INDEPENDENCE ONE PRIME MONEY MARKET FUND
(A PORTFOLIO OF INDEPENDENCE ONE MUTUAL FUNDS)
CLASS A SHARES
PROSPECTUS
The Class A Shares offered by this prospectus represent interests in
Independence One Prime Money Market Fund (the "Fund") which is one of a series
of investment portfolios in Independence One Mutual Funds (the "Trust"), an
open-end, management investment company (a mutual fund). Michigan National Bank
professionally manages the Fund's portfolio.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
MICHIGAN NATIONAL BANK, ARE NOT ENDORSED OR GUARANTEED BY MICHIGAN NATIONAL
BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
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 variety of high-quality money market instruments maturing in 397
days or less.
Shares of the Fund are intended to be sold as an investment vehicle primarily
for individuals, as well as certain institutions, corporations, and fiduciaries.
Shareholders can invest, reinvest, or redeem shares at any time without charge
or penalty imposed by the Fund. Shareholders have access to other portfolios of
the Trust through an exchange program.
This prospectus contains the information you should read and know before you
invest in Class A Shares. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares and Class B Shares dated May 1, 1995 with the Securities and Exchange
Commission. The information contained in the Combined Statement of Additional
Information is incorporated by reference into this prospectus. You may request a
copy of the Combined Statement of Additional Information free of charge, obtain
other information, or make inquiries about the Fund by writing or calling the
Fund toll-free 1-800-334-2292.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated May 1, 1995
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 4
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INVESTMENT INFORMATION 4
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Investment Objective 4
Investment Policies 4
Acceptable Investments 4
Variable Rate Demand Notes 5
Bank Instruments 5
Short-Term Credit Facilities 5
Asset-Backed Securities 5
Credit Enhancement 5
Demand Features 6
Ratings 6
Repurchase Agreements 6
Restricted and Illiquid Securities 6
When-Issued and Delayed
Delivery Transactions 7
Investing in Securities of Other
Investment Companies 7
Investment Risks 8
Investment Limitations 8
Regulatory Compliance 8
INDEPENDENCE ONE MUTUAL FUNDS
INFORMATION 9
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Management of the Trust 9
Board of Trustees 9
Investment Adviser 9
Advisory Fees 9
Adviser's Background 9
Distributon of Class A Shares 9
Shareholder Services Plan 10
Administration of the Fund 10
Administrative Services 10
Custodian 10
Transfer Agent and
Dividend Disbursing Agent 10
Independent Auditors 10
NET ASSET VALUE 10
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INVESTING IN CLASS A SHARES 11
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Share Purchases 11
To Place an Order 11
Minimum Investment Required 11
Cash Sweep Program 11
Participating Depository Institutions 11
What Shares Cost 12
Certificates and Confirmations 12
Dividends 12
Capital Gains 12
EXCHANGE PRIVILEGE 13
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Exchange by Telephone 13
Written Exchange 14
REDEEMING CLASS A SHARES 14
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Cash Sweep Customers 14
Redeeming by Check 14
By Telephone 15
By Mail 15
Accounts with Low Balances 16
SHAREHOLDER INFORMATION 16
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Voting Rights 16
Massachusetts Partnership Law 17
EFFECT OF BANKING LAWS 17
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TAX INFORMATION 18
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Federal Income Tax 18
PERFORMANCE INFORMATION 18
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OTHER CLASSES OF SHARES 19
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FINANCIAL STATEMENTS 20
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INDEPENDENT AUDITORS' REPORT 30
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ADDRESSES Back Cover
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SUMMARY OF FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)...................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)....................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable).......................................... None
Exchange Fee................................................................................................ None
</TABLE>
ANNUAL CLASS A SHARES OPERATING EXPENSES*
(As a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fee (after waiver)(1)............................................................................ .15%
12b-1 Fees.................................................................................................. None
Total Other Expenses........................................................................................ .46%
Shareholder Services Fee(2).................................................................. .25%
Total Class A Shares Operating Expenses(3)......................................................... .61%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.40%.
(2) The Fund can pay up to 0.25 of 1% of average daily net assets of Class A
Shares as a Shareholder Services Fee.
(3) The Total Class A Shares Operating Expenses are estimated to be .86% absent
the anticipated voluntary waiver detailed in note (1).
* Annual Class A Shares Operating Expenses are estimated based on expenses
expected to be incurred during the fiscal year ending April 30, 1996. During
the course of this period, expenses may be more or less than the amount
shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS A SHARES WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "INDEPENDENCE ONE MUTUAL FUNDS INFORMATION" AND
"INVESTING IN CLASS A SHARES." Wire-transferred redemptions of less than $5,000
may be subject to additional fees.
<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on a $1,000 investment assuming (1)
5% annual return and (2) redemption at the end of each time period. The
Fund charges no redemption fees for
Class A Shares........................................................... $6 $20 $34 $76
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FISCAL YEAR ENDING APRIL 30, 1996.
THE INFORMATION SET FORTH IN THE FOREGOING TABLE AND EXAMPLE RELATES ONLY TO
CLASS A SHARES OF THE FUND. THE FUND ALSO OFFERS ANOTHER CLASS OF SHARES CALLED
CLASS B SHARES. CLASS A SHARES AND CLASS B SHARES ARE SUBJECT TO CERTAIN OF THE
SAME EXPENSES; HOWEVER, CLASS B SHARES ARE NOT SUBJECT TO A SHAREHOLDER SERVICES
FEE. SEE "OTHER CLASSES OF SHARES."
INDEPENDENCE ONE PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
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(FOR A CLASS A SHARE+ OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 30.
<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
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.03 0.03 0.05 0.07 0.08
- ----------------------------------------------------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
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Dividends to shareholders from net
investment income (0.03) (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 (A) 2.73% 2.99% 4.89% 7.55% 7.99%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.59% 0.58% 0.54% 0.53% 0.40%(b)
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Net investment income 2.70% 2.91% 4.73% 7.26% 8.24%(b)
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Expense waiver/reimbursement (c) 0.02% 0.04% 0.08% 0.08% 0.23%(b)
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) $310,588 $423,355 $309,009 $371,994 $328,434
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</TABLE>
+ As of May 1, 1995, the single class of shares previously offered by the Fund
has been redesignated as Class A Shares.
* Reflects operations for the period from June 1, 1989 (date of initial public
investment) to April 30, 1990.
(a) Based on net asset value, which does not reflect sales load or contingent
deferred sales charge, if applicable.
(b) Computed on an annualized basis.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
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(FOR A CLASS A SHARE+ OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C> <C> <C> <C> <C>
1995* 1994 1993 1992 1991] 1990**
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------
Net investment income 0.02 0.03 0.03 0.05 0.07 0.08
- -----------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------
Dividends to shareholders
from net investment income (0.02) (0.03) (0.03) (0.05) (0.07) (0.08)
- ----------------------------------------- --------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------- --------- --------- --------- --------- --------- -----------
TOTAL RETURN*** 1.97% 2.73% 2.99% 4.89% 7.55% 7.99%
- -----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------
Expenses 0.61%(a) 0.59% 0.58% 0.54% 0.53% 0.40%(a)
- -----------------------------------------
Net investment income 3.85%(a) 2.70% 2.91% 4.73% 7.26% 8.24%(a)
- -----------------------------------------
Expense waiver/
reimbursement (b) 0.00%(a) 0.02% 0.04% 0.08% 0.08% 0.23%(a)
- -----------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------
Net assets, end of period
(000 omitted) $288,034 $310,588 $423,355 $309,009 $371,994 $328,434
- -----------------------------------------
</TABLE>
As of May 1, 1995, the single class of shares previously offered by the Fund
has been redesignated as Class A Shares.
* Six months ended October 31, 1994 (unaudited). The complete financial
statements for the six months ended October 31, 1994, which, along with this
Financial Highlights table, comprise the Fund's semi-annual report, are
contained in the Fund's statement of additional information.
** Reflects operations for the period from June 1, 1989 (date of initial public
investment) to April 30, 1990.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated January 9, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. In addition, the interests in this portfolio
may be offered in separate classes.
The Fund currently offers two classes of shares for sale: Class A Shares and
Class B Shares. The classes of shares represent interests in one common
investment portfolio but differ in that Class A Shares will be subject to a
shareholder servicing fee paid by the Fund pursuant to a Shareholder Services
Plan, while Class B Shares, which will be sold primarily to certain
institutional investors, will not be subject to such a Plan and will not incur
such shareholder servicing fees. This prospectus relates only to Class A Shares
("Shares"). Shares are designed as a convenient means of accumulating an
interest in a professionally managed, diversified portfolio limited to money
market instruments maturing in 397 days or less.
A minimum initial investment of $1,000 is required. Subsequent investments must
be in amounts of at least $100.
The Fund attempts to stabilize the value of a Share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income consistent
with stability of principal. The investment objective cannot be changed without
approval of shareholders. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing exclusively in a
portfolio of money market instruments maturing in 397 days or less. The average
maturity of money market instruments in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies may be changed by the Board of Trustees ("Trustees") without
the approval of shareholders. Shareholders will be notified before any material
changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in the highest short-term rating category by
one or more nationally recognized statistical rating organizations ("NRSROs") or
of comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
domestic issues of corporate debt obligations, including variable rate
demand notes;
commercial paper (including Canadian Commercial Paper and Europaper);
certificates of deposits, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");
short-term credit facilities, such as demand notes;
asset-backed securities;
obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities
("Government Securities"); and
other money market instruments.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates
and provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the securities
to trade at par. The interest rate may float or be adjusted at regular
intervals (ranging from daily to annually), and is normally based on a
published interest rate or interest rate index. Most variable rate demand
notes allow the Fund to demand the repurchase of the security on not more
than seven days prior notice. Other notes only permit the Fund to tender
the security at the time of each interest rate adjustment or at other fixed
intervals. See "Demand Features." The Fund treats variable rate demand
notes as maturing on the later of the date of the next interest adjustment
or the date on which the Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued
by an institution having capital, surplus and undivided profits over $100
million or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). Bank Instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The Fund will treat
securities credit enhanced with a bank's letter of credit as Bank
Instruments.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Fund may also enter into, or acquire participations
in, short-term revolving credit facilities with corporate borrowers. Demand
notes and other short-term credit arrangements usually provide for floating
or variable rates of interest.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial
interest in a special purpose trust, limited partnership interests or
commercial paper or other debt securities issued by a special purpose
corporation. Although the securities often have some form of credit or
liquidity enhancement, payments on the securities depend predominately upon
collections of the loans and receivables held by the issuer.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may have
been credit enhanced by a guaranty, letter of credit or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities based upon the financial condition and ratings of the party
providing the credit enhancement (the "credit enhancer"), rather than the
issuer. Generally, the Fund will not treat credit-enhanced securities as
having been issued by the credit enhancer for diversification purposes.
However, under certain circumstances, applicable regulations may require
the Fund to treat the securities as having been issued by both the issuer
and the credit enhancer. The bankruptcy, receivership or default of the
credit enhancer will adversely affect the quality and marketability of
the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at
their principal amount (usually with accrued interest) with a fixed period
(usually seven days) following a demand by the Fund. The demand feature may
be issued by the issuer of the underlying securities, a dealer in the
securities or by another third party, and may not be transferred separately
from the underlying security. The Fund uses these arrangements to provide
the Fund with liquidity and not to protect against changes in the market
value of the underlying securities. The bankruptcy, receivership or default
by the issuer of the demand feature, or a default on the underlying
security or other event that terminates the demand feature before its
exercise, will adversely affect the liquidity of the underlying security.
Demand features that are exercisable even after a payment default on the
underlying security may be treated as a form of credit enhancement.
RATINGS. A NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1 or A-1+ by
Standard & Poor's Ratings Group ("S&P"), Prime-1 by Moody's Investors Service,
Inc. ("Moody's"), or F-1 (+ or -) by Fitch Investors Service, Inc. ("Fitch"),
are all considered rated in the highest short-term rating category. The Fund
will follow applicable regulations in determining whether a security rated by
more than one NRSRO can be treated as being in the highest short-term rating
category; currently, such securities must be rated by two NRSROs in their
highest rating category. See "Regulatory Compliance."
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or other securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price within one year from
the date of acquisition. To the extent that the original seller does not
repurchase the securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its total
assets in restricted securities. This restriction is not applicable to
commercial paper issued under the Section 4(2) of the Securities Act of 1933.
Restricted securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective and policies, but which are subject to
restriction on resale under federal securities law. The Fund will limit
investments in illiquid securities, including certain restricted securities not
determined by the Trustees to be liquid, non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days after
notice, to 10% of its net assets.
The Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under federal securities
law and is generally sold to institutional investors, such as the Fund, who
agree that they are purchasing the paper for investment purposes and not with a
view to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Fund believes that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Fund intends,
therefore, to treat the restricted securities which meet the criteria for
liquidity established by the Trustees, including Section 4(2) commercial paper,
as determined by the Fund's investment adviser, as liquid and not subject to the
investment limitation applicable to illiquid securities. In addition, because
Section 4(2) commercial paper is liquid, the Fund intends to not subject such
paper to the limitation applicable to restricted securities.
When the Fund invests in certain restricted securities determined by the
Trustees to be liquid, such investments could have the effect of increasing the
level of Fund illiquidity to the extent that the buyers in the secondary market
for such securities become, for a time, uninterested in purchasing these
securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. _The Fund can acquire up
to 3 per-centum of the total outstanding stock of other investment companies.
The Fund will not be subject to any other limitations with regard to the
acquisition of securities of other invesment companies so long as the public
offering price of the Fund's shares does not include a sales load exceeding
1-1/2 percent. The Fund will purchase securities of investment companies only in
open-market transactions involving only customary broker's commissions (although
the Fund does not expect to incur any broker's commissions in connection with
its purchases). The Fund's adviser will waive its investment advisory fee on
assets invested in securities of other open-end investment companies. However,
these limitations are not applicable if the securities are acquired in a merger,
consolidation, reorganization, or acquisition of assets.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are subject to
somewhat different risks than domestic obligations of domestic banks. Examples
of these risks include international, economic, and political developments,
foreign governmental restrictions that may adversely affect the payment of
principal or interest, foreign withholding or other taxes on interest income,
difficulties in obtaining or enforcing a judgment against the issuing bank, and
the possible impact of interruptions in the flow of international currency
transactions. Different risks may also exist for ECDs, ETDs, and Yankee CDs
because the banks issuing these instruments, or their domestic or foreign
branches, are not necessarily subject to the same regulatory requirements that
apply to domestic banks, such as reserve requirements, loan limitations,
examinations, accounting, auditing, and recordkeeping, and the public
availability of information. These factors will be carefully considered by the
Fund's adviser in selecting investments for the Fund.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its net assets and pledge up to 10% of the
value of its total assets to secure such borrowings; or
with respect to 75% of the value of its total assets, invest more than 5%
of the value of its total assets in the securities of any one issuer
(other than cash or securities issued or guaranteed by the government of
the United States or its agencies or instrumentalities).
The above investment limitations cannot be changed without shareholder approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. For example, with limited exceptions, Rule 2a-7 prohibits
the investment of more than 5% of the Fund's total assets in the securities of
any one issuer, although the Fund's investment limitation only requires such 5%
diversification with respect to 75% of its assets. The Fund will invest more
than 5% of its assets in any one issuer only under circumstances permitted by
Rule 2a-7. The Fund will also determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Fund may
change these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
INDEPENDENCE ONE MUTUAL FUNDS INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trustees are responsible for managing the Trust's
business affairs and for exercising all of the Trust's powers except those
reserved for the shareholders. An Executive Committee of the Board of Trustees
handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Michigan National Bank, as the
Fund's investment adviser (the "Adviser"), subject to direction by the Trustees.
The Adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the assets of the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to 0.40 of 1% of the Fund's average daily net assets. The Adviser has
undertaken to reimburse the Fund, up to the amount of the advisory fee, for
operating expenses in excess of limitations established by certain states.
The Adviser may voluntarily choose to waive a portion of its fee or
reimburse certain expenses of the Fund.
ADVISER'S BACKGROUND. Michigan National Bank, a national banking
association, is a wholly-owned subsidiary of Michigan National Corporation
("MNC"). Through its subsidiaries and affiliates, MNC, Michigan's fifth
largest bank holding company in terms of total assets, as of December 31,
1994, offers a full range of financial services to the public, including
commercial lending, depository services, cash management, brokerage
services, retail banking, mortgage banking, investment advisory services
and trust services. Independence One Capital Management Corporation
("IOCM"), a nationally recognized investment advisory subsidiary of MNC,
provides investment advisory services for trust and other managed assets.
IOCM and the Trust Division have managed custodial assets totaling $9
billion. Of this amount, IOCM and the Trust Division have investment
discretion over $2.2 billion.
Michigan National Bank has managed mutual funds since May 1989. The Trust
Division has managed pools of commingled funds since 1964. In addition,
Michigan National Bank presently manages its own investment portfolio of
approximately $300 million in taxable, short-term instruments.
As part of its regular banking operations, Michigan National Bank may make
loans to public companies. Thus, it may be possible, from time to time, for
the Fund to hold or acquire the securities of issuers which are also
lending clients of Michigan National Bank. The lending relationship will
not be a factor in the selection of securities.
DISTRIBUTION OF CLASS A SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. _The Fund has adopted a Shareholder Services Plan
(the "Plan") with respect to Class A Shares under which it may make payments of
up to 0.25 of 1% of the average daily net asset value of Class A Shares to
obtain certain personal services for shareholders and the maintenance of
shareholder accounts ("shareholder services"). The Fund has entered into a
Shareholder Services Agreement with Michigan National Bank, under which Michigan
National Bank will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon Class A Shares owned by their clients or customers.
The schedules of such fees and the basis upon which such fees will be paid will
be determined from time to time by the Fund and Michigan National Bank.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with certain administrative personnel and
services necessary to operate the Fund, such as certain legal and accounting
services. Federated Administrative Services provides these at an annual rate as
specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE DAILY NET ASSETS
FEE OF THE TRUST
<C> <S>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
for each portfolio in Independence One Mutual Funds. Federated Administrative
Services may choose voluntarily to reimburse a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh Pennsylvania, is transfer agent for the shares of the Fund and
dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are KPMG Peat
Marwick LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per Share is determined by adding the interest of Shares in the value of all
securities and other assets of the Fund, subtracting the interest of Shares in
the liabilities of the Fund and those attributable to Shares, and dividing the
remainder by the number of Shares outstanding. The Fund, of course, cannot
guarantee that its net asset value will always remain at $1.00 per Share.
INVESTING IN CLASS A SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares may be purchased through Michigan National Bank, Independence One
Brokerage Services, Inc. ("Independence One"), or through brokers or dealers
which have a sales agreement with the distributor. Texas residents must purchase
shares through Federated Securities Corp. at 1-800-618-8573. Investors may
purchase shares of the Fund on all business days except on days which the New
York Stock Exchange is closed and federal holidays restricting wire transfers.
In connection with the sale of Shares, the distributor may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request.
TO PLACE AN ORDER. Investors may call toll-free 1-800-334-2292 to purchase
Shares through Michigan National Bank or Independence One. In addition,
investors may purchase Shares by calling their authorized broker directly.
Payment may be made either by check or wire transfer of federal funds.
To purchase by check, the check must be included with the order and made payable
to "Independence One Prime Money Market Fund--Class A Shares." Orders are
considered received after payment by check is converted by the transfer agent's
bank, State Street Bank and Trust Company ("State Street Bank"), into federal
funds.
When payment is made through wire transfer of federal funds, the order is
considered received immediately upon receipt by State Street Bank. Prior to
purchasing by wire, investors should call their Michigan National Bank or
Independence One representative or their authorized broker. It is the
responsibility of Michigan National Bank, Independence One, and authorized
brokers to transmit orders promptly. Federal funds should be wired as follows:
Federated Services Company c/o State Street Bank and Trust Company, Boston,
Massachusetts; Attention: EDGEWIRE; For Credit to: Independence One Prime Money
Market Fund--Class A Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Shares by an investor is $1,000.
Subsequent investments must be in amounts of at least $100.
CASH SWEEP PROGRAM
Cash accumulations in demand deposit accounts with depository institutions such
as banks and savings and loan associations may be automatically invested in
shares of the Fund on a day selected by the depository institution and its
customer, or when the demand deposit account reaches a predetermined dollar
amount (e.g. $5,000).
PARTICIPATING DEPOSITORY INSTITUTIONS. Participating depository institutions
are responsible for prompt transmission of orders relating to the program. These
depository institutions are the record owners of Shares. Depository institutions
participating in this program may charge their customers for their services
relating to the program. This prospectus should, therefore, be read together
with any agreement between the customer and the depository institution with
regard to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund for Shares.
The net asset value is determined at 12:00 noon (Eastern time) and 4:00 p.m.
(Eastern time), Monday through Friday, except on: (i) days on which there are
not sufficient changes in the value of the Fund's portfolio securities that its
net asset value might be materially affected; (ii) days during which no Shares
are tendered for redemption and no orders to purchase Shares are received; and
(iii) on the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued unless
shareholders so request by contacting their Michigan National Bank or
Independence One representative or authorized broker in writing.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional Shares unless cash payments are
requested by shareholders in writing to the Fund through their Michigan National
Bank or Independence One representative or authorized broker. Share purchase
orders received by the Fund before 11:00 a.m. (Eastern time) earn dividends that
day.
Under limited circumstances, arrangements may be made with Michigan National
Bank for same-day receipt of purchase orders, to earn dividends that day, if
such orders are received before 3:00 p.m. (Eastern time). Investors interested
in establishing such arrangements are requested to call Michigan National Bank
at 1-800-334-2292, and are reminded that the Fund reserves the right to refuse
any purchase request.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses,
could result in a decrease in dividends. If, for some extraordinary reason, the
Fund realizes net long-term capital gains, it will distribute them at least once
every 12 months.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
All shareholders of the Fund are shareholders of the Trust, which consists of
the Fund, Independence One Michigan Municipal Cash Fund, Independence One U.S.
Treasury Money Market Fund, and Independence One U.S. Government Securities
Fund. Shareholders of Class A Shares of the Fund have access to Independence One
U.S. Treasury Money Market Fund, Independence One Michigan Municipal Cash Fund,
and Independence One U.S. Government Securities Fund ("participating funds")
through an exchange program.
Shareholders who exercise this exchange privilege must exchange Shares having a
net asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the participating fund into which an
exchange is to be made.
The exchange privilege is available to shareholders residing in any state in
which the participating fund shares being acquired may legally be sold. Upon
receipt by the transfer agent of proper instructions and all necessary
supporting documents, Shares submitted for exchange will be redeemed at the
next-determined net asset value. If the exchanging shareholder does not have an
account in the participating fund whose shares are being acquired, a new account
will be established with the same registration, dividend, and capital gain
options as the account from which Shares are exchanged, unless otherwise
specified by the shareholder. In the case where the new account registration is
not identical to that of the existing account, a signature guarantee is
required. (See "Redeeming Class A Shares By Mail.") Exercise of this privilege
is treated as a redemption and new purchase for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may be
realized. The Fund reserves the right to modify or terminate the exchange
privilege at any time. Shareholders would be notified prior to any modification
or termination. Shareholders may obtain further information on the exchange
privilege by calling their Michigan National Bank or Independence One
representative or authorized broker.
EXCHANGE BY TELEPHONE. Shareholders of Class A Shares may provide instructions
for exchanges between participating funds by telephone to their Michigan
National Bank or Independence One representative by calling 1-800-334-2292. In
addition, investors may exchange shares by calling their authorized brokers
directly.
An authorization form permitting the Fund to accept telephone exchange requests
on behalf of Class A Shares must first be completed. It is recommended that
investors request this privilege at the time of their initial application. If
not completed at the time of initial application, authorization forms and
information on this service can be obtained through a Michigan National Bank or
Independence One representative or authorized broker. Telephone exchange
instructions may be recorded.
Shares may be exchanged by telephone only between fund accounts having identical
shareholder registrations. Exchange instructions given by telephone may be
electronically recorded.
Telephone exchange instructions must be received by Michigan National Bank,
Independence One or an authorized broker and transmitted to the transfer agent
before 4:00 p.m. (Eastern time) for Shares to be exchanged the same day.
Shareholders who exchange into Shares will not receive a dividend from the Fund
on the date of the exchange.
Shareholders of Class A Shares may have difficulty in making exchanges by
telephone through banks, brokers, and other financial institutions during times
of drastic economic or market changes. If shareholders cannot contact their
Michigan National Bank or Independence One representative or authorized broker
by telephone, it is recommended that an exchange request be made in writing and
sent by mail for next day delivery. Send mail requests to: Independence One
Mutual Funds, 27777 Inkster Road, Mail Code 10-52, Farmington Hills, Michigan
48333-9065.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, the transfer agent, by a Michigan
National Bank or Independence One representative or authorized broker and
deposited to the shareholder's account before being exchanged.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN EXCHANGE. A shareholder wishing to make an exchange by written request
may do so by sending it to: Independence One Mutual Funds, 27777 Inkster Road,
Mail Code 10-52, Farmington Hills, Michigan 48333-9065. In addition, an investor
may exchange shares by sending a written request to their authorized broker
directly.
REDEEMING CLASS A SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company receives the redemption request. Redemptions will be made on
days on which the Fund computes its net asset value. Redemption requests cannot
be executed on days on which the New York Stock Exchange is closed and federal
holidays restricting wire transfers. Telephone or written requests for
redemption must be received in proper form and can be made to the Fund through a
Michigan National Bank or Independence One representative or authorized broker.
Although the transfer agent does not charge for telephone redemptions, it
reserves the right to charge a fee for the cost of wire-transferred redemptions
of less than $5,000.
CASH SWEEP CUSTOMERS. Clients of Michigan National Bank who have executed a
Cash Sweep Agreement should refer to that agreement for information about
redeeming Shares purchased through that program.
REDEEMING BY CHECK. At the shareholder's request, Federated Services Company
will establish a checking account for redeeming Shares. For further information,
contact a Michigan National Bank or Independence One representative or
authorized broker.
With a Fund checking account, Shares may be redeemed simply by writing a check
for $250 or more. The redemption will be made at the net asset value on the date
that the transfer agent presents the check to the Fund. A check may not be
written to close an account. In addition, if a shareholder wishes to redeem
Shares and have the proceeds available, a check may be written and
negotiated through the shareholder's local bank. Checks should never be sent to
the transfer agent to redeem Shares. Cancelled checks are sent to the
shareholder each month.
BY TELEPHONE. Shares may be redeemed by telephoning a Michigan National Bank or
an Independence One representative at 1-800-334-2292. In addition, shareholders
may redeem Shares by calling their authorized broker directly. Redemption
requests must be received and transmitted to the transfer agent before 11:00
a.m. (Eastern time) in order for the proceeds to be wired that same day. The
Michigan National Bank or Independence One representative or authorized broker
is responsible for promptly submitting redemption requests and providing proper
written redemption instructions to the transfer agent. Registered broker/dealers
may charge customary fees and commissions for this service. If at any time, the
Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
For calls received before 11:00 a.m. (Eastern time) proceeds will normally be
wired the same day to the shareholder's account at a domestic commercial bank
that is a member of the Federal Reserve System or a check will be sent to the
address of record. For calls received after 11:00 a.m. (Eastern time) proceeds
will normally be wired or a check sent the following business day. In no event
will proceeds be wired or a check sent more than seven days after a proper
request for redemption has been received.
A daily dividend will be paid on shares redeemed if the redemption request is
received after 11:00 a.m. (Eastern time). However, the proceeds are normally not
wired until the following business day. Redemption requests received before
11:00 a.m. (Eastern time) will normally be paid the same day but will not be
entitled to that day's dividend.
An authorization form permitting the Fund to accept telephone redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service can
be obtained through a Michigan National Bank or Independence One representative
or authorized broker. Telephone redemption instructions may be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as By Mail, should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
BY MAIL. Shareholders may redeem Shares by sending a written request to the
Fund through their Michigan National Bank or Independence One representative or
authorized broker. The written request should include the shareholder's name,
the Fund name, the class designation, the account number, and the share or
dollar amount requested. Shareholders redeeming through Michigan National Bank
or Independence One should mail written requests to: Independence One Mutual
Funds, 27777 Inkster Road, Mail Code 10-52, Farmington Hills, Michigan
48333-9065. Investors redeeming through an authorized broker should mail written
requests directly to their broker.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
a trust company or a commercial bank whose deposits are insured by BIF,
which is administered by the Federal Deposit Insurance Corporation
("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by SAIF, which is administered by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions. Before Shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to purchase additional
Shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the Trust's or the Fund's operation and for
the election of Trustees under certain circumstances. As of January 24, 1995,
Michigan National Bank may for certain purposes be deemed to control the Fund
because it is owner of record of certain Class A Shares of the Fund.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument which the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use the
property of the Fund to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them from its
assets.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Federal Bank Holding Company Act of
1956 or any bank or non-bank affiliate thereof from sponsoring, organizing,
controlling or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling or distributing securities.
However, such banking laws and regulations do not prohibit such a holding
company affiliate or banks generally from acting as an investment adviser,
transfer agent or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of their customer.
Michigan National Bank is subject to such banking laws and regulations.
Michigan National Bank believes, based on the advice of its counsel, that
Michigan National Bank may perform the services for the Fund contemplated by its
advisory agreement with the Trust without violation of the Glass-Steagall Act or
other applicable banking laws or regulations. Changes in either federal or state
statutes and regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of such or future statutes and regulations, could
prevent Michigan National Bank from continuing to perform all or a part of the
above services for its customers and/or the Fund. If it were prohibited from
engaging in these customer-related activities, the Trustees would consider
alternative advisers and means of continuing available investment services. In
such event, changes in the operation of the Fund may occur, including possible
termination of any automatic or other Fund share investment and redemption
services then being provided by Michigan National Bank. It is not expected that
existing shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Michigan National Bank is found) as
a result of any of these occurrences.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund intends to pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional Shares. The Fund will
provide detailed tax information for reporting purposes. Shareholders are urged
to consult their own tax advisers regarding the status of their accounts under
state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its yield and effective yield for Class A
Shares.
The yield of Class A Shares represents the annualized rate of income earned on
an investment in Class A Shares over a seven-day period. It is the annualized
dividends earned during the period on the investment, shown as a percentage of
the investment. The effective yield is calculated similarly to the yield, but,
when annualized, the income earned by an investment in Class A Shares is assumed
to be reinvested daily. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in Class A Shares after reinvesting all income distributions. It
is calculated by dividing that change by the initial investment and is expressed
as a percentage.
Yield and effective yield will be calculated separately for Class A Shares and
Class B Shares. Because Class A Shares are subject to a Shareholder Services
Plan fee, the yield and effective yield of Class B Shares for the same period
may exceed that of Class A Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Class B Shares are sold as an investment vehicle primarily for institutions,
corporations, and fiduciaries. Class B Shares are subject to a minimum initial
investment of $1,000,000. Class B Shares are sold at net asset value and are not
subject to a Shareholder Services Fee. Class A Shares are subject to a
Shareholder Services Fee of up to 0.25 of 1% of Class A Shares' average daily
net assets.
The amount of dividends payable to Class A Shares will be less than those
payable to Class B Shares by the difference between Class Expenses and
shareholder service expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ---------------------------------------------------------------------------------- --------------
CERTIFICATES OF DEPOSIT--24.1%
- -------------------------------------------------------------------------------------------------
ISSUED BY FOREIGN BANKS-U.S. BRANCHES--20.9%
----------------------------------------------------------------------------------
Rabobank
----------------------------------------------------------------------------------
$ 10,000,000 3.25%, 5/5/94 $ 10,000,011
----------------------------------------------------------------------------------
Sumitomo Corp. of America
----------------------------------------------------------------------------------
5,000,000 3.37%, 5/9/94 4,999,835
----------------------------------------------------------------------------------
National Westminster
----------------------------------------------------------------------------------
5,000,000 3.70%, 5/31/94 5,000,162
----------------------------------------------------------------------------------
Sanwa Bank, Ltd.
----------------------------------------------------------------------------------
10,000,000 3.99%, 6/24/94 10,000,129
----------------------------------------------------------------------------------
Mitsubishi Bank, NY
----------------------------------------------------------------------------------
10,000,000 4.00%, 6/30/94 10,000,331
----------------------------------------------------------------------------------
Banque Nationale De Paris
----------------------------------------------------------------------------------
10,000,000 3.28%, 7/14/94 10,000,202
----------------------------------------------------------------------------------
CIBC New York
----------------------------------------------------------------------------------
15,000,000 3.25%, 7/18/94 14,975,682
---------------------------------------------------------------------------------- --------------
Total 64,976,352
---------------------------------------------------------------------------------- --------------
ISSUED BY FOREIGN BANKS-LONDON BRANCHES--3.2%
----------------------------------------------------------------------------------
National Westminster
----------------------------------------------------------------------------------
10,000,000 3.25%, 7/14/94 9,998,867
---------------------------------------------------------------------------------- --------------
TOTAL CERTIFICATES OF DEPOSIT 74,975,219
---------------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ---------------------------------------------------------------------------------- --------------
*CERTIFICATES OF DEPOSIT-VARIABLE RATE--8.1%
- -------------------------------------------------------------------------------------------------
Abbey National Treasury Services, PLC
----------------------------------------------------------------------------------
$ 10,000,000 4.06%, 4/27/95 $ 10,000,000
----------------------------------------------------------------------------------
State Bank of New South Wales
----------------------------------------------------------------------------------
15,000,000 3.73%, 7/1/94 15,000,000
---------------------------------------------------------------------------------- --------------
TOTAL CERTIFICATES OF DEPOSIT-VARIABLE RATE 25,000,000
---------------------------------------------------------------------------------- --------------
**COMMERCIAL PAPER--38.5%
- -------------------------------------------------------------------------------------------------
AUTO--4.8%
----------------------------------------------------------------------------------
***Fleet Funding Corp.
----------------------------------------------------------------------------------
5,000,000 3.67%, 5/16/94 4,992,354
----------------------------------------------------------------------------------
***Fleet Funding Corp.
----------------------------------------------------------------------------------
10,000,000 3.77%, 6/14/94 9,953,922
---------------------------------------------------------------------------------- --------------
Total 14,946,276
---------------------------------------------------------------------------------- --------------
BANKING--18.6%
----------------------------------------------------------------------------------
***Asset Securitization Cooperative Corp.
----------------------------------------------------------------------------------
8,000,000 3.48%, 5/9/94 7,993,813
----------------------------------------------------------------------------------
***Asset Securitization Cooperative Corp.
----------------------------------------------------------------------------------
5,000,000 3.67%, 5/13/94 4,993,883
----------------------------------------------------------------------------------
Comdisco, Inc.
----------------------------------------------------------------------------------
10,000,000 3.67%, 5/16/94 9,984,708
----------------------------------------------------------------------------------
SBSA (DE), Inc.
----------------------------------------------------------------------------------
15,000,000 3.45%, 5/18/94 14,975,563
----------------------------------------------------------------------------------
Sceptre International Ltd.
----------------------------------------------------------------------------------
15,000,000 3.92%, 6/3/94 14,946,100
----------------------------------------------------------------------------------
Comdisco, Inc.
----------------------------------------------------------------------------------
5,000,000 3.85%, 6/27/94 4,969,521
---------------------------------------------------------------------------------- --------------
Total 57,863,588
---------------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ---------------------------------------------------------------------------------- --------------
**COMMERCIAL PAPER--CONTINUED
- -------------------------------------------------------------------------------------------------
ELECTRONICS--1.6%
----------------------------------------------------------------------------------
SCI Systems, Inc.
----------------------------------------------------------------------------------
$ 5,000,000 3.66%, 5/13/94 $ 4,993,900
---------------------------------------------------------------------------------- --------------
FINANCE-COMMERCIAL--3.2%
----------------------------------------------------------------------------------
Canadian Wheat Board
----------------------------------------------------------------------------------
10,000,000 3.75%, 6/28/94 9,939,583
---------------------------------------------------------------------------------- --------------
FUNDING CORPORATION--8.0%
----------------------------------------------------------------------------------
Global Funding Corp.
----------------------------------------------------------------------------------
10,000,000 3.15%, 5/2/94 9,999,125
----------------------------------------------------------------------------------
***Bishopsgate
----------------------------------------------------------------------------------
15,000,000 3.85%, 5/19/94 14,971,125
---------------------------------------------------------------------------------- --------------
Total 24,970,250
---------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS--2.3%
----------------------------------------------------------------------------------
American Telephone & Telegraph Co.
----------------------------------------------------------------------------------
7,000,000 3.45%, 5/20/94 6,987,254
---------------------------------------------------------------------------------- --------------
TOTAL COMMERCIAL PAPER 119,700,851
---------------------------------------------------------------------------------- --------------
*VARIABLE RATE OBLIGATIONS--0.6%
- -------------------------------------------------------------------------------------------------
Richmond County, GA
----------------------------------------------------------------------------------
2,000,000 3.80%, 5/2/94 2,000,000
---------------------------------------------------------------------------------- --------------
GOVERNMENT AGENCIES--3.2%
- -------------------------------------------------------------------------------------------------
Federal Home Loan Bank
----------------------------------------------------------------------------------
10,000,000 2.90%, 6/23/94 10,000,000
---------------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ---------------------------------------------------------------------------------- --------------
+REPURCHASE AGREEMENTS--25.3%
- -------------------------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette Securities Corp., 3.60%,
----------------------------------------------------------------------------------
$ 40,000,000 dated 4/29/94, due 5/2/94 $ 40,000,000
----------------------------------------------------------------------------------
38,604,000 Kidder, Peabody & Co., 3.60%, dated 4/29/94, due 5/2/94 38,604,000
---------------------------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 78,604,000
---------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST) $ 310,280,070+
---------------------------------------------------------------------------------- --------------
</TABLE>
* Current rate and next demand date shown.
** Each issue shows the rate of discount at the time of purchase.
*** Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other
"accredited investors." These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
+ 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
($310,588,452) at April 30, 1994.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Investments in securities $ 231,676,070
- ---------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) 78,604,000
- --------------------------------------------------------------------------------- --------------
Total investments, at amortized cost and value (Note 2A) $ 310,280,070
- -------------------------------------------------------------------------------------------------
Cash 24,470
- -------------------------------------------------------------------------------------------------
Interest receivable 856,862
- -------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 38,213
- -------------------------------------------------------------------------------------------------
Deferred expenses (Note 2F) 1,763
- ------------------------------------------------------------------------------------------------- --------------
Total assets 311,201,378
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Dividends payable 481,044
- ---------------------------------------------------------------------------------
Payable for Fund shares redeemed 51,963
- ---------------------------------------------------------------------------------
Payable to transfer and dividend disbursing agent 11,057
- ---------------------------------------------------------------------------------
Accrued expenses 68,862
- --------------------------------------------------------------------------------- --------------
Total liabilities 612,926
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 310,588,452 shares of beneficial interest outstanding $ 310,588,452
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($310,588,452 / 310,588,452 shares of beneficial interest outstanding) $1.00
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 12,328,862
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 1,497,520
- -------------------------------------------------------------------------------------
Administrative personnel and services (Note 4) 470,126
- -------------------------------------------------------------------------------------
Trustees' fees 21,280
- -------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 135,006
- -------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and
expenses (Note 4) 45,091
- -------------------------------------------------------------------------------------
Fund share registration costs 53,145
- -------------------------------------------------------------------------------------
Auditing fees 14,690
- -------------------------------------------------------------------------------------
Legal fees 8,809
- -------------------------------------------------------------------------------------
Printing and postage 21,132
- -------------------------------------------------------------------------------------
Insurance premiums 11,579
- -------------------------------------------------------------------------------------
Miscellaneous 7,475
- ------------------------------------------------------------------------------------- ------------
Total expenses 2,285,853
- -------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 64,765
- ------------------------------------------------------------------------------------- ------------
Net expenses 2,221,088
- --------------------------------------------------------------------------------------------------- -------------
Net investment income $ 10,107,774
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1994 1993
- ---------------------------------------------------------------------------- ----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 10,107,774 $ 10,452,560
- ---------------------------------------------------------------------------- ----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment income (10,107,774) (10,452,560)
- ---------------------------------------------------------------------------- ----------------- -----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ----------------------------------------------------------------------------
Proceeds from sale of shares 2,413,011,015 2,358,845,331
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 2,867,186 3,451,415
- ----------------------------------------------------------------------------
Cost of shares redeemed (2,528,644,351) (2,247,951,529)
- ---------------------------------------------------------------------------- ----------------- -----------------
Change in net assets from Fund share transactions (112,766,150) 114,345,217
- ---------------------------------------------------------------------------- ----------------- -----------------
Change in net assets (112,766,150) 114,345,217
- ----------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------
Beginning of period 423,354,602 309,009,385
- ---------------------------------------------------------------------------- ----------------- -----------------
End of period $ 310,588,452 $ 423,354,602
- ---------------------------------------------------------------------------- ----------------- -----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1994
- --------------------------------------------------------------------------------
(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 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. Effective the date of this
prospectus, the Trust offers two classes of shares of the Fund: Class A Shares
and Class B Shares.
(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. These
policies are in conformity with generally accepted accounting principles (GAAP).
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance 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 collateral to ensure the value at
least equals the principal amount of the repurchase agreement, including
accrued interest.
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.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount are amortized as required by
the Internal Revenue Code, as amended ("Code"). Distributions to
shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on 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 trade date.
(3) 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 April
30, 1994, capital paid in aggregated $310,588,452. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1994 1993
- ------------------------------------------------------------------------------ ---------------- ----------------
Shares sold 2,413,011,015 2,358,845,331
- ------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,867,186 3,451,415
- ------------------------------------------------------------------------------
Shares redeemed (2,528,644,351) (2,247,951,529)
- ------------------------------------------------------------------------------ ---------------- ----------------
Net change resulting from Fund share transactions (112,766,150) 114,345,217
- ------------------------------------------------------------------------------ ---------------- ----------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Michigan National Bank, the Fund's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to 0.40 of 1% of the Fund's average daiy net assets. Adviser may voluntarily
choose to waive a portion of its fee and reimburse certain operating expenses of
the Fund. Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The fee is based on the size, type and number of accounts and transactions made
by shareholders.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES PLAN FEE--Effective December 6, 1994, the Trustees adopted
a Shareholder Services Plan on behalf of the Class A Shares of the Fund. Under
the terms of a Shareholder Services Agreement with Michigan National Bank, the
Class A Shares of the Fund may pay up to 0.25 of 1% of average net assets of
Class A Shares for the period. This fee is to obtain certain personal services
for shareholders and to maintain the shareholder accounts.
For the fiscal year ended April 30, 1994, Class A Shares did not incur a
shareholder services fee.
Certain Officers of the Trust are Officers and Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
INDEPENDENCE ONE MUTUAL FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Independence One Prime Money Market Fund (a
portfolio within Independence One Mutual Funds) as of April 30, 1994, and the
related statement of operations for the year then ended, the statements of
changes in net assets for the years ended April 30, 1994 and 1993, and the
financial highlights, which is presented on page 2 of this prospectus, for each
of the periods indicated therein. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and the financial highlights. Investment securities held in custody
are confirmed to us by the custodian. As to securities purchased and sold but
not received or delivered, we request confirmations from brokers, and where
replies are not received, we carry out other appropriate auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Independence One Prime Money Market Fund at April 30, 1994, and the results of
its operations for the year then ended, the changes in its net assets for the
years ended April 30, 1994 and 1993, and the financial highlights for each of
the periods indicated herein, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
June 3, 1994
INDEPENDENCE ONE
MUTUAL FUNDS
INDEPENDENCE ONE PRIME
MONEY MARKET FUND--CLASS A SHARES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
INVESTMENT ADVISER
Michigan National Bank
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
P.O. Box 1119
Boston, Massachusetts 02103
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
One Mellon Bank Center
Pittsburgh, Pennsylvania 15219
Independence One
Prime
Money Market
Fund
Class A Shares
Distributed by Federated Securities Corp.
Prospectus dated
May 1, 1995
G00979-01 (5/95)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
(A PORTFOLIO OF INDEPENDENCE ONE MUTUAL FUNDS)
CLASS B SHARES
PROSPECTUS
The Class B Shares offered by this prospectus represent interests in
Independence One Prime Money Market Fund (the "Fund") which is one of a series
of investment portfolios in Independence One Mutual Funds (the "Trust"), an
open-end, management investment company (a mutual fund). Michigan National Bank
professionally manages the Fund's portfolio.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
MICHIGAN NATIONAL BANK, ARE NOT ENDORSED OR GUARANTEED BY MICHIGAN NATIONAL
BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
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 variety of high-quality money market instruments maturing in 397
days or less.
Shares of the Fund are intended to be sold as an investment vehicle primarily
for institutions, corporations and fiduciaries. Shareholders can invest,
reinvest, or redeem shares at any time without charge or penalty imposed by the
Fund.
This prospectus contains the information you should read and know before you
invest in Class B Shares. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares and Class B Shares dated May 1, 1995, with the Securities and Exchange
Commission. The information contained in the Combined Statement of Additional
Information is incorporated by reference into this prospectus. You may request a
copy of the Combined Statement of Additional Information free of charge, obtain
other information, or make inquiries about the Fund by writing or calling the
Fund toll-free 1-800-334-2292.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated May 1, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Variable Rate Demand Notes 3
Bank Instruments 3
Short-Term Credit Facilities 3
Asset-Backed Securities 3
Credit Enhancement 3
Demand Features 4
Ratings 4
Repurchase Agreements 4
Restricted and Illiquid Securities 4
When-Issued and Delayed
Delivery Transactions 5
Investing in Securities of Other
Investment Companies 5
Investment Risks 6
Investment Limitations 6
Regulatory Compliance 6
INDEPENDENCE ONE MUTUAL FUNDS
INFORMATION 7
- ------------------------------------------------------
Management of the Trust 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Class B Shares 7
Administration of the Fund 8
Administrative Services 8
Custodian 8
Transfer Agent and
Dividend Disbursing Agent 8
Independent Auditors 8
Expenses of the Fund and
Class B Shares 8
NET ASSET VALUE 9
- ------------------------------------------------------
INVESTING IN CLASS B SHARES 9
- ------------------------------------------------------
Share Purchases 9
To Place an Order 9
Minimum Investment Required 10
Cash Sweep Program 10
Participating Depository Institutions 10
What Shares Cost 10
Certificates and Confirmations 10
Dividends 10
Capital Gains 11
EXCHANGE PRIVILEGE 11
- ----------------------------------------------------------
Exchange by Telephone 11
Written Exchange 12
REDEEMING CLASS B SHARES 12
- ------------------------------------------------------
Cash Sweep Customers 13
By Telephone 13
By Mail 13
Accounts with Low Balances 14
SHAREHOLDER INFORMATION 14
- ------------------------------------------------------
Voting Rights 14
Massachusetts Partnership Law 15
EFFECT OF BANKING LAWS 15
- ------------------------------------------------------
TAX INFORMATION 16
- ------------------------------------------------------
Federal Income Tax 16
PERFORMANCE INFORMATION 16
- ------------------------------------------------------
OTHER CLASSES OF SHARES 17
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS A SHARES 18
- ------------------------------------------------------
ADDRESSES Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).............................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable).................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....................................... None
Exchange Fee............................................................................................. None
</TABLE>
ANNUAL CLASS B SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
<TABLE>
<S> <C>
Management Fee (after waiver)(1)......................................................................... .15%
12b-1 Fees............................................................................................... None
Total Other Expenses..................................................................................... .21%
Total Class B Shares Operating Expenses(2).......................................................... .36%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.40%.
(2) The Total Class B Shares Operating Expenses are estimated to be .61% absent
the anticipated voluntary waiver detailed in note (1).
*Annual Class B Shares Operating Expenses are estimated based on expenses
expected to be incurred during the fiscal year ending April 30, 1996. During
the course of this period, expenses may be more or less than the amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS B SHARES WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "INDEPENDENCE ONE MUTUAL FUNDS
INFORMATION" AND "INVESTING IN CLASS B SHARES." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
<TABLE>
<S> <C> <C>
EXAMPLE 1 YEAR 3 YEARS
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period.
The Fund charges no redemption fees for Class B Shares.......................................... $4 $12
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FISCAL YEAR ENDING APRIL 30, 1996.
The information set forth in the foregoing table and example relates only
to Class B Shares of the Fund. The Fund also offers another class of shares
called Class A Shares. Class B Shares and Class A Shares are subject to certain
of the same expenses; however, Class A Shares are subject to a maximum
Shareholder Services Fee of 0.25 of 1% of the Class A Shares' average daily net
assets. See "Other Classes of Shares."
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated
January 9, 1989. The Declaration of Trust permits the Trust to offer separate
series of shares of beneficial interest representing interests in separate
portfolios of securities. In addition, the interests in this portfolio may be
offered in separate classes.
The Fund currently offers two classes of shares for sale: Class A Shares and
Class B Shares. The classes of shares represent interests in one common
investment portfolio but differ in that Class A Shares will be subject to a
shareholder servicing fee paid by the Fund pursuant to a Shareholder Services
Plan, while Class B shares, which will be sold primarily to certain
institutional investors, will not be subject to such a Plan and will not incur
such shareholder servicing fees. This prospectus relates only to Class B Shares
("Shares"). Shares are designed as a convenient means of accumulating an
interest in a professionally managed, diversified portfolio limited to money
market instruments maturing in 397 days or less. Information about other
portfolios of the Trust may be obtained by calling the toll-free number
appearing on the cover of this prospectus.
A minimum initial investment of $1,000,000 is required.
The Fund attempts to stabilize the value of a Share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income consistent
with stability of principal. The investment objective cannot be changed without
approval of shareholders. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing exclusively in a
portfolio of money market instruments maturing in 397 days or less. The average
maturity of money market instruments in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies may be changed by the Board of Trustees ("Trustees") without
the approval of shareholders. Shareholders will be notified before any material
changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in the highest short-term rating category by
one or more nationally recognized statistical rating organizations ("NRSROs") or
of comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
domestic issues of corporate debt obligations, including variable rate
demand notes;
commercial paper (including Canadian Commercial Paper and Europaper);
certificates of deposits, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");
short-term credit facilities, such as demand notes;
asset-backed securities;
obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities
("Government Securities"); and
other money market instruments.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates
and provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the securities
to trade at par. The interest rate may float or be adjusted at regular
intervals (ranging from daily to annually), and is normally based on a
published interest rate or interest rate index. Most variable rate demand
notes allow the Fund to demand the repurchase of the security on not more
than seven days prior notice. Other notes only permit the Fund to tender
the security at the time of each interest rate adjustment or at other fixed
intervals. See "Demand Features." The Fund treats variable rate demand
notes as maturing on the later of the date of the next interest adjustment
or the date on which the Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued
by an institution having capital, surplus and undivided profits over $100
million or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). Bank Instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The Fund will treat
securities credit enhanced with a bank's letter of credit as Bank
Instruments.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Fund may also enter into, or acquire participations
in, short-term revolving credit facilities with corporate borrowers. Demand
notes and other short-term credit arrangements usually provide for floating
or variable rates of interest.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial
interest in a special purpose trust, limited partnership interests or
commercial paper or other debt securities issued by a special purpose
corporation. Although the securities often have some form of credit or
liquidity enhancement, payments on the securities depend predominately upon
collections of the loans and receivables held by the issuer.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may
have been credit enhanced by a guaranty, letter of credit or insurance.
The Fund typically evaluates the credit quality and ratings of
credit-enhanced securities based upon the financial condition and ratings
of the party providing the credit enhancement (the "credit enhancer"),
rather than the issuer. Generally, the Fund will not treat
credit-enhanced securities as having been issued by the credit enhancer
for diversification purposes. However, under certain circumstances,
applicable regulations may require the Fund to treat the securities as
having been issued by both the issuer and the credit enhancer.
The bankruptcy, receivership or default of the credit enhancer will
adversely affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at
their principal amount (usually with accrued interest) with a fixed period
(usually seven days) following a demand by the Fund. The demand feature may
be issued by the issuer of the underlying securities, a dealer in the
securities or by another third party, and may not be transferred separately
from the underlying security. The Fund uses these arrangements to provide
the Fund with liquidity and not to protect against changes in the market
value of the underlying securities. The bankruptcy, receivership or default
by the issuer of the demand feature, or a default on the underlying
security or other event that terminates the demand feature before its
exercise, will adversely affect the liquidity of the underlying security.
Demand features that are exercisable even after a payment default on the
underlying security may be treated as a form of credit enhancement.
RATINGS. A NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1 or A-1+ by
Standard & Poor's Ratings Group ("S&P"), Prime-1 by Moody's Investors Service,
Inc. ("Moody's"), or F-1 (+ or -) by Fitch Investors Service, Inc. ("Fitch"),
are all considered rated in the highest short-term rating category. The Fund
will follow applicable regulations in determining whether a security rated by
more than one NRSRO can be treated as being in the highest short-term rating
category; currently, such securities must be rated by two NRSROs in their
highest rating category. See "Regulatory Compliance."
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or other securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price within one year from
the date of acquisition. To the extent that the original seller does not
repurchase the securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its total
assets in restricted securities. This restriction is not applicable to
commercial paper issued under the Section 4(2) of the Securities Act of 1933.
Restricted securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective and policies, but which are subject to
restriction on resale under federal securities law. The Fund will limit
investments in illiquid securities, including certain restricted securities not
determined by the Trustees to be liquid, non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days after
notice, to 10% of its net assets.
The Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under federal securities
law and is generally sold to institutional investors, such as the Fund, who
agree that they are purchasing the paper for investment purposes and not with a
view to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Fund believes that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Fund intends,
therefore, to treat the restricted securities which meet the criteria for
liquidity established by the Trustees, including Section 4(2) commercial paper,
as determined by the Fund's investment adviser, as liquid and not subject to the
investment limitation applicable to illiquid securities. In addition, because
Section 4(2) commercial paper is liquid, the Fund intends to not subject such
paper to the limitation applicable to restricted securities.
When the Fund invests in certain restricted securities determined by the
Trustees to be liquid, such investments could have the effect of increasing the
level of Fund illiquidity to the extent that the buyers in the secondary market
for such securities become, for a time, uninterested in purchasing these
securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. _The Fund can acquire up
to 3 per centum of the total outstanding stock of other investment companies.
The Fund will not be subject to any other limitations with regard to the
acquisition of securities of other invesment companies so long as the public
offering price of the Fund's shares does not include a sales load exceeding
1-1/2 percent. The Fund will purchase securities of investment companies only in
open-market transactions involving only customary broker's commissions (although
the Fund does not expect to incur any broker's commissions in connection with
its purchases). The Fund's adviser will waive its investment advisory fee on
assets invested in securities of other open-end investment companies. However,
these limitations are not applicable if the securities are acquired in a merger,
consolidation, reorganization, or acquisition of assets.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are subject to
somewhat different risks than domestic obligations of domestic banks. Examples
of these risks include international, economic, and political developments,
foreign governmental restrictions that may adversely affect the payment of
principal or interest, foreign withholding or other taxes on interest income,
difficulties in obtaining or enforcing a judgment against the issuing bank, and
the possible impact of interruptions in the flow of international currency
transactions. Different risks may also exist for ECDs, ETDs, and Yankee CDs
because the banks issuing these instruments, or their domestic or foreign
branches, are not necessarily subject to the same regulatory requirements that
apply to domestic banks, such as reserve requirements, loan limitations,
examinations, accounting, auditing, and recordkeeping, and the public
availability of information. These factors will be carefully considered by the
Fund's adviser in selecting investments for the Fund.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its net assets and pledge up to 10% of the
value of its total assets to secure such borrowings; or
with respect to 75% of the value of its total assets, invest more than 5%
of the value of its total assets in the securities of any one issuer
(other than cash or securities issued or guaranteed by the government of
the United States or its agencies or instrumentalities).
The above investment limitations cannot be changed without shareholder approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. For example, with limited exceptions, Rule 2a-7 prohibits
the investment of more than 5% of the Fund's total assets in the securities of
any one issuer, although the Fund's investment limitation only requires such 5%
diversification with respect to 75% of its assets. The Fund will invest more
than 5% of its assets in any one issuer only under circumstances permitted by
Rule 2a-7. The Fund will also determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Fund may
change these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
INDEPENDENCE ONE MUTUAL FUNDS INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trustees are responsible for managing the Trust's
business affairs and for exercising all of the Trust's powers except those
reserved for the shareholders. An Executive Committee of the Board of Trustees
handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Michigan National Bank, as the
Fund's investment adviser (the "Adviser"), subject to direction by the Trustees.
The Adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the assets of the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to 0.40 of 1% of the Fund's average daily net assets. The Adviser has
undertaken to reimburse the Fund, up to the amount of the advisory fee, for
operating expenses in excess of limitations established by certain states.
The Adviser may voluntarily choose to waive a portion of its fee or
reimburse certain expenses of the Fund.
ADVISER'S BACKGROUND. Michigan National Bank, a national banking
association, is a wholly-owned subsidiary of Michigan National Corporation
("MNC"). Through its subsidiaries and affiliates, MNC, Michigan's fifth
largest bank holding company in terms of total assets, as of December 31,
1994, offers a full range of financial services to the public, including
commercial lending, depository services, cash management, brokerage
services, retail banking, mortgage banking, investment advisory services
and trust services. Independence One Capital Management Corporation
("IOCM"), a nationally recognized investment advisory subsidiary of MNC,
provides investment advisory services for trust and other managed assets.
IOCM and the Trust Division have managed custodial assets totaling $9
billion. Of this amount, IOCM and the Trust Division have investment
discretion over $2.2 billion.
Michigan National Bank has managed mutual funds since May 1989. The Trust
Division has managed pools of commingled funds since 1964. In addition,
Michigan National Bank presently manages its own investment portfolio of
approximately $300 million in taxable, short-term instruments.
As part of its regular banking operations, Michigan National Bank may make
loans to public companies. Thus, it may be possible, from time to time, for
the Fund to hold or acquire the securities of issuers which are also
lending clients of Michigan National Bank. The lending relationship will
not be a factor in the selection of securities.
DISTRIBUTION OF CLASS B SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with certain administrative personnel and
services necessary to operate the Fund, such as certain legal and accounting
services. Federated Administrative Services provides these at an annual rate as
specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE DAILY NET ASSETS
FEE OF THE TRUST
<C> <S>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
for each portfolio in Independence One Mutual Funds. Federated Administrative
Services may choose voluntarily to reimburse a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh Pennsylvania, is transfer agent for the shares of the Fund and
dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are KPMG Peat
Marwick LLP, Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND AND CLASS B SHARES
Holders of Shares pay their allocable share of Fund and Trust expenses. The
Trust expenses for which holders of Shares pay their allocable share include,
but are not limited to: the cost of organizing the Trust and continuing its
existence; registering the Trust with federal and state securities authorities;
Trustees' fees; auditors' fees; the cost of meetings of Trustees; legal fees of
the Trust; association membership dues and such non-recurring and extraordinary
items as may arise from time to time.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the Fund
under state and federal law; investment advisory services, taxes and
commissions; custodian fees; insurance premiums; auditors' fees; and such
non-recurring and extraordinary items as may arise from time to time.
At present, no expenses are allocated to Shares as a class. However, the
Trustees reserve the right to allocate certain other expenses to the holders of
Shares as they deem appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: transfer agent fees as identified by the transfer agent as
attributable to holders of Shares; printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and to state securities commissions; expenses related
to administrative personnel and services as required to support holders of
Shares; legal fees relating solely to Shares; and Trustees' fees incurred as a
result of issues relating solely to Shares.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per Share is determined by adding the interest of Shares in the value of all
securities and other assets of the Fund, subtracting the interest of Shares in
the liabilities of the Fund and those attributable to Shares, and dividing the
remainder by the number of Shares outstanding. The Fund, of course, cannot
guarantee that its net asset value will always remain at $1.00 per Share.
INVESTING IN CLASS B SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares may be purchased through Michigan National Bank, Independence One
Brokerage Services, Inc. ("Independence One"), or through brokers or dealers
which have a sales agreement with the distributor. Texas residents must purchase
shares through Federated Securities Corp. at 1-800-618-8573. Investors may
purchase shares of the Fund on all business days except on days which the New
York Stock Exchange is closed and federal holidays restricting wire transfers.
In connection with the sale of Shares, the distributor may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request.
TO PLACE AN ORDER. Investors may call toll-free 1-800-334-2292 to purchase
Shares through Michigan National Bank or Independence One. In addition,
investors may purchase Shares by calling their authorized broker directly.
Payment may be made either by check or wire transfer of federal funds.
To purchase by check, the check must be included with the order and made payable
to "Independence One Prime Money Market Fund--Class B Shares." Orders are
considered received after payment by check is converted by the transfer agent's
bank, State Street Bank and Trust Company ("State Street Bank"), into federal
funds.
When payment is made through wire transfer of federal funds, the order is
considered received immediately upon receipt by State Street Bank. Prior to
purchasing by wire, investors should call their Michigan National Bank or
Independence One representative or their authorized broker. It is the
responsibility of Michigan National Bank, Independence One, and authorized
brokers to transmit orders promptly. Federal funds should be wired as follows:
Federated Services Company c/o State Street Bank and Trust Company, Boston,
Massachusetts; Attention: EDGEWIRE; For Credit to: Independence One Prime Money
Market Fund--Class B Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares by an investor is $1,000,000. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Fund for Class B Shares.
Subsequent investments must be in amounts of at least $100.
CASH SWEEP PROGRAM
Cash accumulations in demand deposit accounts with depository institutions such
as banks and savings and loan associations may be automatically invested in
Shares on a day selected by the depository institution and its customer, or when
the demand deposit account reaches a predetermined dollar amount (e.g. $5,000).
PARTICIPATING DEPOSITORY INSTITUTIONS. Participating depository institutions
are responsible for prompt transmission of orders relating to the program. These
depository institutions are the record owners of Shares. Depository institutions
participating in this program may charge their customers for their services
relating to the program. This prospectus should, therefore, be read together
with any agreement between the customer and the depository institution with
regard to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund for Shares.
The net asset value is determined at 12:00 noon (Eastern time) and 4:00 p.m.
(Eastern time), Monday through Friday, except on: (i) days on which there are
not sufficient changes in the value of the Fund's portfolio securities that its
net asset value might be materially affected; (ii) days during which no Shares
are tendered for redemption and no orders to purchase Shares are received; and
(iii) on the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued unless
shareholders so request by contacting their Michigan National Bank or
Independence One representative or authorized broker in writing.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional Shares unless cash payments are
requested by shareholders in writing to the Fund through their Michigan
National Bank or Independence One representative or authorized broker. Share
purchase orders received by the Fund before 11:00 a.m. (Eastern time) earn
dividends that day.
Under limited circumstances, arrangements may be made with Michigan National
Bank for same-day receipt of purchase orders, to earn dividends that day, if
such orders are received before 3:00 p.m. (Eastern time). Investors interested
in establishing such arrangements are requested to call Michigan National Bank
at 1-800-334-2292, and are reminded that the Fund does reserve the right to
refuse any purchase request.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses,
could result in a decrease in dividends. If, for some extraordinary reason, the
Fund realizes net long-term capital gains, it will distribute them at least once
every 12 months.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
All shareholders of the Fund are shareholders of the Trust, which consists of
the Fund, Independence One Michigan Municipal Cash Fund, Independence One U.S.
Treasury Money Market Fund, and Independence One U.S. Government Securities
Fund. Shareholders of Class B Shares of the Fund have access to Independence One
U.S. Treasury Money Market Fund, Independence One Michigan Municipal Cash Fund,
and Independence One U.S. Government Securities Fund ("participating funds")
through an exchange program.
Shareholders who exercise this exchange privilege must exchange Shares having a
net asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the participating fund into which an
exchange is to be made.
The exchange privilege is available to shareholders residing in any state in
which the participating fund shares being acquired may legally be sold. Upon
receipt by the transfer agent of proper instructions and all necessary
supporting documents, Shares submitted for exchange will be redeemed at the
next-determined net asset value. If the exchanging shareholder does not have an
account in the participating fund whose shares are being acquired, a new account
will be established with the same registration, dividend, and capital gain
options as the account from which Shares are exchanged, unless otherwise
specified by the shareholder. In the case where the new account registration is
not identical to that of the existing account, a signature guarantee is
required. (See "Redeeming Class B Shares By Mail.") Exercise of this privilege
is treated as a redemption and new purchase for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may be
realized. The Fund reserves the right to modify or terminate the exchange
privilege at any time. Shareholders would be notified prior to any modification
or termination. Shareholders may obtain further information on the exchange
privilege by calling their Michigan National Bank or Independence One
representative or authorized broker.
EXCHANGE BY TELEPHONE. _Shareholders of Class B Shares may provide instructions
for exchanges between participating funds by telephone to their Michigan
National Bank or Independence One representative by calling 1-800-334-2292. In
addition, investors may exchange shares by calling their authorized brokers
directly.
An authorization form permitting the Fund to accept telephone exchange requests
on behalf of Class B Shares must first be completed. It is recommended that
investors request this privilege at the time of their initial application. If
not completed at the time of initial application, authorization forms and
information on this service can be obtained through a Michigan National Bank or
Independence One representative or authorized broker. Telephone exchange
instructions may be recorded.
Shares may be exchanged by telephone only between fund accounts having identical
shareholder registrations. Exchange instructions given by telephone may be
electronically recorded.
Telephone exchange instructions must be received by Michigan National Bank,
Independence One or an authorized broker and transmitted to the transfer agent
before 4:00 p.m. (Eastern time) for Shares to be exchanged the same day.
Shareholders who exchange into Shares will not receive a dividend from the Fund
on the date of the exchange.
Shareholders of Class B Shares may have difficulty in making exchanges by
telephone through banks, brokers, and other financial institutions during times
of drastic economic or market changes. If shareholders cannot contact their
Michigan National Bank or Independence One representative or authorized broker
by telephone, it is recommended that an exchange request be made in writing and
sent by mail for next day delivery. Send mail requests to: Independence One
Mutual Funds, 27777 Inkster Road, Mail Code 10-52, Farmington Hills, Michigan
48333-9065.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, the transfer agent, by a Michigan
National Bank or Independence One representative or authorized broker and
deposited to the shareholder's account before being exchanged.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN EXCHANGE. _A shareholder wishing to make an exchange by written request
may do so by sending it to: Independence One Mutual Funds, 27777 Inkster Road,
Mail Code 10-52, Farmington Hills, Michigan 48333-9065. In addition, an investor
may exchange shares by sending a written request to their authorized broker
directly.
REDEEMING CLASS B SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company receives the redemption request. Redemptions will be made on
days on which the Fund computes its net asset value. Redemption requests cannot
be executed on days on which the New York Stock Exchange is closed and federal
holidays restricting wire transfers. Telephone or written requests for
redemption must be received in proper form and can be made to the Fund through
a Michigan National Bank or Independence One representative or authorized
broker. Although the transfer agent does not charge for telephone redemptions,
it reserves the right to charge a fee for the cost of wire-transferred
redemptions of less than $5,000.
CASH SWEEP CUSTOMERS. Clients of Michigan National Bank who have executed a
Cash Sweep Agreement should refer to that agreement for information about
redeeming Shares purchased through that program.
BY TELEPHONE. Shares may be redeemed by telephoning a Michigan National Bank or
an Independence One representative at 1-800-334-2292. In addition, shareholders
may redeem Shares by calling their authorized broker directly. Redemption
requests must be received and transmitted to the transfer agent before 11:00
a.m. (Eastern time) in order for the proceeds to be wired that same day. The
Michigan National Bank or Independence One representative or authorized broker
is responsible for promptly submitting redemption requests and providing proper
written redemption instructions to the transfer agent. Registered broker/dealers
may charge customary fees and commissions for this service. If at any time, the
Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
For calls received before 11:00 a.m. (Eastern time) proceeds will normally be
wired the same day to the shareholder's account at a domestic commercial bank
that is a member of the Federal Reserve System or a check will be sent to the
address of record. For calls received after 11:00 a.m. (Eastern time) proceeds
will normally be wired or a check sent the following business day. In no event
will proceeds be wired or a check sent more than seven days after a proper
request for redemption has been received.
A daily dividend will be paid on shares redeemed if the redemption request is
received after 11:00 a.m. (Eastern time). However, the proceeds are normally not
wired until the following business day. Redemption requests received before
11:00 a.m. (Eastern time) will normally be paid the same day but will not be
entitled to that day's dividend.
An authorization form permitting the Fund to accept telephone redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service can
be obtained through a Michigan National Bank or Independence One representative
or authorized broker. Telephone redemption instructions may be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as By Mail, should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
BY MAIL. Shareholders may redeem Shares by sending a written request to the
Fund through their Michigan National Bank or Independence One representative or
authorized broker. The written request should include the shareholder's name,
the Fund name, the class designation, the account number, and the share or
dollar amount requested. Shareholders redeeming through Michigan National Bank
or Independence One should mail written requests to: Independence One Mutual
Funds, 27777 Inkster Road, Mail Code 10-52, Farmington Hills, Michigan
48333-9065. Investors redeeming through an authorized broker should mail
written requests directly to their broker.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
a trust company or a commercial bank whose deposits are insured by BIF,
which is administered by the Federal Deposit Insurance Corporation
("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by SAIF, which is administered by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000,000 due to
shareholder redemptions. Before Shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to purchase additional
Shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the Trust's or the Fund's operation and for
the election of Trustees under certain circumstances. As of January 24, 1995,
Michigan National Bank may for certain purposes be deemed to control the Fund
because it is owner of record of certain Shares of the Fund.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument which the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use the
property of the Fund to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them from its
assets.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Federal Bank Holding Company Act of
1956 or any bank or non-bank affiliate thereof from sponsoring, organizing,
controlling or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling or distributing securities.
However, such banking laws and regulations do not prohibit such a holding
company affiliate or banks generally from acting as an investment adviser,
transfer agent or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of their customer.
Michigan National Bank is subject to such banking laws and regulations.
Michigan National Bank believes, based on the advice of its counsel, that
Michigan National Bank may perform the services for the Fund contemplated by its
advisory agreement with the Trust without violation of the Glass-Steagall Act or
other applicable banking laws or regulations. Changes in either federal or state
statutes and regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of such or future statutes and regulations, could
prevent Michigan National Bank from continuing to perform all or a part of the
above services for its customers and/or the Fund. If it were prohibited from
engaging in these customer-related activities, the Trustees would consider
alternative advisers and means of continuing available investment services. In
such event, changes in the operation of the Fund may occur, including possible
termination of any automatic or other Fund share investment and redemption
services then being provided by Michigan National Bank. It is not expected that
existing shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Michigan National Bank is found) as
a result of any of these occurrences.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
TAX INFORMATION
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FEDERAL INCOME TAX
The Fund intends to pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional Shares. The Fund will
provide detailed tax information for reporting purposes. Shareholders are urged
to consult their own tax advisers regarding the status of their accounts under
state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its yield and effective yield for Class B
Shares.
The yield of Class B Shares represents the annualized rate of income earned on
an investment in Class B Shares over a seven-day period. It is the annualized
dividends earned during the period on the investment, shown as a percentage of
the investment. The effective yield is calculated similarly to the yield, but,
when annualized, the income earned by an investment in Class B Shares is assumed
to be reinvested daily. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in Class B Shares after reinvesting all income distributions. It
is calculated by dividing that change by the initial investment and is expressed
as a percentage.
Yield and effective yield will be calculated separately for Class A Shares and
Class B Shares. Because Class A Shares are subject to a Shareholder Services
Plan fee, the yield and effective yield of Class B Shares for the same period
may exceed that of Class A Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Class A Shares are sold as an investment vehicle primarily for individuals,
institutions, corporations, and fiduciaries. Class A Shares are subject to a
minimum initial investment of $1,000. Class A Shares are sold at net asset value
and are subject to a Shareholder Services Fee of up to 0.25 of 1% of Class A
Shares' average daily net assets. Class B Shares are not subject to a
Shareholder Services Fee.
The amount of dividends payable to Class A Shares will be less than those
payable to Class B Shares by the difference between Class Expenses and
shareholder service expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A CLASS 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 0.03 0.03 0.05 0.07 0.08
- ----------------------------------------------------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- -----------------------------------------------------
Dividends to shareholders from net
investment income (0.03) (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 (A) 2.73% 2.99% 4.89% 7.55% 7.99%
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------
Expenses 0.59% 0.58% 0.54% 0.53% 0.40%(b)
- -----------------------------------------------------
Net investment income 2.70% 2.91% 4.73% 7.26% 8.24%(b)
- -----------------------------------------------------
Expense waiver/reimbursement (c) 0.02% 0.04% 0.08% 0.08% 0.23%(b)
- -----------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------
Net assets, end of period (000 omitted) $310,588 $423,355 $309,009 $371,994 $328,434
- -----------------------------------------------------
</TABLE>
+ As of May 1, 1995, the single class of shares previously offered by the Fund
has been redesignated as Class A Shares.
* Reflects operations for the period from June 1, 1989 (date of initial public
investment) to April 30, 1990.
(a) Based on net asset value, which does not reflect sales load or contingent
deferred sales charge, if applicable.
(b) Computed on an annualized basis.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A CLASS A SHARE+ OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C> <C> <C> <C> <C>
1995* 1994 1993 1992 1991] 1990**
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------
Net investment income 0.02 0.03 0.03 0.05 0.07 0.08
- -----------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------
Dividends to shareholders
from net investment income (0.02) (0.03) (0.03) (0.05) (0.07) (0.08)
- ----------------------------------------- --------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------- --------- --------- --------- --------- --------- -----------
TOTAL RETURN*** 1.97% 2.73% 2.99% 4.89% 7.55% 7.99%
- -----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------
Expenses 0.61%(a) 0.59% 0.58% 0.54% 0.53% 0.40%(a)
- -----------------------------------------
Net investment income 3.85%(a) 2.70% 2.91% 4.73% 7.26% 8.24%(a)
- -----------------------------------------
Expense waiver/
reimbursement (b) 0.00%(a) 0.02% 0.04% 0.08% 0.08% 0.23%(a)
- -----------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------
Net assets, end of period
(000 omitted) $288,034 $310,588 $423,355 $309,009 $371,994 $328,434
- -----------------------------------------
</TABLE>
+ As of May 1, 1995, the single class of shares previously offered by the Fund
has been redesignated as Class A Shares.
* Six months ended October 31, 1994 (unaudited). The complete financial
statements for the six months ended October 31, 1994, which, along with this
Financial Highlights table, comprise the Fund's semi-annual report, are
contained in the Fund's statement of additional information.
** Reflects operations for the period from June 1, 1989 (date of initial public
investment) to April 30, 1990.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
INDEPENDENCE ONE
MUTUAL FUNDS
INDEPENDENCE ONE PRIME
MONEY MARKET FUND--CLASS B SHARES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
INVESTMENT ADVISER
Michigan National Bank
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
P.O. Box 1119
Boston, Massachusetts 02103
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
One Mellon Bank Center
Pittsburgh, Pennsylvania 15219
Independence Onet
Prime
Money Market
Fund
Class B Shares
Distributed by Federated Securities Corp.
Prospectus dated
May 1, 1995
G00979-02 (5/95)
INDEPENDENCE ONE
PRIME MONEY MARKET FUND
(A PORTFOLIO OF INDEPENDENCE ONE MUTUAL FUNDS)
CLASS A SHARES
CLASS B SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION
This Combined Statement of Additional Information should be read with
the respective prospectuses for Class A Shares and Class B Shares of
Independence One Prime Money Market Fund (the "Fund") dated May 1,
1995. This Statement is not a prospectus itself. To receive a copy of
either prospectus, write the Fund or call toll-free 1-800-334-2292.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated May 1, 1995
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
Repurchase Agreements 1
Restricted and Illiquid Securities 2
When-Issued and Delayed Delivery
Transactions 2
Reverse Repurchase Agreements 2
Investment Limitations 2
INDEPENDENCE ONE MUTUAL FUNDS MANAGEMENT 4
- ---------------------------------------------------------------
Officers and Trustees 4
Fund Ownership 5
Trustees' Compensation 5
Trustee Liability 5
INVESTMENT ADVISORY SERVICES 6
- ---------------------------------------------------------------
Adviser to the Fund 6
Advisory Fees 6
ADMINISTRATIVE SERVICES 6
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 6
- ---------------------------------------------------------------
PURCHASING SHARES 7
- ---------------------------------------------------------------
Shareholder Services Plan
(Class A Shares only) 7
Conversion to Federal Funds 7
DETERMINING NET ASSET VALUE 7
- ---------------------------------------------------------------
Use of the Amortized Cost Method 7
EXCHANGE PRIVILEGE 8
- ---------------------------------------------------------------
REDEEMING SHARES 8
- ---------------------------------------------------------------
Redemption in Kind 8
TAX STATUS 9
- ---------------------------------------------------------------
The Fund's Tax Status 9
Shareholders' Tax Status 9
YIELD 9
- ---------------------------------------------------------------
EFFECTIVE YIELD 9
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 9
- ---------------------------------------------------------------
FINANCIAL STATEMENTS 11
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in Independence One Mutual Funds (the "Trust") which was
established as a Massachusetts business trust under a Declaration of Trust dated
January 9, 1989.
Shares of the Fund are currently offered in two classes: Class A Shares and
Class B Shares (individually and collectively referred to as "Shares"); and this
combined Statement of Additional Information relates to both classes of shares.
Prior to May 1, 1995, the Fund offered a single class of shares, which are
currently designated as Class A Shares.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide current income consistent with
stability of principal. The investment objective cannot be changed without
approval of shareholders. The policies described below may be changed by the
Trustees without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.
TYPES OF INVESTMENTS
The Fund invests in money market instruments which mature in 397 days or less
and which include, but are not limited to, commercial paper and variable amount
demand master notes, bank instruments and U.S. government obligations.
The instruments of banks and savings and loans that are insured by the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund ("SAIF") such
as certificates of deposit, demand and time deposits, savings shares, and
bankers' acceptances, are not necessarily guaranteed by those organizations.
BANK INSTRUMENTS
In addition to domestic bank obligations such as certificates of deposit,
demand and time deposits, savings shares, and bankers' acceptances, the
Fund may invest in:
Eurodollar Certificates of Deposit issued by foreign branches of U.S. or
foreign banks;
Eurodollar Time Deposits, which are U.S. dollar-denominated deposits in
foreign branches of U.S. or foreign banks;
Canadian Time Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the United States;
and
Yankee Certificates of Deposit, which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and
held in the United States.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are
backed by:
the full faith and credit of the U.S. Treasury;
the issuer's right to borrow from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase certain
obligations of agencies or
instrumentalities; or
the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
Farm Credit Banks;
National Bank for Cooperatives;
Banks for Cooperatives;
Federal Home Loan Banks;
Federal National Mortgage Association;
Student Loan Marketing Association; and
Federal Home Loan Mortgage Corporation.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. 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.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under the Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive safe harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under Rule
144A. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities (eligible for resale
under Rule 144A) to the Trustees. The Trustees consider the following criteria
in determining the liquidity of certain restricted securities:
.the frequency of trades and quotes for the securities;
.the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
.dealer undertakings to make a market in the security; and
.the nature of the security and the nature of the marketplace trades.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and
maintained until the transaction is settled. The Fund does not intend to engage
in when-issued and delayed delivery transactions to an extent that would cause
the segregation of more than 20% of the total value of its assets.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
The use of reverse repurchase agreements may enable the Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its net assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess of 5% of
its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In these cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of the value of total assets at the time of the pledge.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
any one industry.
However, investing in bank instruments (such as time and demand deposits
and certificates of deposit), U.S. government obligations or instruments
secured by these money market instruments, such as repurchase agreements,
shall not be considered investments in any one industry.
INVESTING IN COMMODITIES, COMMODITY CONTRACTS, OR COMMODITY FUTURES
CONTRACTS
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, although it may invest in
the securities of issuers whose business involves the purchase or sale of
real estate or in securities which are secured by real estate or
interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its net assets in securities
subject to restrictions on resale under the federal securities laws,
except for Section 4(2) commercial paper.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or
hold money market instruments, including repurchase agreements and
variable amount demand master notes, in accordance with its investment
objective, policies and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of its assets, the Fund will not
purchase securities of any one issuer (other than securities issued or
guaranteed by the government of the United States or its agencies or
instrumentalities) if as a result more than 5% of the value of its total
assets would be invested in the securities of that issuer.
The above investment limitations cannot be changed without approval of
shareholders. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser owning
individually more than .5 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund can acquire up to 3 per centum of the total outstanding stock of
other investment companies. The Fund will not be subject to any other
limitations with regard to the acquisition of securities of other
investment companies so long as the public offering price of the Fund's
shares does not include a sales load exceeding 1-1/2 percent. The Fund
will purchase securities of investment companies only in open-market
transactions involving only customary broker's commissions. However,
these limitations are not applicable if the securities are acquired in a
merger, consolidation, reorganization, or acquisition of assets.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs, except it may purchase the
securities of issuers which invest in or sponsor such programs.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, certain restricted
securities not determined by the Trustees to be liquid, and
non-negotiable fixed time deposits with maturities over seven days.
In order to comply with the registration requirements of a particular state, the
Fund will not invest in real estate limited partnerships and oil, gas or other
mineral leases. If this state's policy changes, these restrictions may be
revised without shareholder notification.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund did not borrow money, pledge securities, invest in illiquid securities,
restricted securities, or engage in when-issued and delayed delivery
transactions, or reverse repurchase agreements in excess of 5% of the value of
its net assets during the last fiscal period and has no present intent to do so
during the coming fiscal year.
INDEPENDENCE ONE MUTUAL FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, birthdates, principal
occupations, and present positions, including any affiliation with Michigan
National Bank, Michigan National Corporation, Federated Investors, Federated
Securities Corp., Federated Administrative Services, and Federated Services
Company.
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
Robert E. Baker Trustee Retired; formerly, Vice Chairman, Chrysler Financial Corporation.
4327 Stoneleigh Road
Bloomfield Hills, MI
Birthdate: April 6, 1930
Harold Berry Trustee Chairman, Independent Sprinkler Companies, Inc.; formerly, Chairman,
100 Galleria Officentre, Executive Committee, Federal Enterprises, Inc.; Chairman, Berry,
Suite 219 Ziegelman & Company; Chairman, Teleco, Inc.; Vice Chairman, Tel-Am
Southfield, MI Corp.; Chairman, Winjak, Inc.
Birthdate: September 17, 1925
Clarence G. Frame+ Trustee Director, Tosco Corporation, Chicago Milwaukee Corporation, and
W-875 First Bank Building Voyageur Funds Group; formerly, Vice Chairman, First Bank System,
332 Minnesota Street Inc., and President, The First National Bank of St. Paul, a
St. Paul, MN subsidiary of First Bank System, Inc.
Birthdate: July 26, 1918
Harry J. Nederlander+* Trustee Chairman, Nederlander Enterprises.
231 S. Woodward,
Suite 219
Birmingham, MI
Birthdate: September 5, 1917
Thomas S. Wilson Trustee President, Detroit Pistons; Executive Administrator, Detroit Pistons,
Two Championship Drive The Palace of Auburn Hills, and The Pine Knob Music Theatre.
Auburn Hills, MI
Birthdate: October 9, 1949
Edward C. Gonzales President and Executive Vice President, Treasurer and Director, Federated
Federated Investors Tower Treasurer Securities Corp; Chairman, Treasurer and Trustee, Federated
Pittsburgh, PA Administrative Services; Vice President, Treasurer and Trustee,
Birthdate: October 22, 1930 Federated Investors.
Jeffrey W. Sterling Vice President Vice President, Federated Administrative Services.
Federated Investors Tower and Assistant
Pittsburgh, PA Treasurer
Birthdate: February 5, 1947
Jay S. Neuman Secretary Corporate Counsel, Federated Investors; Prior to January 1991,
Federated Investors Tower Associate Counsel, The Boston Company Advisors, Inc.
Pittsburgh, PA
Birthdate: April 22, 1950
</TABLE>
+Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
*This Trustee is deemed to be an "interested person" of the Fund or Trust as
defined in the Investment Company Act of 1940.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the outstanding shares of the Fund.
The following indicates the beneficial ownership of the shareholder who is the
beneficial owner of more than 5% of the outstanding Class A Shares as of January
24, 1995: Michigan National Bank, acting in various capacities for numerous
accounts owned, of record: approximately 133,949,368.56 Class A Shares (54.13%).
TRUSTEES' COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME, POSITION COMPENSATION
WITH TRUST FROM TRUST*
<S> <C>
Robert E. Baker
Trustee $8,500
Harold Berry
Trustee $8,500
Clarence G. Frame
Trustee $8,500
Harry J. Nederlander
Trustee $8,500
Thomas S. Wilson
Trustee $7,650
</TABLE>
*The aggregate compensation is provided for the Trust which is comprised of four
portfolios. The Trust is the only investment Company in the Fund Complex.
Information is furnished for the fiscal year ended April 30, 1995.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Michigan National Bank (the "Adviser").
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Because of the internal controls maintained by Michigan National Bank to
restrict the flow of non-public information, Fund investments are typically made
without any knowledge of Michigan National Bank's or its affiliates' lending
relationships with an issuer.
ADVISORY FEES
For its advisory services, Michigan National Bank receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended April
30, 1994, 1993, and 1992, with respect to Class A Shares, the Adviser earned
$1,497,520, $1,437,564, and $1,692,928, respectively, of which $64,765,
$158,210, and $326,759, respectively, were waived because of undertakings to
limit the Fund's expenses.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the Adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for the fees set forth in the
prospectus. For the fiscal years ended April 30, 1994, 1993 and 1992, the Fund
incurred administrative services costs with respect to Class A Shares of
$470,126, $457,734, and $551,632, respectively.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include:
.advice as to the advisability of investing in securities;
.security analysis and reports;
.economic studies;
.industry studies;
.receipt of quotations for portfolio evaluations; and
.similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser for other
accounts. To the extent that receipt of these services may supplant services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days which
the New York Stock Exchange is open for business, except on federal holidays
restricting wire transfers. The procedure for purchasing Shares of the Fund is
explained in the respective prospectuses under "Investing in Class A Shares" or
"Investing in Class B Shares."
SHAREHOLDER SERVICES PLAN (CLASS A SHARES ONLY)
This arrangement permits the payment of fees to Michigan National Bank and
financial institutions to cause services to be provided which are necessary for
the maintenance of shareholder accounts and to encourage personal services to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may include,
but are not limited to: providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of a
client's account cash balance; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses. By
adopting the Shareholder Services Plan on behalf of Class A Shares, the Board of
Trustees expects that the Class A Shares will benefit by: (1) providing personal
services to shareholders; (2) investing shareholder assets with a minimum of
delay and administrative detail; (3) enhancing shareholder recordkeeping
systems; and (4) responding promptly to shareholders' requests and inquiries
concerning their accounts.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. Federated Services Company
acts as the shareholder's agent in depositing checks and converting them to
federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the value of a Share at $1.00. The days on which
net asset value is calculated by the Fund are described in the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with Rule 2a-7, as amended (the "Rule"), under the
Investment Company Act of 1940. Under the Rule, the Trustees must establish
procedures reasonably designed to stabilize the net asset value per Share, as
computed for purposes of distribution and redemption, at $1.00 per Share, taking
into account current market conditions and the Fund's investment objective.
Under the Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, a demand
feature entitles the Fund to receive the principal amount of the instrument from
the issuer or a third party on (1) no more than 30 days' notice or (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Fund to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
Although demand features and standby commitments are defined as "puts" under the
Rule, the Fund does not consider them to be "puts" as that term is used in the
Fund's investment limitations. Demand features and standby commitments are
features which enhance an instrument's liquidity, and the investment limitation
which proscribes puts is designed to prohibit the purchase and sale of put and
call options and is not designed to prohibit the Fund from using techniques
which enhance the liquidity of portfolio instruments.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per Share and the net asset value per Share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more than
.5 of 1% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks, and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires the Fund to maintain a dollar-weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per Share. In addition, no
instrument with a remaining maturity of more than 397 days can be
purchased by the Fund.
Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity of more than 90 days, the Fund
will invest its available cash to reduce the average maturity to 90 days
or less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of valuation,
neither the amount of daily income nor the net asset value is affected by any
unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on either
class of shares, computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above, may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on either class
of shares, computed the same way may tend to be lower than a similar computation
made by using a method of calculation based upon market prices and estimates.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders using the exchange privilege must exchange Shares having a net
asset value of at least $1,000. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund.
Instructions for exchanges may be given in writing or by telephone. Exchange
procedures are explained in the respective prospectuses for Class A and Class B
Shares under "Exchange Privilege."
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at the next computed net asset value after Federated
Services Company receives the redemption request. Redemption procedures are
explained in the respective prospectuses under "Redeeming Class A Shares" or
"Redeeming Class B Shares."
REDEMPTION IN KIND
Although the Fund intends to redeem Shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio. To satisfy registration
requirements in a particular state, redemption in kind will be made (for any
shareholder requesting redemption) in readily marketable securities to the
extent that such securities are available. If this state's policy changes, the
Fund reserves the right to redeem in kind by delivering those securities it
deems appropriate.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Trustees determine to be fair and
equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem Shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund intends to pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
.derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
.derive less than 30% of its gross income from the sale of securities held less
than three months;
.invest in securities within certain statutory limits; and
.distribute to its shareholders at least 90% of its net income earned during the
year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional Shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends and any short-term capital gains are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Fund realizes net long-term capital
gains, it will distribute them at least once every 12 months.
YIELD
- --------------------------------------------------------------------------------
The Fund's yield for the seven-day period ended April 30, 1994, was 3.09% for
Class A Shares.
The Fund calculates its yield for both classes of Shares daily, based upon the
seven days ending on the day of the calculation, called the "base period." This
yield is computed by:
.determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
.dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
.multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the performance will be reduced for those shareholders paying those fees.
EFFECTIVE YIELD
- --------------------------------------------------------------------------------
The Fund's effective yield for the seven-day period ended April 30, 1994, was
3.13% for Class A Shares.
The Fund's effective yield for both classes of shares is computed by compounding
the unannualized base period return by:
.adding 1 to the base period return;
.raising the sum to the 365/7th power; and
.subtracting 1 from the result.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The performance of both classes of shares depends upon such variables as:
.portfolio quality;
.average portfolio maturity;
.type of instruments in which the portfolio is invested;
.changes in interest rates on money market instruments;
.changes in Fund expenses; and
.the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
.LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Trust will quote its Lipper ranking in the "money market
instrument funds" category in advertising and sales literature.
.MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day compound (effective) yield.
From time to time, the Fund will quote its Money ranking in advertising and
sales literature.
Advertisements and other sales literature for either class of shares may refer
to total return. Total return is the historic change in the value of an
investment in either class of shares based on the monthly reinvestment of
dividends over a specified period of time.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
BANKERS ACCEPTANCE--2.5%
- ------------------------------------------------------------------------------------------------
$ 7,300,000 Bank of Tokyo
---------------------------------------------------------------------------------
5.09%, 12/7/94 $ 7,262,843
--------------------------------------------------------------------------------- --------------
CERTIFICATES OF DEPOSIT--34.7%
- ------------------------------------------------------------------------------------------------
10,000,000 Banque Nationale De Paris
---------------------------------------------------------------------------------
5.25%, 1/23/95 10,000,227
---------------------------------------------------------------------------------
10,000,000 Commerzbank
---------------------------------------------------------------------------------
5.46%, 1/13/95 10,000,702
---------------------------------------------------------------------------------
10,000,000 Credit Suisse
---------------------------------------------------------------------------------
5.16%, 1/6/95 10,000,361
---------------------------------------------------------------------------------
10,000,000 Fuji Bank, New York
---------------------------------------------------------------------------------
5.50%, 1/20/95 10,000,000
---------------------------------------------------------------------------------
10,000,000 Mitsubishi Bank, NY
---------------------------------------------------------------------------------
5.00%, 12/30/94 10,000,161
---------------------------------------------------------------------------------
10,000,000 NBD Bank
---------------------------------------------------------------------------------
5.02%, 12/9/94 10,000,105
---------------------------------------------------------------------------------
10,000,000 Rabobank
---------------------------------------------------------------------------------
4.81%, 11/25/94 10,000,066
---------------------------------------------------------------------------------
5,000,000 Sanwa Bank, Ltd.
---------------------------------------------------------------------------------
5.53%, 1/17/95 5,000,211
---------------------------------------------------------------------------------
5,000,000 Sanwa Bank, Ltd.
---------------------------------------------------------------------------------
5.37%, 3/20/95 4,996,963
---------------------------------------------------------------------------------
10,000,000 Societe Generale Bank
---------------------------------------------------------------------------------
5.10%, 1/26/95 10,000,234
---------------------------------------------------------------------------------
</TABLE>
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------- --------------
CERTIFICATES OF DEPOSIT--CONTINUED
- ------------------------------------------------------------------------------------------------
$ 10,000,000 Sumitomo Bank, Ltd.
---------------------------------------------------------------------------------
4.90%, 11/14/94 $ 10,000,107
--------------------------------------------------------------------------------- --------------
TOTAL CERTIFICATES OF DEPOSIT 99,999,137
--------------------------------------------------------------------------------- --------------
*CERTIFICATES OF DEPOSIT--VARIABLE RATE--3.5%
- ------------------------------------------------------------------------------------------------
10,000,000 Abbey National Treasury Services, PLC
---------------------------------------------------------------------------------
5.195%, 4/27/95 10,000,000
--------------------------------------------------------------------------------- --------------
**COMMERCIAL PAPER--20.8%
- ------------------------------------------------------------------------------------------------
BANKING--6.9%
---------------------------------------------------------------------------------
5,000,000 ***Asset Securitization Cooperative Corp.
---------------------------------------------------------------------------------
5.00%, 11/7/94 4,995,833
---------------------------------------------------------------------------------
5,000,000 ***Asset Securitization Cooperative Corp.
---------------------------------------------------------------------------------
4.85%, 11/9/94 4,994,611
---------------------------------------------------------------------------------
10,000,000 State Bank of New South Wales
---------------------------------------------------------------------------------
5.08%, 12/13/94 9,940,733
--------------------------------------------------------------------------------- --------------
Total 19,931,177
--------------------------------------------------------------------------------- --------------
ELECTRONICS--3.5%
---------------------------------------------------------------------------------
10,000,000 SCI Systems, Inc.
---------------------------------------------------------------------------------
5.12%, 11/14/94 9,981,511
--------------------------------------------------------------------------------- --------------
FINANCE--COMMERICAL--3.5%
---------------------------------------------------------------------------------
10,000,000 Canadian Wheat Board
---------------------------------------------------------------------------------
4.80%, 11/21/94 9,973,333
--------------------------------------------------------------------------------- --------------
FUNDING CORPORATION--3.4%
---------------------------------------------------------------------------------
10,000,000 ***Bishopsgate
---------------------------------------------------------------------------------
4.90%, 11/21/94 9,972,778
--------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS--3.5%
---------------------------------------------------------------------------------
10,000,000 American Telephone & Telegraph Co.
---------------------------------------------------------------------------------
4.84%, 11/17/94 9,978,489
--------------------------------------------------------------------------------- --------------
TOTAL COMMERICAL PAPER 59,837,288
--------------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------- --------------
FLOATING RATE NOTE--3.5%
- ------------------------------------------------------------------------------------------------
$ 10,000,000 Bankers Trust New York Corp., Medium Term Note
---------------------------------------------------------------------------------
4.94%, 6/20/95 $ 10,000,000
--------------------------------------------------------------------------------- --------------
GOVERNMENT AGENCIES--3.5%
- ------------------------------------------------------------------------------------------------
10,000,000 Federal Farm Credit Bank
---------------------------------------------------------------------------------
4.83%, 12/1/94 10,000,000
--------------------------------------------------------------------------------- --------------
*VARIABLE RATE OBLIGATIONS--0.7%
- ------------------------------------------------------------------------------------------------
2,000,000 Richmond County, GA
---------------------------------------------------------------------------------
5.15%, 11/1/94 2,000,000
--------------------------------------------------------------------------------- --------------
+REPURCHASE AGREEMENTS--31.4%
- ------------------------------------------------------------------------------------------------
45,000,000 Donaldson, Lufkin & Jenrette Securities Corp., 4.78%,
dated 10/31/94, due 11/1/94 45,000,000
---------------------------------------------------------------------------------
45,556,000 Kidder, Peabody & Co., 4.78%, dated 10/31/94, due 11/1/94 45,556,000
--------------------------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS 90,556,000
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS, AT AMORTIZED COST $ 289,655,268++
--------------------------------------------------------------------------------- --------------
</TABLE>
* Current rate and next demand date shown.
** Each issue shows the rate of discount at the time of purchase.
*** Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other
"accredited investors." These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
+ 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
($288,033,788) at
October 31, 1994.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Investments in repurchase agreements $ 90,556,000
- ---------------------------------------------------------------------------------
Investments in other securities 199,099,268
- --------------------------------------------------------------------------------- --------------
Total investments, at amortized cost and value $ 289,655,268
- -------------------------------------------------------------------------------------------------
Cash 344
- -------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 8,448,024
- -------------------------------------------------------------------------------------------------
Interest receivable 766,139
- ------------------------------------------------------------------------------------------------- --------------
Total assets 298,869,775
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed 10,239,803
- ---------------------------------------------------------------------------------
Dividends payable 554,196
- ---------------------------------------------------------------------------------
Accrued expenses 41,988
- --------------------------------------------------------------------------------- --------------
Total liabilities 10,835,987
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 288,033,788 shares of beneficial interest outstanding $ 288,033,788
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($288,033,788 / 288,033,788 shares of beneficial interest outstanding) $1.00
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------------------
Interest income $ 6,151,873
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee $ 551,455
- ----------------------------------------------------------------------------------------
Trustees' fees 9,776
- ----------------------------------------------------------------------------------------
Administrative personnel and services fees 178,103
- ----------------------------------------------------------------------------------------
Custodian fees 22,605
- ----------------------------------------------------------------------------------------
Portfolio accounting fees 23,909
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 24,893
- ----------------------------------------------------------------------------------------
Fund share registration fees 4,752
- ----------------------------------------------------------------------------------------
Auditing fees 7,039
- ----------------------------------------------------------------------------------------
Legal fees 2,247
- ----------------------------------------------------------------------------------------
Printing and postage 5,560
- ----------------------------------------------------------------------------------------
Insurance premiums 5,433
- ----------------------------------------------------------------------------------------
Miscellaneous 5,667
- ---------------------------------------------------------------------------------------- ----------
Total expenses 841,439
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income $ 5,310,434
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1995* 1994
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 5,310,434 $ 10,107,774
- ---------------------------------------------------------------------------- ----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment income (5,310,434) (10,107,774)
- ---------------------------------------------------------------------------- ----------------- -----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ----------------------------------------------------------------------------
Proceeds from sale of shares 1,033,718,600 2,413,011,015
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 2,450,566 2,867,186
- ----------------------------------------------------------------------------
Cost of shares redeemed (1,058,723,830) (2,528,644,351)
- ---------------------------------------------------------------------------- ----------------- -----------------
Change in net assets from Fund share transactions (22,554,664) (112,766,150)
- ---------------------------------------------------------------------------- ----------------- -----------------
Change in net assets (22,554,664) (112,766,150)
- ----------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------
Beginning of period 310,588,452 423,354,602
- ---------------------------------------------------------------------------- ----------------- -----------------
End of period $ 288,033,788 $ 310,588,452
- ---------------------------------------------------------------------------- ----------------- -----------------
</TABLE>
* Six months ended October 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
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> <C>
1995* 1994 1993 1992 1991 1990**
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------
Net investment income 0.02 0.03 0.03 0.05 0.07 0.08
- -----------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------
Dividends to shareholders
from net investment income (0.02) (0.03) (0.03) (0.05) (0.07) (0.08)
- ----------------------------------------- --------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------- --------- --------- --------- --------- --------- -----------
TOTAL RETURN*** 1.97% 2.73% 2.99% 4.89% 7.55% 7.99%
- -----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------
Expenses 0.61%(a) 0.59% 0.58% 0.54% 0.53% 0.40%(a)
- -----------------------------------------
Net investment income 3.85%(a) 2.70% 2.91% 4.73% 7.26% 8.24%(a)
- -----------------------------------------
Expense waiver/
reimbursement (b) 0.00%(a) 0.02% 0.04% 0.08% 0.08% 0.23%(a)
- -----------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------
Net assets, end of period
(000 omitted) $288,034 $310,588 $423,355 $309,009 $371,994 $328,434
- -----------------------------------------
</TABLE>
* Six months ended October 31, 1994 (unaudited).
** Reflects operations for the period from June 1, 1989 (date of initial public
investment) to
April 30, 1990.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of three diversified and one
non-diversified portfolios: Independence One Prime Money Market Fund,
Independence One U.S. Treasury Money Market Fund, Independence One U.S.
Government Securities Fund, and Independence One Michigan Municipal Cash Fund,
respectively. The financial statements included herein present 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.
(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. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
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 collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
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 Board of Trustees (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. INVESTMENT INCOME, EXPENSES AND DISTRIBUTION--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its 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. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on 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 its shares, have been deferred and amortized using
the straight-line method not exceeding a period of five years from the
Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) 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, 1994, capital paid-in aggregated $288,033,788. Transactions in Fund
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1995* 1994
Shares sold 1,033,718,600 2,413,011,015
- ------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,450,566 2,867,186
- ------------------------------------------------------------------------------
Shares redeemed (1,058,723,830) (2,528,644,351)
- ------------------------------------------------------------------------------ ---------------- ----------------
Net change resulting from Fund share transactions (22,554,664) (112,766,150)
- ------------------------------------------------------------------------------ ---------------- ----------------
</TABLE>
*Six months ended October 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Michigan National Bank, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.40 of 1% of the Fund's average daily net assets.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waiver a portion of its fee.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
TRANSFER AND DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer agent and dividend disbursing
agent for the Fund. The FServ fee is based on the size, type, and number of
accounts and transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period, plus out-of-pocket
expenses. Prior to August 1, 1994, State Street Bank and Trust Company
maintained the Fund's accounting records.
Certain of the Officers and Trustees are Officers and Trustees of the above
companies.
G00980-01
