan Strategic Fund Limited Obligation Revenue Bonds, Weekly
VRDNs (Riverfront Development Co.)/ (Old Kent & Trust Co. LOC) NR/NR 870,000
------------------------------------------------------------------
50,000 Michigan Strategic Fund Limited Obligation Revenue Bonds, Weekly
VRDNs (Riverfront Development Co.)/ (Old Kent & Trust Co. LOC) NR/NR 50,000
------------------------------------------------------------------
3,000,000 Michigan Strategic Fund, Weekly VRDN (Louisiana-- Pacific
Corp)/(Wachovia LOC) NR/NR 3,000,000
------------------------------------------------------------------
3,000,000 New Jersey State Turnpike Authority Revenue Bonds, Weekly VRDNs
(Series D)/(Societe General Bond Insurance)/(FGIC Insured) VMIG1/A-1+ 3,000,000
------------------------------------------------------------------
150,000 Oakland County, MI, EDC 3.00% (Orchard Maple
Project)/(First of America LOC), 11/15/93 NR/NR 150,000
------------------------------------------------------------------
195,000 Oakland County, MI, EDC 2.70% (Corners Shopping Center)/(First of
America LOC), 2/1/94 NR/NR 195,000
------------------------------------------------------------------
150,000 Puerto Rico Industries & Environmental, 2.70%
(Abbott Lakes Project), 3/1/94 Aa1/NR 150,000
------------------------------------------------------------------
950,000 Richmond Community Schools, 2.55% TANs, 4/5/94 NR/NR 950,189
------------------------------------------------------------------
2,800,000 Tawas Area Schools, Iosco & Arenal Counties, MI, 2.55% TANs,
3/31/94 NR/NR 2,802,249
------------------------------------------------------------------
1,700,000 White Pigeon Community Schools, St. Joseph & Gass Counties, MI,
2.55% TANs, 4/5/94 NR/NR 1,701,764
------------------------------------------------------------------ --------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 72,927,376
------------------------------------------------------------------ --------------
OTHER--3.8%
- ---------------------------------------------------------------------------------
2,906,000 Nuveen Tax-Exempt Money Market Fund NR/NR 2,906,000
------------------------------------------------------------------ --------------
TOTAL INVESTMENTS (AT AMORTIZED COST) $ 75,833,376\
------------------------------------------------------------------ --------------
</TABLE>
* See Notes to Portfolio of Investments.
\ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($76,039,835) at October 31, 1993.
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
- --------------------------------------------------------------------------------
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMT--Alternative Minimum Tax IDR--Industrial Development Revenue
AMBAC--American Municipal Bond Assurance
Corporation LOC--Letter of Credit
LT--Limited Tax
EDC--Economic Development Corporation
MBIA--Municipal Bond Investors
EDR--Economic Development Revenue Assurance
FGIC--Financial Guaranty Insurance Company
SFM--Single Family Mortgage
FSA--Financial Security Assurance
TANs--Tax Anticipation Notes
GO--General Obligation
VRDNs--Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
Moody's highest rating for state and municipal and other short-term notes is
MIG1/VMIG1. Short-term municipal securities rated MIG1/VMIG1 are the best
quality. They have strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing or both. The VMIG1 rating denotes that the security has a demand
feature. Moody's rating of MIG2/VMIG2 denotes high-quality margins of protection
which are ample although not so large as in the preceding group.
The three highest ratings of Moody's for municipal bonds are Aaa, Aa and A.
Bonds rated Aaa are judged to be of the "best quality." The rating Aa is
assigned to bonds which are of "high quality by all standards," but as to which
margins of protection or other elements make long-term risks appear somewhat
larger than Aaa-rated bonds. The Aaa and Aa-rated bonds comprise what are
generally known as "high-grade bonds." Bonds which are rated A by Moody's
possess many favorable investment attributes and are considered "upper
medium-grade obligations." Factors giving security to principal and interest of
A-rated bonds are considered adequate, but elements may be present which suggest
a susceptibility to impairment sometime in the future. The bonds in the A group
which Moody's believes possess the strongest investment attributes are
designated by the symbol A1.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate or municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Standard & Poor's highest rating for municipal commercial paper is A-1.
Short-term municipal commercial paper rated A-1 is of the best quality. The
capacity for timely payment on issues with an
A-2 designation is strong. The rating Prime-1 (P-1) is the highest municipal
commerical paper rating assigned by Moody's. Issues rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations.
The three highest ratings of Standard & Poor's for municipal bonds are AAA
(Prime), AA (High Grade) and A (Good Grade). Bonds rated AAA have the highest
rating assigned by Standard & Poor's to a debt obligation. Capacity to pay
interest and repay principal is extremely strong. Bonds rated AA have a very
strong capacity to pay interest and repay principal and differ from the highest
rated issues only by a small degree. Bonds rated A have a strong capacity to pay
interest and repay principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than bonds
in higher rated categories. The ratings AA and A may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
category.
Standard & Poor's rating SP-1 is assigned to short-term municipal obligations
with a very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation. The SP-2 rating denotes a satisfactory capacity to pay
principal and interest.
NR indicates the bonds are not currently rated by Moody's or Standard & Poor's.
However, managment considers them to be of good quality.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Investments, at amortized cost and value (Note 2A) $ 75,833,376
- -------------------------------------------------------------------------------------------------
Cash 351
- -------------------------------------------------------------------------------------------------
Interest receivable 326,931
- -------------------------------------------------------------------------------------------------
Receivable for Investment sold 5,000
- -------------------------------------------------------------------------------------------------
Prepaid/deferred expenses (Note 2E) 1,702
- ------------------------------------------------------------------------------------------------- --------------
Total assets 76,167,360
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 46,300
- --------------------------------------------------------------------------------------
Dividends payable 46,220
- --------------------------------------------------------------------------------------
Accrued expenses 35,005
- -------------------------------------------------------------------------------------- ---------
Total liabilities 127,525
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 76,039,835 shares of beneficial interest outstanding $ 76,039,835
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, ]Offering Price, and Redemption Price Per Share:
($76,039,835 / 76,039,835 shares of beneficial interest outstanding) $1.00
- ------------------------------------------------------------------------------------------------- --------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------------
Interest income (Note 2B) $ 965,080
- -----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 157,475
- ----------------------------------------------------------------------------------------
Administrative personnel and services (Note 5) 49,645
- ----------------------------------------------------------------------------------------
Trustees' fees 1,239
- ----------------------------------------------------------------------------------------
Custodian, transfer, and dividend disbursing agent fees and expenses 41,280
- ----------------------------------------------------------------------------------------
Fund share registration costs 3,784
- ----------------------------------------------------------------------------------------
Auditing fees 4,750
- ----------------------------------------------------------------------------------------
Legal fees 2,518
- ----------------------------------------------------------------------------------------
Printing and postage 5,180
- ----------------------------------------------------------------------------------------
Insurance premiums 2,664
- ----------------------------------------------------------------------------------------
Miscellaneous 2,351
- ---------------------------------------------------------------------------------------- -----------
Total expenses 270,886
- ----------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 5) 77,601
- ---------------------------------------------------------------------------------------- -----------
Net expenses 193,285
- ----------------------------------------------------------------------------------------------------- -----------
Net investment income $ 771,795
- ----------------------------------------------------------------------------------------------------- -----------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 1993 APRIL 30,
(UNAUDITED) 1993
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------
Net investment income $ 771,795 $ 1,963,249
- ----------------------------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -----------------------------------------------------------------------------
Dividends to shareholders from net investment income (771,795) (1,963,249)
- ----------------------------------------------------------------------------- ---------------- ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -----------------------------------------------------------------------------
Proceeds from sale of shares 170,854,530 346,602,170
- -----------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of distribution of Fund shares 486,618 1,197,537
- -----------------------------------------------------------------------------
Cost of shares redeemed (180,063,826) (334,782,477)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets from Fund share transactions (8,722,678) 13,017,230
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets (8,722,678) 13,017,230
- -----------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------
Beginning of period 84,762,513 71,745,283
- ----------------------------------------------------------------------------- ---------------- ----------------
End of period $ 76,039,835 $ 84,762,513
- ----------------------------------------------------------------------------- ---------------- ----------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C> <C> <C> <C>
1994* 1993 1992 1991 1990***
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------
Net investment income 0.01 0.02 0.04 0.05 0.05
- ------------------------------------------------------- --------- --------- --------- --------- -----------
LESS DISTRIBUTIONS
- -------------------------------------------------------
Dividends to shareholders from net
investment income (0.01) (0.02) (0.04) (0.05) (0.05)
- ------------------------------------------------------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------- --------- --------- --------- --------- -----------
TOTAL RETURN** 0.99%(a) 2.27% 3.68% 5.18% 5.14%(a)
- -------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------
Expenses 0.49%(b) 0.53% 0.50% 0.67% 0.44%(b)
- -------------------------------------------------------
Net investment income 1.96%(b) 2.23% 3.51% 5.02% 5.70%(b)
- -------------------------------------------------------
Expense adjustments (c) 0.20%(b) 0.20% 0.39% 0.19% 0.39%(b)
- -------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------
Net assets, end of period (000 omitted) $76,040 $84,763 $71,745 $31,705 $28,921
- -------------------------------------------------------
</TABLE>
* Six months ended October 31, 1993 (unaudited).
** Based on net asset value.
*** Reflects operations for the period from June 14, 1989 (date of initial
public investment) to April 30, 1990.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses (Note 5).
(See Notes which are an integral part of the Financial Statements.)
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Trust was established as a Massachussets business trust under a Declaration
of Trust dated January 9, 1989. The Trust currently consists of four portfolios.
The financial statements included herein are only those of Independence One
Michigan Municipal Cash Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate portfolios of
securities.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Board of Trustees ("Trustees") has determined
that the best method currently available for valuing portfolio securities is
amortized cost. The Fund's use of the amortized cost method to value its
portfolio securities is conditioned on its compliance with Rule 2a-7 under
the Investment Company Act of 1940.
Since the Fund may invest a substantial portion of its assets in issuers
located in one state, it will be more susceptible to factors adversely
affecting issuers of that state, than would be a comparable general
tax-exempt mutual fund. In order to reduce the risk associated with such
factors, at October 31, 1993, 61.1% of the securities in the portfolio of
investments are backed by letters of credit of various financial
institutions and various assurance institutions. The aggregate percentages
by financial institutions and assurance institutions ranged from 0.6% to
7.9% of total investments.
B. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest earned net of premium, and original issue discount as
required by the Internal Revenue Code.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to investment companies and to distribute
to shareholders each year all of its taxable income. Accordingly, no
provision for federal tax is necessary. At April 30, 1993, the Fund, for
federal tax purposes, had a capital loss carryforward of approximately
$6,510, which will reduce the Fund's taxable income arising from future net
realized gain on investments, if any, to the extent permitted by the
Internal Revenue Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal income tax. Pursuant to the Internal Revenue Code,
such capital loss carryforward will expire in 1998 ($717), 1999 ($4,003) and
2000 ($1,790). Dividends paid by the Fund representing net interest received
on tax-exempt municipal securities are not includable by shareholders as
gross income for federal income tax purposes because the Fund intends to
meet certain requirements of the Internal Revenue Code applicable to
regulated investment companies which will enable the Fund to pay exempt
interest dividends. The portion of such interest, if any, earned on private
activity bonds issued after August 7, 1986, may be considered a
tax-preference item to shareholders.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. To the extent the Fund engages
in such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not for
the purpose of investment leverage. When the Fund indicates its interest in
acquiring such portfolio securities, no liability accrues to the Fund until
the trade date of the transaction. The Fund will maintain security positions
such that sufficient liquid assets will be available to make payment for the
securities to be purchased. These securities are marked to market daily and
maintained until the transaction is settled. Securities purchased on a
when-issued or delayed delivery basis do not earn income until the
settlement date.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
F. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS
The Fund computes its net income daily and, immediately prior to the calculation
of its net asset value at the close of business, declares and records dividends
to shareholders of record at the time of the previous computation of the Fund's
net asset value. Payment of dividends is made monthly in cash or in additional
shares at the net asset value on the payable date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1993, capital paid in aggregated $76,039,835. Transactions in Fund
shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
1993 1993
<S> <C> <C>
Shares outstanding, beginning of period 84,762,513 71,745,283
- --------------------------------------------------------------------------------
Shares sold 170,854,530 346,602,170
- --------------------------------------------------------------------------------
Shares issued to shareholders electing to receive
payment of distribution in Fund shares 486,618 1,197,537
- --------------------------------------------------------------------------------
Shares redeemed (180,063,826) (334,782,477)
- -------------------------------------------------------------------------------- --------------- ---------------
Shares outstanding, end of period 76,039,835 84,762,513
- -------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Michigan National Bank, the Fund's investment adviser ("Adviser"), receives for
its services an annual investment advisory fee equal to .40 of 1% of the Fund's
average daily net assets, subject to an undertaking to reimburse the Fund by the
amount that normal operating expenses of the Fund (including the investment
advisory fee, but excluding brokerage commissions, interest, taxes and
extraordinary expenses) exceed 2-1/2% per year on the first $30 million of
average daily net assets of the Fund, 2% per year on the next $70 million of
average daily net assets of the Fund and 1-1/2% per year on any additional net
assets. For the six months ended October 31, 1993, Adviser earned an investment
advisory fee of $157,475 of which $77,601 was voluntarily waived.
Administrative personnel and services are provided by Federated Administrative
Services ("FAS") at annual rates of .150 of 1% on the first $250 million, .125
of 1% on the next $250 million, .100 of 1% on the next $250 million, and .075 of
1% on assets in excess of $750 million, respectively, of average aggregate daily
net assets of the Independence One Mutual Funds. For the six months ended
October 31, 1993, FAS earned administrative personnel fees amounting to $49,645.
Expenses of organizing the Fund ($30,610) were borne initially by FAS. The Fund
has agreed to pay FAS, at an annual rate of .005 of 1% of average daily net
assets, until the organization expenses initially borne by FAS are reimbursed or
five years from June 1, 1989, the date the Trust's portfolio became effective,
whichever occurs earlier. During the six months ended October 31, 1993, the Fund
paid FAS $1,988 for organization expenses, pursuant to this agreement. Certain
Officers of the Fund are Officers and Directors of FAS.
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Robert E. Baker Edward C. Gonzales
Harold Berry President and Treasurer
Clarence G. Frame Jeffrey W. Sterling
Harry J. Nederlander Vice President and Assistant Treasurer
David L. VanAndel* Jay S. Neuman
Thomas S. Wilson* Secretary
</TABLE>
* Assumed office on December 7, 1993.
Mutual funds are not obligations of or insured by any bank nor are they insured
by the federal government or any of its agencies.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
INDEPENDENCE
ONE
U.S. TREASURY
MONEY MARKET
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1993
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
0112906 (12/93)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report of Independence One U.S. Treasury
Money Market Fund (the "Fund") for the six-month period ended October 31, 1993.
It contains complete financial information for the Fund--including the
Investment Review and Portfolio of Investments.
The Fund continues to help your cash pursue competitive income through the
relative safety of short-term U.S. Treasury securities, and in repurchase
agreements fully backed by these securities. Total net assets in the Fund at the
end of the report period stood at $224.6 million. Dividends paid to shareholders
during the period totaled $2.6 million.
Thank you for your confidence in the Fund as a prudent way to put your cash to
work. As always, we welcome your questions, comments, or suggestions.
Sincerely,
Edward C. Gonzales
President
December 15, 1993
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The shares of the Independence One U.S. Treasury Money Market Fund represent
interests in the Fund, which is one of a series of investment portfolios in the
Independence One Mutual Funds, an open-end, management investment company. The
investment objective of the Fund is to provide current income consistent with
stability of principal. The Fund pursues this investment objective by investing
in a portfolio of short-term U.S. Treasury obligations.
Short-term interest rates have been fairly steady for most of 1993. This trend
in interest rates is reflected in the 7-day average yield for the Fund, which
has ranged from 2.66% on January 31, 1993 to its current yield of 2.55% on
October 31, 1993.* Total net assets in the Fund are approximately $224.6
million. The average maturity for the Fund as of October 31, 1993 was 50 days.
The primary reason short-term interest rates have remained steady in 1993 is
that the Federal Reserve Board (the "Fed") elected to leave monetary policy
unchanged. The Fed has been satisfied with the pace of the economy and the
relatively low rate of inflation.
Looking ahead to 1994, we do not expect a significant change in short-term
interest rates. However, as the economy continues to grow, it could trigger a
resurgence in inflation, thereby forcing a tightening in monetary policy and a
subsequent increase in interest rates.
The Fund's investment adviser will continue to monitor economic and market
developments to best serve our shareholders who seek a well-managed fund that
stresses a high degree of safety, liquidity and competitive yields.
* Past performance is not indicative of future results. Yield will vary.
Although money market funds seek to maintain a stable net asset value of $1.00
per share, there is no assurance that they will be able to do so. An
investment in the Fund is neither insured nor guaranteed by the U.S.
government.
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------- -------------------------------------------------------------------------------- ---------------
U.S. TREASURY OBLIGATIONS--39.6%
- ------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS
--------------------------------------------------------------------------------
$ 10,000,000 11/18/93 $ 9,985,149
--------------------------------------------------------------------------------
10,000,000 12/2/93 9,973,090
--------------------------------------------------------------------------------
10,000,000 1/27/94 9,921,337
--------------------------------------------------------------------------------
10,000,000 2/10/94 9,914,992
--------------------------------------------------------------------------------
10,000,000 4/7/94 9,865,460
--------------------------------------------------------------------------------
10,000,000 4/21/94 9,851,088
--------------------------------------------------------------------------------
10,000,000 4/28/94 9,842,272
--------------------------------------------------------------------------------
10,000,000 5/5/94 9,838,639
--------------------------------------------------------------------------------
10,000,000 5/5/94 9,837,211
-------------------------------------------------------------------------------- ---------------
TOTAL U.S. TREASURY OBLIGATIONS 89,029,238
-------------------------------------------------------------------------------- ---------------
REPURCHASE AGREEMENTS--64.9%*
- ------------------------------------------------------------------------------------------------
11,086,000 Daiwa Securities America, Inc., 2.95%, dated 10/29/93, due 11/1/93 11,086,000
--------------------------------------------------------------------------------
56,215,000 Donaldson, Lufkin & Jenrette Securities Corp., 2.98%, dated
10/29/93, due 11/1/93 56,215,000
--------------------------------------------------------------------------------
56,215,000 Kidder, Peabody & Co., Inc., 2.97%, dated 10/29/93, due 11/1/93 56,215,000
--------------------------------------------------------------------------------
11,087,000 Merrill Lynch, Pierce, Fenner & Smith, Inc., 2.80%, dated 10/29/93, due 11/1/93 11,087,000
--------------------------------------------------------------------------------
11,086,000 UBS Securities, Inc., 2.95%, dated 10/29/93, due 11/1/93 11,086,000
-------------------------------------------------------------------------------- ---------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 145,689,000
-------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS, AT AMORTIZED COST $ 234,718,238\
-------------------------------------------------------------------------------- ---------------
</TABLE>
* Repurchase agreements are fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.
\ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($224,630,548) at
October 31, 1993.
(See Notes which are an integral part of the Financial Statements)
2
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $ 145,689,000
- -------------------------------------------------------------------------------
Investments in U.S. Treasury obligations 89,029,238
- ------------------------------------------------------------------------------- ---------------
Total investments, at amortized cost and value (Note 2A) $ 234,718,238
- ------------------------------------------------------------------------------------------------
Cash 634
- ------------------------------------------------------------------------------------------------
Interest receivable 35,911
- ------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 500
- ------------------------------------------------------------------------------------------------
Deferred expenses (Note 2F) 3,635
- ------------------------------------------------------------------------------------------------ ---------------
Total assets 234,758,918
- ------------------------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------------------------
Payable for investments purchased 9,837,211
- -------------------------------------------------------------------------------
Dividends payable 220,631
- -------------------------------------------------------------------------------
Accrued expenses 70,528
- ------------------------------------------------------------------------------- ---------------
Total liabilities 10,128,370
- ------------------------------------------------------------------------------------------------ ---------------
NET ASSETS for 224,630,548 shares of beneficial interest outstanding $ 224,630,548
- ------------------------------------------------------------------------------------------------ ---------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($224,630,548 / 224,630,548 SHARES OF BENEFICIAL INTEREST OUTSTANDING) $1.00
- ------------------------------------------------------------------------------------------------ ---------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 3,264,064
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 415,153
- --------------------------------------------------------------------------------------
Administrative personnel and services (Note 5) 131,553
- --------------------------------------------------------------------------------------
Trustees' fees 3,026
- --------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 36,881
- --------------------------------------------------------------------------------------
Fund share registration costs 10,032
- --------------------------------------------------------------------------------------
Auditing fees 6,624
- --------------------------------------------------------------------------------------
Legal fees 5,484
- --------------------------------------------------------------------------------------
Printing and postage 11,130
- --------------------------------------------------------------------------------------
Insurance premiums 4,596
- --------------------------------------------------------------------------------------
Miscellaneous 6,586
- -------------------------------------------------------------------------------------- -----------
Total expenses 631,065
- --------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 5) 586
- -------------------------------------------------------------------------------------- -----------
Net expenses 630,479
- --------------------------------------------------------------------------------------------------- -------------
Net investment income $ 2,633,585
- --------------------------------------------------------------------------------------------------- -------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
10/31/93 ENDED
INCREASE (DECREASE) IN NET ASSETS: (UNAUDITED) 4/30/93
<S> <C> <C>
- --------------------------------------------------------------------------- ---------------- ------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 2,633,585 $ 6,772,915
- --------------------------------------------------------------------------- ---------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ---------------------------------------------------------------------------
Dividends to shareholders from net investment income (2,633,585) (6,772,915)
- --------------------------------------------------------------------------- ---------------- ------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ---------------------------------------------------------------------------
Proceeds from sale of shares 704,461,221 1,660,748,209
- ---------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to receive
payment of distribution in Fund shares 1,140,337 2,450,153
- ---------------------------------------------------------------------------
Cost of shares redeemed (695,040,216) (1,673,931,783)
- --------------------------------------------------------------------------- ---------------- ------------------
Change in net assets from Fund share transactions 10,561,342 (10,733,421)
- --------------------------------------------------------------------------- ---------------- ------------------
Change in net assets 10,561,342 (10,733,421)
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period 214,069,206 224,802,627
- --------------------------------------------------------------------------- ---------------- ------------------
End of period $ 224,630,548 $ 214,069,206
- --------------------------------------------------------------------------- ---------------- ------------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C> <C> <C> <C>
1994*** 1993 1992 1991 1990**
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------
Net investment income 0.01 0.03 0.05 0.07 0.08
- ------------------------------------------------------ ----------- --------- --------- --------- -----------
LESS DISTRIBUTIONS
- ------------------------------------------------------
Dividends to shareholders from net
investment income (0.01) (0.03) (0.05) (0.07) (0.08)
- ------------------------------------------------------ ----------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------ ----------- --------- --------- --------- -----------
TOTAL RETURN* 1.28%(a) 2.92% 4.81% 7.17% 7.83%(a)
- ------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------
Expenses .61%(b) 0.54% 0.57% 0.60% 0.35%(b)
- ------------------------------------------------------
Net investment income 2.54%(b) 2.90% 4.55% 6.91% 8.17%(b)
- ------------------------------------------------------
Expense adjustment (c) -- 0.09% 0.12% 0.07% 0.32%(b)
- ------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------
Net assets, end of period
(000 omitted) $224,631 $214,069 $224,803 $131,263 $82,947
- ------------------------------------------------------
</TABLE>
* Based on net asset value.
** Reflects operations for the period from June 1, 1989 (date of initial public
investment) to April 30, 1990. For the period from the start of business,
May 15, 1989, to May 31, 1989, net investment income aggregating $0.0045 per
share ($45,273) was distributed to Michigan National Bank and Federated
Administrative Services ("FAS").
*** For the six months ended October 31, 1993 (unaudited).
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses (Note 5).
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated January 9, 1989. The Trust currently consists of four portfolios.
The financial statements included herein are only those of Independence One U.S.
Treasury Money Market Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate portfolios of
securities.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Board of Trustees ("Trustees") has determined
that the best method currently available for valuing portfolio securities
is amortized cost. The Fund's use of the amortized cost method to value its
portfolio securities is conditioned on its compliance with Rule 2a-7 under
the Investment Company Act of 1940.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market value of
each repurchase agreement's underlying investments to ensure the existence
of a proper level of collateral.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Trustees. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
C. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest and discount earned (net of premium), including original
issue discount as required by the Internal Revenue Code, plus realized net
gains, if any, on portfolio securities.
7
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to investment companies and to distribute
to shareholders each year all of its taxable income. Accordingly, no
provision for federal tax is necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. To the extent the Fund
engages in such transactions, it will do so for the purpose of acquiring
portfolio securities consistent with its investment objective and policies
and not for the purpose of investment leverage. When the Fund indicates its
interest in acquiring such portfolio securities, no liability accrues to
the Fund until the trade date of the transaction. The Fund will maintain
security positions such that sufficient liquid assets will be available to
make payment for the securities to be purchased. These securities are
marked to market daily and maintained until the transaction is settled.
Securities purchased on a when-issued or delayed delivery basis do not earn
income until the settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS
The Fund computes its net income daily and, immediately prior to the calculation
of its net asset value at the close of business, declares and records dividends
to shareholders of record at the time of the previous computation of the Fund's
net asset value. Payment of dividends is made monthly in cash, or in additional
shares at the net asset value on the payable date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1993, capital paid in aggregated $224,630,548. Transactions in Fund
shares were as follows:
8
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
10/31/93 4/30/93
<S> <C> <C>
Shares outstanding, beginning of period 214,069,206 224,802,627
- ------------------------------------------------------------------------------
Shares sold 704,461,221 1,660,748,209
- ------------------------------------------------------------------------------
Shares issued to shareholders electing to receive payment of
distribution in Fund shares 1,140,337 2,450,153
- ------------------------------------------------------------------------------
Shares redeemed (695,040,216) (1,673,931,783)
- ------------------------------------------------------------------------------ --------------- -----------------
Shares outstanding, end of period 224,630,548 214,069,206
- ------------------------------------------------------------------------------ --------------- -----------------
</TABLE>
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Michigan National Bank, the Fund's investment adviser ("Adviser"), receives for
its services an annual investment advisory fee equal to .40 of 1% of the Fund's
average daily net assets, subject to an undertaking to reimburse the Fund by the
amount that normal operating expenses of the Fund (including the investment
advisory fee, but excluding brokerage commissions, interest, taxes and
extraordinary expenses) exceed 2-1/2% per year on the first $30 million of
average daily net assets of the Fund, 2% per year on the next $70 million of
average daily net assets of the Fund and 1-1/2% per year on any additional net
assets. For the six months ended October 31, 1993, Adviser earned an investment
advisory fee of $415,153 of which $586 was voluntarily waived.
Administrative personnel and services are provided by Federated Administrative
Services ("FAS") at annual rates of .150 of 1% on the first $250 million, .125
of 1% on the next $250 million, .100 of 1% on the next $250 million, and .075 of
1% on assets in excess of $750 million, respectively, of average aggregate daily
net assets of the Independence One Mutual Funds. For the six months ended
October 31, 1993, FAS earned administrative personnel fees amounting to
$131,553. Expenses of organizing the Fund ($37,116) were borne initially by FAS.
The Fund has agreed to pay FAS, at an annual rate of .005 of 1% of average daily
net assets, until the organization expenses initially borne by FAS are
reimbursed or five years from June 1, 1989, the date the Trust's portfolio
became effective, whichever occurs earlier. During the six months ended October
31, 1993, the Fund paid FAS $5,183 for organization expenses pursuant to this
agreement. Certain Officers of the Fund are Officers and Directors of FAS.
9
TRUSTEES
OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Robert E. Baker Edward C. Gonzales
Harold Berry President and Treasurer
Clarence G. Frame Jeffrey W. Sterling
Harry J. Nederlander Vice President and Assistant Treasurer
David L. VanAndel* Jay S. Neuman
Thomas S. Wilson* Secretary
</TABLE>
*Assumed office on December 7, 1993.
Mutual funds are not obligations of or insured by any bank nor are they insured
by the federal government or any of its agencies.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
INDEPENDENCE
ONE
PRIME
MONEY MARKET
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1993
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
0112904 (12/93)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report of Independence One Prime Money
Market Fund (the "Fund") for the six-month period ended October 31, 1993. It
contains complete financial information for the Fund--including the Investment
Review and Portfolio of Investments.
The Fund continues to pursue competitive yields from a high-quality, diversified
portfolio of money market securities, including certificates of deposit,
commercial paper, and repurchase agreements fully backed by U.S. government and
government agency securities. Total assets in the Fund at the end of the report
period stood at $390.7 million. Dividends paid to shareholders during the period
totaled $5.2 million.
Thank you for choosing the Fund as a way to put your cash to work earning
competitive money market income, with relative stability and easy access to your
money. As always, we welcome your questions, comments, or suggestions.
Sincerely,
Edward C. Gonzales
President
December 15, 1993
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The shares of the Independence One Prime Money Market Fund represent interests
in the Fund, which is one of a series of investment portfolios in the
Independence One Mutual Funds, an open-end, management investment company. The
investment objective of the Fund is to provide current income consistent with
stability of principal. The Fund pursues this investment obective by investing
in a variety of high-quality money market instruments maturing in 397 days or
less.
Short-term interest rates have been fairly steady for most of 1993. This trend
in interest rates is reflected in the monthly average yield for the Fund, which
has ranged from 2.77% on January 31, 1993 to its current yield of 2.65% on
October 31, 1993.* Total net assets in the Fund are approximately $390.7
million. The average maturity for the Fund as of October 31, 1993 was 33 days.
The primary reason short-term interest rates have remained steady in 1993 is
that the Federal Reserve Board (the "Fed") elected to leave monetary policy
unchanged. The Fed has been satisfied with the pace of the economy and the
relatively low rate of inflation.
Looking ahead to 1994, we do not expect a significant change in short-term
interest rates. However, as the economy continues to grow, it could trigger a
resurgence in inflation, thereby forcing a tightening in monetary policy and a
subsequent increase in interest rates.
The Fund's investment adviser will continue to monitor economic and market
developments to best serve our shareholders who seek a well-managed fund that
stresses a high degree of safety, liquidity and competitive yields.
* Past performance is not indicative of future results. Yield will vary.
Although money market funds seek to maintain a stable net asset value of $1.00
per share, there is no assurance that they will be able to do so. An
investment in the Fund is neither insured nor guaranteed by the U.S.
government.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------- -------------------------------------------------------------------------------- ---------------
CERTIFICATES OF DEPOSIT--34.6%
- ------------------------------------------------------------------------------------------------
ISSUED BY FOREIGN BANKS--U.S. BRANCHES--28.2%
--------------------------------------------------------------------------------
$ 15,000,000 Societe Generale Bank
--------------------------------------------------------------------------------
3.16%, 11/1/93 $ 15,000,000
--------------------------------------------------------------------------------
5,000,000 Credit Suisse, Zurich
--------------------------------------------------------------------------------
3.28%, 11/24/93 4,999,962
--------------------------------------------------------------------------------
10,000,000 Credit Suisse, Zurich
--------------------------------------------------------------------------------
3.28%, 11/29/93 10,000,229
--------------------------------------------------------------------------------
10,000,000 Banque Paribas
--------------------------------------------------------------------------------
3.28%, 12/1/93 10,000,164
--------------------------------------------------------------------------------
10,000,000 Banque National De Paris
--------------------------------------------------------------------------------
3.34%, 12/2/93 10,000,169
--------------------------------------------------------------------------------
5,000,000 Banque Paribas
--------------------------------------------------------------------------------
3.25%, 1/5/94 5,000,179
--------------------------------------------------------------------------------
10,000,000 Sumitomo Bank, Ltd.
--------------------------------------------------------------------------------
3.29%, 1/12/94 10,000,198
--------------------------------------------------------------------------------
10,000,000 Sanwa Bank, Ltd.
--------------------------------------------------------------------------------
3.29%, 1/18/94 10,000,643
--------------------------------------------------------------------------------
10,000,000 Sakura Bank, Ltd.
--------------------------------------------------------------------------------
3.33%, 1/21/94 10,000,446
--------------------------------------------------------------------------------
5,000,000 Banque Nationale De Paris
--------------------------------------------------------------------------------
3.38%, 1/28/94 5,000,120
--------------------------------------------------------------------------------
10,000,000 ABN AMRO Bank
--------------------------------------------------------------------------------
3.25%, 2/25/94 10,000,319
--------------------------------------------------------------------------------
</TABLE>
3
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------- -------------------------------------------------------------------------------- ---------------
CERTIFICATES OF DEPOSIT--CONTINUED
- ------------------------------------------------------------------------------------------------
ISSUED BY FOREIGN BANKS--U.S. BRANCHES--CONTINUED
--------------------------------------------------------------------------------
$ 10,000,000 Bank of Nova Scotia
--------------------------------------------------------------------------------
3.28%, 2/25/94 $ 10,000,956
-------------------------------------------------------------------------------- ---------------
Total 110,003,385
-------------------------------------------------------------------------------- ---------------
ISSUED BY FOREIGN BANKS--LONDON BRANCHES--6.4%
--------------------------------------------------------------------------------
5,000,000 Banque Indosuez
--------------------------------------------------------------------------------
3.18%, 11/19/93 5,000,049
--------------------------------------------------------------------------------
10,000,000 Bank of Tokyo, Ltd.
--------------------------------------------------------------------------------
3.31%, 1/5/94 10,000,179
--------------------------------------------------------------------------------
10,000,000 Lloyds Bank PLC
--------------------------------------------------------------------------------
3.30%, 3/2/94 10,000,330
-------------------------------------------------------------------------------- ---------------
Total 25,000,558
-------------------------------------------------------------------------------- ---------------
TOTAL CERTIFICATES OF DEPOSIT 135,003,943
-------------------------------------------------------------------------------- ---------------
*CERTIFICATES OF DEPOSIT--VARIABLE RATE--5.1%
- ------------------------------------------------------------------------------------------------
5,000,000 Abbey National PLC
--------------------------------------------------------------------------------
3.50%, 11/26/93 5,000,000
--------------------------------------------------------------------------------
15,000,000 State Bank of New South Wales
--------------------------------------------------------------------------------
3.11%, 7/1/94 15,000,000
-------------------------------------------------------------------------------- ---------------
TOTAL CERTIFICATES OF DEPOSIT--VARIABLE RATE 20,000,000
-------------------------------------------------------------------------------- ---------------
**COMMERCIAL PAPER--22.4%
- ------------------------------------------------------------------------------------------------
AUTO--2.1%
--------------------------------------------------------------------------------
8,000,000 Fleet Funding Corp.
--------------------------------------------------------------------------------
3.10%, 11/8/93 7,995,178
-------------------------------------------------------------------------------- ---------------
BANKING--8.9%
--------------------------------------------------------------------------------
5,000,000 Den Danske Bank
--------------------------------------------------------------------------------
3.22%, 11/12/93 4,995,080
--------------------------------------------------------------------------------
</TABLE>
4
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------- -------------------------------------------------------------------------------- ---------------
COMMERCIAL PAPER--CONTINUED
- ------------------------------------------------------------------------------------------------
BANKING--CONTINUED
--------------------------------------------------------------------------------
$ 5,000,000 Canadian Imperial Holdings, Inc.
--------------------------------------------------------------------------------
3.17%, 1/7/94 $ 4,970,539
--------------------------------------------------------------------------------
5,000,000 Kreditbank of North America
--------------------------------------------------------------------------------
3.20%, 1/13/94 4,967,556
--------------------------------------------------------------------------------
10,000,000 Kreditbank of North America
--------------------------------------------------------------------------------
3.22%, 1/18/94 9,930,233
--------------------------------------------------------------------------------
10,000,000 Canadian Imperial Holdings, Inc.
--------------------------------------------------------------------------------
3.24%, 1/24/94 9,924,400
-------------------------------------------------------------------------------- ---------------
Total 34,787,808
-------------------------------------------------------------------------------- ---------------
ELECTRONICS--3.8%
--------------------------------------------------------------------------------
5,000,000 SCI Systems, Inc.
--------------------------------------------------------------------------------
3.12%, 11/18/93 4,992,633
--------------------------------------------------------------------------------
10,000,000 SCI Systems, Inc.
--------------------------------------------------------------------------------
3.13%, 11/19/93 9,984,350
-------------------------------------------------------------------------------- ---------------
Total 14,976,983
-------------------------------------------------------------------------------- ---------------
FINANCE--COMMERCIAL--3.8%
--------------------------------------------------------------------------------
5,000,000 Canadian Wheat Board
--------------------------------------------------------------------------------
3.17%, 11/24/93 4,989,874
--------------------------------------------------------------------------------
10,000,000 Canadian Wheat Board
--------------------------------------------------------------------------------
3.22%, 11/23/93 9,980,323
-------------------------------------------------------------------------------- ---------------
Total 14,970,197
-------------------------------------------------------------------------------- ---------------
FUNDING CORPORATION--3.8%
--------------------------------------------------------------------------------
15,000,000 Bishopsgate Funding, Inc.
--------------------------------------------------------------------------------
3.13%, 11/19/93 14,976,525
-------------------------------------------------------------------------------- ---------------
TOTAL COMMERCIAL PAPER 87,706,691
-------------------------------------------------------------------------------- ---------------
</TABLE>
5
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- ---------------
MASTERNOTES--3.8%
- ------------------------------------------------------------------------------------------------
$ 15,000,000 Shearson Lehman Brothers Holdings
--------------------------------------------------------------------------------
3.11%, 11/1/93 $ 15,000,000
-------------------------------------------------------------------------------- ---------------
*VARIABLE RATE OBLIGATIONS--0.5%
- ------------------------------------------------------------------------------------------------
2,000,000 Richmond County, GA
--------------------------------------------------------------------------------
3.15%, 11/1/93 2,000,000
-------------------------------------------------------------------------------- ---------------
GOVERNMENT AGENCIES--2.6%
- ------------------------------------------------------------------------------------------------
10,000,000 Federal Home Loan Bank
--------------------------------------------------------------------------------
3.15%, 6/23/94 10,000,000
-------------------------------------------------------------------------------- ---------------
\REPURCHASE AGREEMENTS--33.5%
- ------------------------------------------------------------------------------------------------
65,947,000 Donaldson, Lufkin & Jenrette Securities Corp., 2.98%,
dated 10/29/93, due 11/1/93 65,947,000
--------------------------------------------------------------------------------
65,000,000 Kidder, Peabody & Co., 2.97%, dated 10/29/93, due 11/1/93 65,000,000
-------------------------------------------------------------------------------- ---------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 130,947,000
-------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (AT AMORTIZED COST) $ 400,657,634\\
-------------------------------------------------------------------------------- ---------------
</TABLE>
* Current rate and next demand date shown.
** Each issue shows the rate of discount at the time of purchase.
\ The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on
market prices at the date of the portfolio.
\\ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($390,770,383) at October 31, 1993.
(See Notes which are an integral part of the Financial Statements)
6
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------
Investments in securities $ 269,710,634
- -------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) 130,947,000
- ------------------------------------------------------------------------------- ---------------
Total investments, at amortized cost and value (Note 2A) $ 400,657,634
- ------------------------------------------------------------------------------------------------
Cash 16,049
- ------------------------------------------------------------------------------------------------
Interest receivable 1,065,049
- ------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 9,614
- ------------------------------------------------------------------------------------------------
Deferred expenses (Note 2F) 12,339
- ------------------------------------------------------------------------------------------------ ---------------
Total assets 401,760,685
- ------------------------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------------------------
Payable for investments purchased $ 10,000,330
- -------------------------------------------------------------------------------
Dividends payable 601,227
- -------------------------------------------------------------------------------
Payable for Fund shares redeemed 289,181
- -------------------------------------------------------------------------------
Accrued expenses 99,564
- ------------------------------------------------------------------------------- ---------------
Total liabilities 10,990,302
- ------------------------------------------------------------------------------------------------ ---------------
NET ASSETS for 390,770,383 shares of beneficial interest outstanding $ 390,770,383
- ------------------------------------------------------------------------------------------------ ---------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($390,770,383 / 390,770,383 shares of beneficial interest outstanding) $1.00
- ------------------------------------------------------------------------------------------------ ---------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
7
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 6,312,336
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 778,053
- ------------------------------------------------------------------------------------
Administrative personnel and services (Note 5) 244,883
- ------------------------------------------------------------------------------------
Trustees' fees 6,991
- ------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 90,926
- ------------------------------------------------------------------------------------
Fund share registration costs 31,360
- ------------------------------------------------------------------------------------
Auditing fees 7,739
- ------------------------------------------------------------------------------------
Legal fees 5,950
- ------------------------------------------------------------------------------------
Printing and postage 12,812
- ------------------------------------------------------------------------------------
Insurance premiums 6,349
- ------------------------------------------------------------------------------------
Miscellaneous 2,821
- ------------------------------------------------------------------------------------
Taxes 783
- ------------------------------------------------------------------------------------ -------------
Total expenses 1,188,667
- ------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 5) 64,765
- ------------------------------------------------------------------------------------ -------------
Net expenses 1,123,902
- --------------------------------------------------------------------------------------------------- -------------
Net investment income $ 5,188,434
- --------------------------------------------------------------------------------------------------- -------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
8
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
10/31/93 YEAR ENDED
(UNAUDITED) 4/30/93
<S> <C> <C>
- ------------------------------------------------------------------------- ------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 5,188,434 $ 10,452,560
- ------------------------------------------------------------------------- ------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (5,188,434) (10,452,560)
- ------------------------------------------------------------------------- ------------------ ------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -------------------------------------------------------------------------
Proceeds from sale of shares 1,161,965,430 2,358,845,331
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders
electing to receive payment of distributions in Fund shares 1,368,747 3,451,415
- -------------------------------------------------------------------------
Cost of shares redeemed (1,195,918,396) (2,247,951,529)
- ------------------------------------------------------------------------- ------------------ ------------------
Change in net assets from Fund share transactions (32,584,219) 114,345,217
- ------------------------------------------------------------------------- ------------------ ------------------
Change in net assets (32,584,219) 114,345,217
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period 423,354,602 309,009,385
- ------------------------------------------------------------------------- ------------------ ------------------
End of period $ 390,770,383 $ 423,354,602
- ------------------------------------------------------------------------- ------------------ ------------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
9
INDEPENDENCE ONE PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C> <C> <C> <C>
1994* 1993 1992 1991 1990**
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------
Net investment income 0.01 0.03 0.05 0.07 0.08
- ---------------------------------------------------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- ----------------------------------------------------
Dividends to shareholders from net
investment income (0.01) (0.03) (0.05) (0.07) (0.08)
- ---------------------------------------------------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------- --------- --------- --------- --------- ---------
TOTAL RETURN*** 1.34%(a) 2.99% 4.89% 7.55% 7.99%(a)
- ----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------
Expenses 0.58%(b) 0.58% 0.54% 0.53% 0.40%(b)
- ----------------------------------------------------
Net investment income 2.67%(b) 2.91% 4.73% 7.26% 8.24%(b)
- ----------------------------------------------------
Expense adjustment (c) 0.03%(b) 0.04% 0.08% 0.08% 0.23%(b)
- ----------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------
Net assets, end of period (000 omitted) 390,770 423,355 309,009 371,994 328,434
- ----------------------------------------------------
</TABLE>
* Six months ended October 31, 1993 (unaudited).
** Reflects operations for the period from June 1, 1989 (date of initial public
investment) to April 30, 1990. For the period from the start of business May
1, 1989 to May 31, 1989, net investment income aggregating $0.0084 per share
($85,665) was distributed to Michigan National Bank and Federated
Administrative Services.
*** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses (Note 5).
(See Notes which are an integral part of the Financial Statements)
10
INDEPENDENCE ONE PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated January 9, 1989. The Trust currently consists of four portfolios.
The financial statements included herein are only those of Independence One
Prime Money Market Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate portfolios of
securities.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Board of Trustees ("Trustees") has determined
that the best method currently available for valuing portfolio securities is
amortized cost. The Fund's use of the amortized cost method to value its
portfolio securities is conditioned on its compliance with Rule 2a-7 under
the Investment Company Act of 1940.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System or to have segregated within the custodian bank's vault,
all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying investments to ensure the existence of a proper level of
collateral.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by
the Fund's adviser to be creditworthy pursuant to guidelines established by
the Trustees. Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral securities.
C. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest and discount earned (net of premium), including original
issue discount as required by the Internal Revenue Code, plus realized net
gains, if any, on portfolio securities.
11
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to investment companies and distribute to
shareholders each year all of its taxable income. Accordingly, no provision
for federal tax is necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. To the extent the Fund engages
in such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not for
the purpose of investment leverage. When the Fund indicates its interest in
acquiring such portfolio securities, no liability accrues to the Fund until
the trade date of the transaction. The Fund will maintain security positions
such that sufficient liquid assets will be available to make payment for the
securities to be purchased. These securities are marked to market daily and
maintained until the transaction is settled. Securities purchased on a
when-issued or delayed delivery basis do not earn income until the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS
The Fund computes its net income daily and, immediately prior to the calculation
of its net asset value at the close of business, declares and records dividends
to shareholders of record at the time of the previous computation of the Fund's
net asset value. Payment of dividends is made monthly in cash, or in additional
shares at the net asset value on the payable date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1993, capital paid in aggregated $390,770,383. Transactions in Fund
shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
10/31/93 4/30/93
<S> <C> <C>
- ---------------------------------------------------------------------------- ----------------- -----------------
Shares outstanding, beginning of period 423,354,602 309,009,385
- ----------------------------------------------------------------------------
Shares sold 1,161,965,430 2,358,845,331
- ----------------------------------------------------------------------------
Shares issued to shareholders electing to receive payment of
distributions in Fund shares 1,368,747 3,451,415
- ----------------------------------------------------------------------------
Shares redeemed (1,195,918,396) (2,247,951,529)
- ---------------------------------------------------------------------------- ----------------- -----------------
Shares outstanding, end of period 390,770,383 423,354,602
- ---------------------------------------------------------------------------- ----------------- -----------------
</TABLE>
12
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Michigan National Bank, the Fund's investment adviser ("Adviser"), receives for
its services an annual investment advisory fee equal to .40 of 1% of the Fund's
average daily net assets, subject to an undertaking to reimburse the Fund by the
amount that normal operating expenses of the Fund (including the investment
advisory fee, but excluding brokerage commissions, interest, taxes and
extraordinary expenses) exceed 2-1/2% per year on the first $30 million of
average daily net assets of the Fund, 2% per year on the next $70 million of
average daily net assets of the Fund and 1-1/2% per year on any additional net
assets. For the six months ended October 31, 1993, Adviser earned an investment
advisory fee of $778,053 of which $64,765 was voluntarily waived.
Administrative personnel and services are provided by Federated Administrative
Services ("FAS") at annual rates of .150 of 1% on the first $250 million, .125
of 1% on the next $250 million, .100 of 1% on the next $250 million, and .075 of
1% on assets in excess of $750 million, respectively, of average aggregate daily
net assets of the Independence One Mutual Funds. For the six months ended
October 31, 1993, FAS earned administrative personnel fees amounting to
$244,883. Certain Officers of the Fund are Officers and Directors of FAS.
13
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Robert E. Baker Edward C. Gonzales
Harold Berry President and Treasurer
Clarence G. Frame Jeffrey W. Sterling
Harry J. Nederlander Vice President and Assistant Treasurer
David L. VanAndel* Jay S. Neuman
Thomas S. Wilson* Secretary
</TABLE>
*Assumed office on December 7, 1993.
Mutual funds are not obligations of or insured by any bank nor are they insured
by the federal government or any of its agencies.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
