INDEPENDENCE ONE EQUITY PLUS FUND
(A PORTFOLIO OF INDEPENDENCE ONE MUTUAL FUNDS)
PROSPECTUS
The shares of Independence One Equity Plus Fund (the "Fund") offered by this
prospectus represent interests in the Fund which is a diversified portfolio and
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.
The investment objective of the Fund is total return. The Fund will pursue this
objective by attempting to provide investment results that correspond to or
exceed the aggregate price and dividend performance of the Standard & Poor's 100
Composite Stock Price Index (the "S&P 100") by investing primarily in the common
stocks comprising the S&P 100. The Fund is neither affiliated with nor sponsored
by Standard & Poor's ("S&P").
Shares of the Fund are intended to be sold as an investment vehicle for
institutions, corporations, fiduciaries and individuals. 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.
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. INVESTMENT IN THESE SHARES
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated June 30,
1996 with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement is incorporated by reference into this prospectus.
You may request a copy of the Statement free of charge by calling toll-free
1-800-334-2292. To obtain other information, or make inquiries about the Trust,
contact the Trust at the address listed in the back of this prospectus.
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 June 30, 1996
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 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Acceptable Investments 4
Equity Investment Considerations 7
Derivative Contracts and Securities 7
Investment Limitation 7
INDEPENDENCE ONE MUTUAL FUND
INFORMATION 7
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Management of the Trust 7
Board of Trustees 7
Investment Adviser 7
Sub-Adviser 8
Distribution of Fund Shares 9
Fund Administration 9
Brokerage Transactions 9
Expenses of the Fund 10
NET ASSET VALUE 10
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INVESTING IN THE FUND 10
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Share Purchases 10
Minimum Investment Required 11
What Shares Cost 11
Certificates and Confirmations 11
Dividends and Capital Gains 11
Systematic Investment Program 11
EXCHANGING SECURITIES FOR FUND SHARES 12
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EXCHANGE PRIVILEGE 12
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REDEEMING FUND SHARES 14
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Systematic Withdrawal Program 15
Accounts with Low Balances 15
SHAREHOLDER INFORMATION 16
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EFFECT OF BANKING LAWS 16
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TAX INFORMATION 17
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Federal Income Tax 17
PERFORMANCE INFORMATION 17
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STANDARD & POOR'S 18
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FINANCIAL STATEMENTS 19
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INDEPENDENT AUDITOR'S REPORT 32
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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>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)............................ None
Maximum Sales Charge 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 FUND OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C>
Management Fee (after waiver)(1)......................................................................... 0.20%
12b-1 Fees............................................................................................... None
Total Other Expenses (after waiver)(2)................................................................... 0.19%
Total Fund Operating Expenses (after waivers)(3).................................................... 0.39%
</TABLE>
(1) The management fee was reduced to reflect the 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) Total Other Expenses have been reduced to reflect the voluntary waiver of a
portion of the administration fee. The administrator can terminate this
voluntary waiver at any time at its sole discretion.
(3) The Total Fund Operating Expenses for the fiscal year ended April 30, 1996
was 0.70% absent the voluntary waivers detailed in Note (1) and Note (2).
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "INVESTING IN THE FUND." 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............. $4 $13 $22 $49
</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.
INDEPENDENCE ONE EQUITY PLUS FUND
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Independent Auditors' Report on page 32.
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 30, 1996(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.11
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Net realized and unrealized gain on investments 1.38
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Total from investment operations 1.49
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LESS DISTRIBUTIONS
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Total distributions (0.10)
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NET ASSET VALUE, END OF PERIOD $ 11.39
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TOTAL RETURN (b) 14.96%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.39%*
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Net investment income 1.92%*
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Expense waiver/reimbursement (c) 0.31%*
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) $112,609
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Average commission rate paid 0.0034%
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Portfolio turnover 6%
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</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 25, 1995 (date of initial
public investment) to April 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) 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)
Further information about the Fund's performance is contained in the Annual
Report for the fiscal year ended April 30, 1996, which can be obtained free of
charge.
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 representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
This prospectus relates only to the Trust's portfolio known as Independence One
Equity Plus Fund. As of the date of this prospectus, the Fund does not offer
separate classes of shares.
Shares of the Fund are designed primarily for individuals and institutions as a
convenient means of accumulating an interest in a professionally-managed,
diversified portfolio investing substantially in the common stocks of companies
with very large market capitalization. A minimum initial investment of $1,000 is
required. Subsequent investments must be in the amount of at least $100.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Fund is total return. The investment objective
cannot be changed without the 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 will pursue its investment objective by attempting to provide
investment results that correspond to or exceed the aggregate price and dividend
performance of the S&P 100 by investing primarily in the stocks comprising the
S&P 100. Unless indicated otherwise, the investment policies of the Fund may be
changed by the Board of Trustees ("Trustees") without the approval of
shareholders. Shareholders will be notified before any material change in these
policies becomes effective.
The S&P 100 is a capitalization-weighted index of 100 stocks from a broad range
of industries. It provides a measure of overall large company performance
because it comprises 100 blue chip stocks from diverse industry groups. Stocks
selected for inclusion tend to be the leading companies in leading industries in
the U.S. economy. Selection criteria include market value, capitalization,
trading activity and liquidity, and soundness of financial and operating
conditions. The component stocks are weighted according to the total market
value of their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price times
the number of shares outstanding. These are summed for all 100 stocks and
divided by a predetermined base value. The base value for the S&P 100 is
adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights and substitutions. Inclusion of a particular stock in
the S&P 100 in no way implies an opinion by S&P as to its investment
attractiveness, nor is S&P a sponsor or in any way affiliated with the Fund.
Under normal circumstances, at least 80% of the Fund's assets will be invested
to correspond as closely as possible to the relative weighting of the S&P 100.
With respect to this 80% investment level, the Fund will attempt to achieve a
high degree of correlation between the performance of its portfolio and that of
the S&P 100. In managing this portion of the Fund's assets, Michigan National
Bank (the "Adviser") and Sosnoff Sheridan Group (the "Sub-Adviser")
(collectively, the "Advisers") will utilize a technique called index fund
management which entails the use of a computer program to track the S&P 100 on a
daily basis. The Advisers will purchase and sell securities from the Fund's
portfolio as necessary to continually and accurately duplicate the composition
of the S&P 100, as appropriate, as it changes over time. The Advisers will
continually assess the validity of the adjustments made to the Fund's portfolio.
With respect to the remaining 20% of the Fund's assets, the Advisers will
normally select common stocks that are included in the S&P 100, the weightings
of which may or may not be identical to that of the S&P 100. These weightings
will be determined by the Advisers in an effort to exceed the total return
performance of the S&P 100. Several criteria are considered in selecting those
stocks that, in the Advisers' opinion, are likely to have above-average
performance. These criteria include: (1) projections by securities analysts of
the stock's earnings and dividend growth; (2) growth potential, as measured by
reinvestment of a high portion of a company's current earnings; (3) improving
earnings outlook, as determined based upon surveys of Wall Street securities
analysts; (4) technical measures, such as rising trading volume indicating an
increasing investor interest in a stock; and (5) dividend yield, with preference
being given to high-yield stocks and stocks of companies which pay no dividends
and retain their earnings to finance growth.
The Fund's ability to provide investment results that correspond to or exceed
the aggregate price and dividend performance of the S&P 100 will depend partly
on the size and timing of cash flows into and out of the Fund. Investment
changes to accommodate these cash flows will be made to maintain the similarity
of the Fund's portfolio to the S&P 100, with respect to the 80% investment level
described above, to the maximum practicable extent. With respect to the
reciprocal 20% investment level described above, changes will be made to
accommodate cash flows, as appropriate. From time to time, adjustments may be
made in the Fund because of changes in the composition of the S&P 100 as
announced by S&P. It is anticipated that these adjustments will occur
infrequently, and therefore, the accompanying costs, including brokerage fees,
custodial expenses, and transfer taxes, are expected to be relatively low.
Portfolio turnover is also expected to be lower than for most other investment
companies. The adverse financial situation of an issuer may not directly result
in the elimination of its securities from the portfolio, unless the securities
are removed from the S&P 100. The Fund reserves the right to remove an
investment from the Fund if, in the Advisers' opinion, the merit of the
investment has been substantially impaired by extraordinary events or financial
conditions.
ACCEPTABLE INVESTMENTS
In addition to the investment policies described above, the Fund may utilize
stock index futures contracts and options on stocks, stock indices and stock
index futures contracts for the purposes of managing cash flows into and out of
the Fund's portfolio and potentially reducing transactional costs. The Fund will
only enter into stock index futures contracts for the purpose of offsetting
risks from other positions.
The Fund may hold cash reserves which may be invested in temporary investments
which include, but are not limited to, short-term money market instruments, U.S.
government securities (including variable rate U.S. government securities), and
repurchase agreements. The Fund may also invest in restricted and illiquid
securities, securities of other investment companies, and lend portfolio
securities.
STOCK INDEX FUTURES AND OPTIONS. The Fund may utilize stock index futures
contracts, options, and options on futures contracts, subject to the limitation
that the value of these futures contracts and options will not exceed 20% of the
Fund's total assets. Also the Fund will not purchase options to the extent that
more than 5% of the value of the Fund's total assets would be invested in
premiums on open option positions.
These contracts and options will serve three purposes. First, the contracts,
some of which require a small margin, will allow the Fund to maintain sufficient
liquidity to meet redemption requests, thereby handling cash flows into and out
of the Fund. In addition, the contracts will increase the level of Fund assets
that may be devoted to attempting to approximate the investment return of the
S&P 100. Third, participation in futures contracts could potentially reduce
transaction costs, since transaction costs associated with futures and options
contracts can be lower than costs stemming from direct investments in stocks.
RISKS. There are several risks accompanying the utilization of futures
contracts to effectively anticipate market movements. First, positions in
futures contracts may be closed only on an exchange or board of trade that
furnishes a secondary market for such contracts. While the Fund plans to
utilize futures contracts only if an active market for such contracts
exists, there is no guarantee that a liquid market will exist for the
contracts at a specified time. The Fund's ability to establish and close
out futures and options positions depends on this secondary market.
Furthermore, because, by definition, futures contracts look to projected
price levels in the future, and not to current levels of valuation, market
circumstances may result in there being a discrepancy between the price of
the stock index future and the movement in the corresponding stock index.
The absence of a perfect price correlation between the futures contract and
its underlying stock index could stem from investors choosing to close
futures contracts by offsetting transactions, rather than satisfying
additional margin requirements. This could result in a distortion of the
relationship between the index and futures market. In addition, because the
futures market imposes less burdensome margin requirements than the
securities market, an increased amount of participation by speculators in
the futures market could result in price fluctuations.
The effective use of futures and options as hedging techniques depends on
the correlation between their prices and the behavior of the Fund's
portfolio securities as well as the Adviser's ability to accurately predict
the direction of stock prices, interest rates and other relevant economic
factors. In addition, daily limits on the fluctuation of futures and
options prices could cause the Fund to be unable to timely liquidate its
futures or options position and cause it to suffer greater losses than
would otherwise be the case. In this regard, the Fund may be unable to
anticipate the extent of its losses from futures transactions. The
Statement of Additional Information includes a further discussion of
futures and options transactions.
In view of these considerations, the Fund will comply with the following
restrictions when purchasing and selling futures contracts. First, the Fund
will not participate in futures transactions if the sum of its initial
margin deposits on open contracts will exceed 5% of the market value of the
Fund's total assets, after taking into account the unrealized profits and
losses on those contracts it has entered into. Second, the Fund will not
enter into these contracts for speculative purposes. Third, since the Fund
does not constitute a commodity pool, it will not market itself as such,
nor serve as a vehicle for trading in the commodities futures or commodity
options markets. In this regard, the Fund will disclose to all prospective
investors the limitations on its futures and options transactions, and make
clear that these transactions are entered into only for bona fide hedging
purposes, or other permissible purposes pursuant to regulations promulgated
by the Commodity Futures Trading Commission ("CFTC"). Finally, the Fund has
claimed an exclusion from registration as a commodity pool operator under
the regulations promulgated by the CFTC.
TEMPORARY INVESTMENTS. For temporary defensive purposes, the Fund may invest up
to 100% of its total assets in cash and cash items including: short-term money
market instruments; securities issued and/or guaranteed as to payment of
principal and interest by the U.S. government, its agencies or
instrumentalities; and repurchase agreements.
The Fund may also hold the instruments described above in such amounts as
necessary: to provide funds for the settlement of portfolio transactions;
pending investment of cash receipts in the ordinary course of business; and to
meet requests for redemption of Fund shares.
U.S. GOVERNMENT SECURITIES. The Fund is permitted to invest in U.S.
government securities which are either issued or guaranteed by the U.S.
government, its agencies, or instrumentalities. These securities include,
but are not limited to, the following:
.direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and
.notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for
Cooperatives; Farmers Home Administration; Federal Home Loan Banks;
Federal Home Loan Mortgage Corporation; Federal National Mortgage
Association; Government National Mortgage Association; and Student Loan
Marketing Association.
Some of the short-term U.S. government securities the Fund may purchase
carry variable interest rates. These securities have a rate of interest
subject to adjustment at least annually. This adjusted interest rate is
ordinarily tied to some objective standard, such as a published interest
rate or interest rate index.
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.
EQUITY INVESTMENT CONSIDERATIONS
As described above, the Fund invests primarily in the common stocks comprising
the S&P 100. As with other mutual funds that invest primarily in common stocks,
the Fund is subject to market risks. That is, the possibility exists that common
stocks will decline over short or even extended periods of time, and the United
States equity market tends to be cyclical, experiencing both periods when stock
prices generally increase and periods when stocks prices generally decrease.
DERIVATIVE CONTRACTS AND SECURITIES
The term "derivative" has traditionally been applied to certain contracts
(including futures, forward, option and swap contracts) that "derive" their
value from changes in the value of an underlying security, currency, commodity
or index. Certain types of securities that incorporate the performance
characteristics of these contracts are also referred to as "derivatives." The
term has also been applied to securities "derived" from the cash flows from
underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the response of
certain derivative contracts and securities to market changes may differ from
traditional investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Fund will only
use derivative contracts for the purposes disclosed in the applicable prospectus
sections above. To the extent that the Fund invests in securities that could be
characterized as derivatives, it will only do so in a manner consistent with its
investment objectives, policies and limitations.
INVESTMENT LIMITATION
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for at least a
percentage of its cash value with an agreement to buy it back on a set date)
except, under certain circumstances, the Fund may borrow up to one-third of the
value of its total assets and pledge securities to secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
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, 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 may receive an annual investment advisory fee
equal to 0.40% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse certain
expenses of the Fund. 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.
ADVISER'S BACKGROUND. Michigan National Bank, a national banking
association, is a wholly-owned subsidiary of Michigan National Corporation
("MNC"). MNC is a wholly owned subsidiary of National Australia Bank
Limited, which is a transnational banking organization, headquartered in
Melbourne, Australia. Through its subsidiaries and affiliates, MNC,
Michigan's sixth largest bank holding company in terms of total assets, as
of March 31, 1996 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 of Michigan National Bank
(the "Trust Division") have managed custodial assets totaling $10.9
billion. Of this amount, IOCM and the Trust Division have investment
discretion over $1.8 billion.
Michigan National Bank has managed mutual funds since May 1989. The Trust
Division has managed pools of commingled funds since 1964.
As part of its regular banking operations, Michigan National Bank may make
loans to or provide credit support for obligations issued by public
companies or municipalities. 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.
Sharon Dischinger is Second Vice President and Portfolio Manager for
Michigan National Bank and Independence One Capital Management Corporation
in Farmington Hills, and has been responsible for management of the Fund's
portfolio since its inception. Ms. Dischinger joined Michigan National Bank
in 1990 and is currently the head equity trader. She is also a General
Securities Representative. Prior to Michigan National Bank, Ms. Dischinger
was the head equity trader at Morison Asset Management.
SUB-ADVISER. Pursuant to the terms of an investment sub-advisory agreement
between the Adviser and Sosnoff Sheridan Corporation (doing business as Sosnoff
Sheridan Group), the Sub-Adviser furnishes certain investment advisory services
to the Adviser, including investment research, statistical and other factual
information, and recommendations, based on its analysis, and assists the Adviser
in identifying securities for potential purchase and/or sale on behalf of the
Fund's portfolio. For the services provided and the expenses incurred by the
Sub-Adviser pursuant to the sub-advisory agreement, the Sub-Adviser is entitled
to receive an annual fee of 0.035% of the average daily value of the Fund's
equity securities payable by the Adviser. The Sub-Adviser may elect to
waive some or all of its fee. In no event shall the Fund be responsible for any
fees due to the Sub-Adviser for its services to the Adviser. The Sub-Adviser,
located at 440 South LaSalle Street, Suite 2301, Chicago, Illinois, 60605, is a
corporation controlled by Thomas Sosnoff, its Director and President, and Scott
Sheridan, its Director, Executive Vice-President and Secretary. Although Messrs.
Sosnoff and Sheridan have experience in providing index management services,
prior to September, 1995, they had not previously served as a sub-adviser to an
investment company. In the event that the Sub-Adviser, for any reason, ceases to
furnish sub-advisory services to the Fund, the Adviser will assume direct
responsibility for all advisory functions.
DISTRIBUTION OF FUND 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.
FUND ADMINISTRATION
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 DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
<C> <S>
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% 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 waive a portion of its fee.
CUSTODIAN. Michigan National Bank, Farmington Hills, Michigan, is custodian for
the securities and cash of the Fund.
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. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Board of Trustees.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of the Trust's
expenses. These expenses include, but are not limited to, the cost of:
organizing the Trust and continuing its existence; Trustees' fees; investment
advisory and administrative services; printing prospectuses and other Fund
documents for shareholders; registering the Trust, the Fund and shares of the
Fund; taxes and commissions; issuing, purchasing, repurchasing and redeeming
shares; fees for custodians, transfer agents, dividend disbursing agents,
shareholder servicing agents, and registrars; printing, mailing, auditing,
accounting, and legal expenses; reports to shareholders and government agencies;
meetings of Trustees and shareholders and proxy solicitations therefor;
insurance premiums; association membership dues; and such nonrecurring and
extraordinary items as may arise. However, the Adviser may voluntarily waive
and/or reimburse some expenses.
NET ASSET VALUE
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The Fund's net asset value per share fluctuates. It is determined by adding the
market value of all securities and other assets of the Fund, subtracting the
liabilities of the Fund, and dividing the remainder by the total number of
shares outstanding.
INVESTING IN THE FUND
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SHARE PURCHASES
Shares of the Fund 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 days on which both the New York Stock Exchange
and Federal Reserve Wire System are open for business. In connection with the
sale of Fund 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 of the Fund through Michigan National Bank or Independence One. In
addition, investors may purchase shares of the Fund by calling their authorized
broker directly. Payments may be made either by check or wire transfer of
federal funds.
Payment by wire must be received before 4:00 p.m. (Eastern time). It is the
responsibility of Michigan National Bank, Independence One or broker/dealers to
transmit orders to the Fund by 5:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price. For settlement of an order, payment must be
received by check or wire transfer within three business days of receipt of the
order. To purchase by check, the check must be included with the order and made
payable to "Independence One Equity Plus Fund." Checks must be converted into
federal funds to be considered received.
Federal funds should be wired as follows: Federated Shareholder Services Company
c/o Michigan National Bank, Farmington Hills, Michigan; Account Number:
6856238933; For Credit to: Independence One Equity Plus Fund; 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 072000805.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000. Subsequent investments
must be in amounts of at least $100.
WHAT SHARES COST
Shares of the Fund are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Fund.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, 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 Shareholder 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.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid quarterly. Capital gains realized by the Fund,
if any, will be distributed at least once every 12 months. Dividends and capital
gains are automatically reinvested on payment dates in additional shares without
a sales charge unless cash payments are requested by shareholders in writing to
the Fund through their Michigan National Bank or Independence One representative
or authorized broker. Shares purchased with reinvested dividends are credited to
shareholder accounts on the following day.
SYSTEMATIC INVESTMENT PROGRAM
Once the Fund account has been opened, shareholders may add to their investment
on a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Fund shares at the net asset value next determined after an order is
received. A shareholder may apply for participation in this program through
Michigan National Bank.
EXCHANGING SECURITIES FOR FUND SHARES
- --------------------------------------------------------------------------------
The Fund may accept securities in exchange for Fund shares. The Fund will allow
such exchanges only upon the prior approval of the Fund and a determination by
the Fund and the Adviser that the securities to be exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of the
Fund, must have a readily ascertainable market value, and must be liquid. The
market value of any securities exchanged in an initial investment, plus any
cash, must be at least equal to the minimum investment in the Fund. The Fund
acquires the exchanged securities for investment and not for resale.
Securities accepted by the Fund will be valued in the same manner as the Fund
values its assets. The basis of the exchange will depend on the net asset value
of Fund shares on the day the securities are valued. One share of the Fund will
be issued for the equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription or other rights
attached to the securities become the property of the Fund, along with the
securities.
If an exchange is permitted, it will be treated as a sale for federal income tax
purposes. Depending upon the cost basis of the securities exchanged for Fund
shares, a gain or loss may be realized by the investor.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
All shareholders of the Fund are shareholders of the Trust, which consists of
the Fund, Independence One Fixed Income Fund, Independence One Michigan
Municipal Bond Fund, Independence One U.S. Government Securities Fund and the
following money market funds: Independence One Michigan Municipal Cash Fund;
Independence One Prime Money Market Fund; and Independence One U.S. Treasury
Money Market Fund. Shareholders of the Fund have access to these funds
("participating funds") through an exchange program.
With the exception of Independence One Prime Money Market Fund, the
participating funds currently offer only one class of shares. If such funds
should add a second class of shares, exchanges may be limited to shares of the
same class of each fund. Shareholders of the Fund have access to both Class A
Shares and Class B Shares of Independence One Prime Money Market Fund through
the exchange program.
Shares of the Fund may be exchanged for shares of participating funds at net
asset value.
Shareholders who exercise this exchange privilege must exchange shares having a
net asset value at least equal to the minimum investment of the participating
fund into which they are exchanging. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the participating fund into which
the exchange is being 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 Fund 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 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.
Shares may be exchanged by telephone only between fund accounts having identical
shareholder registrations.
An authorization form permitting the Fund to accept telephone exchange 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 exchange instructions may be 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 a fund will not receive a dividend from the Fund
on the date of the exchange.
Shareholders 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 10-30, Farmington Hills, Michigan 48333-9065.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Shareholder 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 10-30, Farmington Hills, Michigan 48333-9065. In addition, an investor
may exchange shares by sending a written request to their authorized broker
directly.
REDEEMING FUND SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their next determined net asset value after Federated
Shareholder 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 or on 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.
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 brokers directly. Redemption
requests must be received and transmitted to the transfer agent before 4:00 p.m.
(Eastern time) in order for shares to be redeemed at that day's net asset value.
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 4:00 p.m. (Eastern time) proceeds will normally be
wired the next 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. In no event will proceeds be wired or a check sent more than
seven days after a proper request for redemption has been received.
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 10-30, 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 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 commercial bank whose deposits are insured by the Bank
Insurance Fund, 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 association whose deposits are insured by the
Savings Association Insurance Fund, 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 within one business day, but in no
event more than seven days after receipt of a proper written redemption request.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, shares of
the Fund are redeemed to provide for periodic withdrawal payments in an amount
directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Fund shares, and the fluctuation of the net asset value of Fund
shares redeemed under this program, redemptions may reduce, and eventually
deplete, the shareholder's investment in the Fund. For this reason, payments
under this program should not be considered as yield or income on the
shareholder's investment in the Fund. To be eligible to participate in this
program, a shareholder must have an account value of at least $10,000. A
shareholder may apply for participation in this program through Michigan
National Bank.
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. This requirement does
not apply, however, if the balance falls below $1,000 because of changes in the
Fund's net asset value. 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 May 31, 1996,
Pierson & Co., the nominee for 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 shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in general.
Such banking laws and regulations do not prohibit such a holding company or
affiliate 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 customers.
Some entities providing services to the Trust are subject to such banking laws
and regulations. They believe, based on the advice of its counsel, that they may
perform those services for the Trust contemplated by any agreement entered into
with the Trust without violating those 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 present or future statutes and
regulations, could prevent these entities from continuing to perform all or a
part of the above services. If this happens, the Trustees would consider
alternative means of continuing available investment services. It is not
expected that existing shareholders would suffer any adverse financial
consequences 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 will 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, if any, 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, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held their shares.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its total return and yield.
Total return represents the change, over a specific period of time, in the value
of an investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the offering price per share of the Fund on the last
day of the period. This number is then annualized using semi-annual compounding.
The yield does not necessarily reflect income actually earned by the Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
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.
STANDARD & POOR'S
- --------------------------------------------------------------------------------
"Standard & Poor's", "S&P", and "S&P 100" are trademarks of the McGraw-Hill
Companies, Inc. and have been licensed for use by Michigan National Bank. The
Fund is not sponsored, endorsed, sold or promoted by, or affiliated with,
Standard & Poor's ("S&P").
S&P makes no representation or warranty, express or implied, to the owners of
the Fund or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly or the ability of the Standard
& Poor's 100 Index ("S&P 100 Index") to track general stock market performance.
S&P's only relationship to Michigan National Bank (the "Licensee") is the
licensing of certain trademarks and trade names of S&P and of the S&P 100 Index
which is determined, composed and calculated by S&P without regard to the
Licensee or the Fund. S&P has no obligation to take the needs of the Licensee or
the owners of the Fund into consideration in the determination of the timing of,
prices at, or quantities of the Fund to be issued or in the determination or
calculation of the equation by which the Fund is to be converted into cash. S&P
has no obligation or liability in connection with the administration, marketing
or trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 100 INDEX
OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY THE LICENSEE, OWNERS OF THE FUND, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE S&P 100 INDEX OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 100 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
INDEPENDENCE ONE EQUITY PLUS FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ----------------------------------------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS--96.4%
- -------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.2%
-----------------------------------------------------------------------------------
17,531 Boeing Co. $ 1,439,733
-----------------------------------------------------------------------------------
3,218 General Dynamics Corp. 203,136
-----------------------------------------------------------------------------------
12,383 Raytheon Co. 626,889
-----------------------------------------------------------------------------------
11,099 Rockwell International Corp. 649,292
-----------------------------------------------------------------------------------
6,233 United Technologies Corp. 688,747
----------------------------------------------------------------------------------- --------------
Total 3,607,797
----------------------------------------------------------------------------------- --------------
AUTOMOTIVE--4.8%
-----------------------------------------------------------------------------------
19,328 Chrysler Corp. 1,212,832
-----------------------------------------------------------------------------------
59,714 Ford Motor Co. 2,142,239
-----------------------------------------------------------------------------------
38,287 General Motors Corp. 2,077,069
----------------------------------------------------------------------------------- --------------
Total 5,432,140
----------------------------------------------------------------------------------- --------------
BANKING--1.9%
-----------------------------------------------------------------------------------
18,903 BankAmerica Corp. 1,431,902
-----------------------------------------------------------------------------------
16,390 First Chicago NBD Corp. 676,088
----------------------------------------------------------------------------------- --------------
Total 2,107,990
----------------------------------------------------------------------------------- --------------
CAPITAL GOODS--1.4%
-----------------------------------------------------------------------------------
7,484 Homestake Mining Co. 150,616
-----------------------------------------------------------------------------------
21,440 Minnesota Mining & Manufacturing Co. 1,409,680
----------------------------------------------------------------------------------- --------------
Total 1,560,296
----------------------------------------------------------------------------------- --------------
CHEMICALS--4.0%
-----------------------------------------------------------------------------------
13,375 Dow Chemical Co. 1,188,703
-----------------------------------------------------------------------------------
28,371 Du Pont (E.I.) de Nemours & Co. 2,280,319
-----------------------------------------------------------------------------------
3,822 Mallinckrodt Group, Inc. 150,491
-----------------------------------------------------------------------------------
5,941 Monsanto Co. 900,062
----------------------------------------------------------------------------------- --------------
Total 4,519,575
----------------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ----------------------------------------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMPUTERS--7.9%
-----------------------------------------------------------------------------------
3,378 (a)Ceridian Corp. $ 161,300
-----------------------------------------------------------------------------------
28,227 (a)Cisco Systems, Inc. 1,464,275
-----------------------------------------------------------------------------------
2,856 (a)Computer Sciences Corp. 211,344
-----------------------------------------------------------------------------------
26,054 Hewlett-Packard Co. 2,758,467
-----------------------------------------------------------------------------------
29,056 International Business Machines Corp. 3,123,520
-----------------------------------------------------------------------------------
33,359 (a)Oracle Corp. 1,125,866
-----------------------------------------------------------------------------------
8,758 (a)Unisys Corp. 52,548
----------------------------------------------------------------------------------- --------------
Total 8,897,320
----------------------------------------------------------------------------------- --------------
COSMETICS & PERSONAL CARE--0.5%
-----------------------------------------------------------------------------------
3,467 Avon Products, Inc. 308,130
-----------------------------------------------------------------------------------
5,669 International Flavors & Fragrances, Inc. 278,490
----------------------------------------------------------------------------------- --------------
Total 586,620
----------------------------------------------------------------------------------- --------------
ELECTRIC--0.9%
-----------------------------------------------------------------------------------
11,636 Entergy Corp. 308,354
-----------------------------------------------------------------------------------
34,034 Southern Co. 748,748
----------------------------------------------------------------------------------- --------------
Total 1,057,102
----------------------------------------------------------------------------------- --------------
ELECTRICAL EQUIPMENT--6.7%
-----------------------------------------------------------------------------------
4,394 Black & Decker Corp. 176,859
-----------------------------------------------------------------------------------
7,824 (a)Digital Equipment Corp. 467,484
-----------------------------------------------------------------------------------
85,334 General Electric Co. 6,613,385
-----------------------------------------------------------------------------------
6,487 Honeywell, Inc. 341,378
----------------------------------------------------------------------------------- --------------
Total 7,599,106
----------------------------------------------------------------------------------- --------------
ELECTRONICS--3.7%
-----------------------------------------------------------------------------------
11,117 AMP, Inc. 497,486
-----------------------------------------------------------------------------------
41,955 Intel Corp. 2,842,451
-----------------------------------------------------------------------------------
6,928 (a)National Semiconductor Corp. 109,116
-----------------------------------------------------------------------------------
2,322 Polaroid Corp. 104,490
-----------------------------------------------------------------------------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ----------------------------------------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
ELECTRONICS--CONTINUED
-----------------------------------------------------------------------------------
1,714 Tektronix, Inc. $ 67,917
-----------------------------------------------------------------------------------
9,646 Texas Instruments, Inc. 544,999
----------------------------------------------------------------------------------- --------------
Total 4,166,459
----------------------------------------------------------------------------------- --------------
ENTERTAINMENT--2.1%
-----------------------------------------------------------------------------------
34,607 Disney (Walt) Co. 2,145,634
-----------------------------------------------------------------------------------
5,244 (a)Harrah's Entertainment, Inc. 180,918
----------------------------------------------------------------------------------- --------------
Total 2,326,552
----------------------------------------------------------------------------------- --------------
FINANCIAL SERVICES--3.4%
-----------------------------------------------------------------------------------
24,748 American Express Co. 1,200,278
-----------------------------------------------------------------------------------
24,840 Citicorp 1,956,150
-----------------------------------------------------------------------------------
6,982 Great Western Financial Corp. 160,586
-----------------------------------------------------------------------------------
8,977 Merrill Lynch & Co., Inc. 541,986
----------------------------------------------------------------------------------- --------------
Total 3,859,000
----------------------------------------------------------------------------------- --------------
FOOD & BEVERAGE--9.3%
-----------------------------------------------------------------------------------
64,085 Coca-Cola Co. 5,222,927
-----------------------------------------------------------------------------------
18,886 Heinz (H.J.) Co. 639,763
-----------------------------------------------------------------------------------
35,573 McDonald's Corp. 1,703,057
-----------------------------------------------------------------------------------
40,255 PepsiCo, Inc. 2,556,192
-----------------------------------------------------------------------------------
5,413 Ralston Purina Co. 315,984
----------------------------------------------------------------------------------- --------------
Total 10,437,923
----------------------------------------------------------------------------------- --------------
FOREST PRODUCTS & PAPER--1.3%
-----------------------------------------------------------------------------------
2,459 Boise Cascade Corp. 114,344
-----------------------------------------------------------------------------------
4,931 Champion International Corp. 237,921
-----------------------------------------------------------------------------------
15,110 International Paper Co. 602,511
-----------------------------------------------------------------------------------
10,305 Weyerhaeuser Co. 510,098
----------------------------------------------------------------------------------- --------------
Total 1,464,874
----------------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ----------------------------------------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
HOMEBUILDERS--0.3%
-----------------------------------------------------------------------------------
4,263 Fluor Corp. $ 281,891
----------------------------------------------------------------------------------- --------------
HOUSEHOLD PRODUCTS--0.5%
-----------------------------------------------------------------------------------
7,438 Colgate-Palmolive Co. 569,937
----------------------------------------------------------------------------------- --------------
INSURANCE--2.9%
-----------------------------------------------------------------------------------
10,463 American General Corp. 367,513
-----------------------------------------------------------------------------------
24,221 American International Group, Inc. 2,213,193
-----------------------------------------------------------------------------------
3,880 CIGNA Corp. 439,895
-----------------------------------------------------------------------------------
6,080 ITT Hartford Group, Inc. 297,160
----------------------------------------------------------------------------------- --------------
Total 3,317,761
----------------------------------------------------------------------------------- --------------
MANUFACTURING--1.3%
-----------------------------------------------------------------------------------
17,478 Eastman Kodak Co. 1,337,067
-----------------------------------------------------------------------------------
2,851 Teledyne, Inc. 105,843
----------------------------------------------------------------------------------- --------------
Total 1,442,910
----------------------------------------------------------------------------------- --------------
MEDICAL SUPPLIES--1.6%
-----------------------------------------------------------------------------------
13,871 Baxter International, Inc. 613,792
-----------------------------------------------------------------------------------
22,743 Columbia/HCA Healthcare Corp. 1,208,222
----------------------------------------------------------------------------------- --------------
Total 1,822,014
----------------------------------------------------------------------------------- --------------
METALS & MINING--0.5%
-----------------------------------------------------------------------------------
9,054 Aluminum Co. of America 564,743
----------------------------------------------------------------------------------- --------------
OFFICE EQUIPMENT--0.8%
-----------------------------------------------------------------------------------
1,996 Harris Corp. 123,253
-----------------------------------------------------------------------------------
5,510 Xerox Corp. 807,215
----------------------------------------------------------------------------------- --------------
Total 930,468
----------------------------------------------------------------------------------- --------------
OIL & GAS--11.6%
-----------------------------------------------------------------------------------
25,380 Amoco Corp. 1,852,740
-----------------------------------------------------------------------------------
8,217 Atlantic Richfield Co. 967,552
-----------------------------------------------------------------------------------
7,283 Baker Hughes, Inc. 231,235
-----------------------------------------------------------------------------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ----------------------------------------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
OIL & GAS--CONTINUED
-----------------------------------------------------------------------------------
5,365 Coastal Corp. $ 212,588
-----------------------------------------------------------------------------------
63,437 Exxon Corp. 5,392,145
-----------------------------------------------------------------------------------
5,844 Halliburton Co. 335,300
-----------------------------------------------------------------------------------
20,154 Mobil Corp. 2,317,710
-----------------------------------------------------------------------------------
16,270 Occidental Petroleum Corp. 418,953
-----------------------------------------------------------------------------------
12,358 Schlumberger Ltd. 1,090,593
-----------------------------------------------------------------------------------
5,189 Williams Cos., Inc. (The) 265,288
----------------------------------------------------------------------------------- --------------
Total 13,084,104
----------------------------------------------------------------------------------- --------------
PHARMACEUTICALS--8.9%
-----------------------------------------------------------------------------------
25,778 Bristol-Myers Squibb Co. 2,120,240
-----------------------------------------------------------------------------------
34,040 Johnson & Johnson 3,148,700
-----------------------------------------------------------------------------------
62,908 Merck & Co., Inc. 3,805,934
-----------------------------------------------------------------------------------
25,735 Pharmacia & Upjohn, Inc. 984,364
----------------------------------------------------------------------------------- --------------
Total 10,059,238
----------------------------------------------------------------------------------- --------------
RECREATION--0.1%
-----------------------------------------------------------------------------------
4,902 Brunswick Corp. 107,844
----------------------------------------------------------------------------------- --------------
RETAIL--4.9%
-----------------------------------------------------------------------------------
23,469 K Mart Corp. 237,624
-----------------------------------------------------------------------------------
13,954 Limited, Inc. 289,546
-----------------------------------------------------------------------------------
12,720 May Department Stores Co. 648,720
-----------------------------------------------------------------------------------
19,917 Sears, Roebuck & Co. 993,360
-----------------------------------------------------------------------------------
3,245 Tandy Corp. 168,334
-----------------------------------------------------------------------------------
13,952 (a)Toys R Us, Inc. 388,912
-----------------------------------------------------------------------------------
117,228 Wal-Mart Stores, Inc. 2,798,818
----------------------------------------------------------------------------------- --------------
Total 5,525,314
----------------------------------------------------------------------------------- --------------
STEEL--0.1%
-----------------------------------------------------------------------------------
5,752 (a)Bethlehem Steel Corp. 78,371
----------------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ----------------------------------------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--9.7%
-----------------------------------------------------------------------------------
81,679 AT&T Corp. $ 5,002,838
-----------------------------------------------------------------------------------
28,298 Ameritech Corp. 1,651,896
-----------------------------------------------------------------------------------
22,342 Bell Atlantic Corp. 1,452,230
-----------------------------------------------------------------------------------
34,806 MCI Communications Corp. 1,024,602
-----------------------------------------------------------------------------------
21,968 NYNEX Corp. 1,079,178
-----------------------------------------------------------------------------------
12,973 Northern Telecom Ltd. 668,110
----------------------------------------------------------------------------------- --------------
Total 10,878,854
----------------------------------------------------------------------------------- --------------
TRANSPORTATION--1.5%
-----------------------------------------------------------------------------------
7,248 Burlington Northern Santa Fe 634,200
-----------------------------------------------------------------------------------
2,615 Delta Air Lines, Inc. 210,181
-----------------------------------------------------------------------------------
2,896 (a)Federal Express Corp. 233,852
-----------------------------------------------------------------------------------
6,630 Norfolk Southern Corp. 556,920
----------------------------------------------------------------------------------- --------------
Total 1,635,153
----------------------------------------------------------------------------------- --------------
UTILITIES-ELECTRIC--0.6%
-----------------------------------------------------------------------------------
9,517 American Electric Power Co., Inc. 386,628
-----------------------------------------------------------------------------------
10,975 Unicom Corp. 301,813
----------------------------------------------------------------------------------- --------------
Total 688,441
----------------------------------------------------------------------------------- --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $90,695,858) 108,609,797
----------------------------------------------------------------------------------- --------------
PREFERRED STOCKS--0.0%
- -------------------------------------------------------------------------------------------------
MANUFACTURING--0.0%
-----------------------------------------------------------------------------------
89 Teledyne, Inc., Pfd., Series E, $1.20 (IDENTIFIED COST $887) 1,291
----------------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ ----------------------------------------------------------------------------------- --------------
<C> <S> <C>
(b) REPURCHASE AGREEMENT--3.5%
- -------------------------------------------------------------------------------------------------
$ 3,888,000 First Chicago Capital Markets, Inc., 5.30%, dated 4/30/96,
due 5/1/1996 (AT AMORTIZED COST) $ 3,888,000
----------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $94,584,745)(C) $ 112,499,088
----------------------------------------------------------------------------------- --------------
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(c) The cost of investments for federal tax purposes amounts to $94,612,322.
The net unrealized appreciation of investments on a federal tax basis
amounts to $17,886,766 which is comprised of $18,032,094 appreciation and
$145,328 depreciation at April 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($112,608,978) at April 30, 1996.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Total investments in securities, at value
(identified cost $94,584,745 and tax cost $94,612,322) $ 112,499,088
- --------------------------------------------------------------------------------------------------
Cash 457
- --------------------------------------------------------------------------------------------------
Income receivable 148,254
- --------------------------------------------------------------------------------------------------
Receivable for shares sold 5,122
- --------------------------------------------------------------------------------------------------
Deferred expenses 19,590
- -------------------------------------------------------------------------------------------------- --------------
Total assets 112,672,511
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------
Payable for shares redeemed $ 9,450
- ---------------------------------------------------------------------------------------
Accrued expenses 54,083
- --------------------------------------------------------------------------------------- ---------
Total liabilities 63,533
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 9,888,603 shares outstanding $ 112,608,978
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid in capital $ 94,047,010
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 17,914,343
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 566,391
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 81,234
- -------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 112,608,978
- -------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$112,608,978 / 9,888,603 shares outstanding $ 11.39
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 25, 1995 (DATE OF INITIAL PUBLIC INVESTMENT)
TO APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Dividends $ 1,134,849
- ---------------------------------------------------------------------------------------------------
Interest 70,364
- --------------------------------------------------------------------------------------------------- -------------
Total income 1,205,213
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------------
Investment advisory fee $ 208,897
- --------------------------------------------------------------------------------------
Administrative personnel and services fee 58,574
- --------------------------------------------------------------------------------------
Custodian fees 25,812
- --------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 7,834
- --------------------------------------------------------------------------------------
Directors'/Trustees' fees 3,656
- --------------------------------------------------------------------------------------
Legal fees 4,700
- --------------------------------------------------------------------------------------
Portfolio accounting fees 32,066
- --------------------------------------------------------------------------------------
Printing and postage 7,834
- --------------------------------------------------------------------------------------
Insurance premiums 3,128
- --------------------------------------------------------------------------------------
Miscellaneous 11,489
- -------------------------------------------------------------------------------------- -----------
Total expenses 363,990
- --------------------------------------------------------------------------------------
Waivers--
- -------------------------------------------------------------------------
Waiver of investment advisory fee ($104,448)
- -------------------------------------------------------------------------
Waiver of administrative personnel and services fee (57,628)
- ------------------------------------------------------------------------- -----------
Total waivers (162,076)
- -------------------------------------------------------------------------------------- -----------
Net expenses 201,914
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 1,003,299
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments 566,391
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 17,914,343
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain on investments 18,480,734
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 19,484,033
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30, 1996*
<S> <C>
- ---------------------------------------------------------------------------------------------- ------------------
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------------------
Net investment income $ 1,003,299
- ----------------------------------------------------------------------------------------------
Net realized gain on investments ($593,968 net gain,
as computed for federal tax purposes) 566,391
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation 17,914,343
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from operations 19,484,033
- ---------------------------------------------------------------------------------------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------------------------
Distributions from net investment income (922,065)
- ---------------------------------------------------------------------------------------------- ------------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------------------------------
Proceeds from sale of shares 98,945,293
- ----------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 6,353
- ----------------------------------------------------------------------------------------------
Cost of shares redeemed (4,904,636)
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from share transactions 94,047,010
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets 112,608,978
- ----------------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------------
Beginning of period 0
- ---------------------------------------------------------------------------------------------- ------------------
End of period (including undistributed net investment income of $81,234) $ 112,608,978
- ---------------------------------------------------------------------------------------------- ------------------
</TABLE>
*For the period from September 25, 1995 (date of initial public investment) to
April 30, 1996.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
(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 seven portfolios. The financial
statements included herein are only those of Independence One Equity Plus Fund
(the "Fund"), a diversified portfolio. The investment objective of the Fund is
total return. 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 Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on a national securities exchange. Short-term securities are
valued at the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less at
the time of purchase may be valued at amortized cost, which approximates
fair market value.
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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
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 the guidelines and/or
standards reviewed or 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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--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"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
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
provisions for federal tax are necessary.
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 are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
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).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30, 1996*
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
Shares sold 10,346,964
- ----------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 571
- ----------------------------------------------------------------------------------------------
Shares redeemed (458,932)
- ---------------------------------------------------------------------------------------------- ------------------
Net change resulting from share transactions 9,888,603
- ---------------------------------------------------------------------------------------------- ------------------
</TABLE>
*For the period from September 25, 1995 (date of initial public investment) to
April 30, 1996.
(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 the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee. The
Adviser can modify or terminate this voluntary waiver at any time at its
sole discretion.
Under the terms of a sub-advisory agreement between the Adviser and Sosnoff
Sheridan Corporation, Sosnoff Sheridan Corporation receives an annual fee
from the Adviser equal to 0.035% of the average daily value of the Fund's
equity securities. Sosnoff Sheridan Corporation may voluntarily choose to
reduce its compensation.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Fund with certain administrative personnel and services. The fee paid to
FAS 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 AGENT AND DIVIDEND DISBURSING AGENT FEES-- Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC"), serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Trust's accounting records
for which it receives a fee. The fee is based on the level of the Trust's
average daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Michigan National Bank is the Fund's custodian. The fee is
based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses estimated to be $23,382
will be borne initially by FAS.
The Fund has agreed to reimburse FAS for the organizational expenses during
the five year period following the effective date. For the period ended
April 30, 1996, the Fund paid $2,305 pursuant to this agreement.
GENERAL--Certain of the Officers of the Trust are Officers and/or Directors
or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period from September 25, 1995 (date of initial public investment) to April 30,
1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 95,101,435
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 4,971,081
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
REPORT OF KPMG PEAT MARWICK LLP,
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To 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 Equity Plus Fund (a portfolio
within Independence One Mutual Funds) as of April 30, 1996, and the related
statement of operations, statement of changes in net assets, and the financial
highlights, which is presented on page 2 of this prospectus, for the period from
September 25, 1995 (commencement of operations) to April 30, 1996. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit 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 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. Our
procedures included confirmation of securities owned at April 30, 1996 by
correspondence with the custodian. 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Independence One Equity Plus Fund at April 30, 1996, and the results of its
operations, the changes in its net assets, and the financial highlights for the
period listed above, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
June 14, 1996
INDEPENDENCE ONE
MUTUAL FUNDS
INDEPENDENCE ONE
EQUITY PLUS FUND
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
INVESTMENT ADVISER
Michigan National Bank
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
SUB-ADVISER
Sosnoff Sheridan Corporation
440 South LaSalle Street
Suite 2301
Chicago, Illinois 60605
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
CUSTODIAN
Michigan National Bank
27777 Inkster Road
Mail Code 10-30
Farmington Hills, Michigan 48333-9065
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, Massachusetts 02266-8600
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
One Mellon Bank Center
Pittsburgh, Pennsylvania 15219
[LOGO] RECYCLED PAPER
Cusip 453777872
G00979-08 (6/96)
Independence One/R/
Equity Plus Fund
Distributed by Federated Securities Corp.
Prospectus dated
June 30, 1996
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
[LOGO] MICHIGAN NATIONAL BANK
INDEPENDENCE ONE EQUITY PLUS FUND
(A PORTFOLIO OF INDEPENDENCE ONE MUTUAL FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Independence One Equity Plus Fund (the "Fund"), a
portfolio of Independence One Mutual Funds (the "Trust") dated June
30, 1996. This Statement is not a prospectus. You may request a copy
of a prospectus free of charge by calling 1-800-334-2292.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated June 30, 1996
FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the
distributor of the Fund and is a
subsidiary of Federated Investors.
Cusip 453777872
G001198-01 (6/96)
GENERAL INFORMATION ABOUT THE FUND 3
INVESTMENT OBJECTIVE AND POLICIES 3
Types of Investments 3
Portfolio Turnover 9
Investment Limitations 10
INDEPENDENCE ONE MUTUAL FUNDS MANAGEMENT 15
Officers and Trustees 15
Fund Ownership 19
Trustees' Compensation 19
Trustee Liability 20
Massachusetts Partnership Law 20
INVESTMENT ADVISORY SERVICES 21
Adviser to the Fund 21
Advisory Fees 21
Sub-Adviser to the Fund 21
Sub-Advisory Fees 22
BROKERAGE TRANSACTIONS 22
OTHER SERVICES 24
Trust Administration 24
Custodian 24
Transfer Agent and Dividend Disbursing
Agent 24
Independent Auditors 24
PURCHASING SHARES 24
Conversion to Federal Funds 25
DETERMINING NET ASSET VALUE 25
DETERMINING MARKET VALUE OF SECURITIES 25
REDEEMING SHARES 26
Redemption in Kind 26
TAX STATUS 27
The Fund's Tax Status 27
Shareholders' Tax Status 27
Capital Gains 28
TOTAL RETURN 28
YIELD 29
PERFORMANCE COMPARISONS 29
Economic and Market Information 31
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.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is total return. This investment objective
cannot be changed without the approval of shareholders.
TYPES OF INVESTMENTS
In addition to the common stocks described in the prospectus, the Fund may
also invest in temporary investments which include, but are not limited to,
short-term money market instruments and U.S. government obligations, and
securities in such proportions as, in the judgment of the Adviser,
prevailing market conditions warrant. The following discussion supplements
the description of the Fund's investment policies in the prospectus. Unless
otherwise indicated, the investment policies described below may be changed
by the Board of Trustees (the "Trustees") without shareholder approval.
Shareholders will be notified before any material change in the policies
becomes effective.
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:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
othe 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
System, including the National Bank for Cooperatives, Farm Credit
Banks, and Banks for Cooperatives; Farmers Home Administration;
Federal Home Loan Banks; Federal Home Loan Mortgage Corporation;
Federal National Mortgage Association; Government National Mortgage
Association; and Student Loan Marketing Association.
VARIABLE RATE U.S. GOVERNMENT SECURITIES
In the case of certain U.S. government securities purchased by the
Fund that carry variable interest rates, these rates will reduce the
changes in the market value of such securities from their original
purchase prices.
Accordingly, the potential for capital appreciation or capital
depreciation should not be greater than the potential for capital
appreciation or capital depreciation of fixed interest rate U.S.
government securities having maturities equal to the interest rate
adjustment dates of the variable rate U.S. government securities.
The Fund may purchase variable rate U.S. government securities upon
the determination by the Trustees that the interest rate as adjusted
will cause the instrument to have a current market value that
approximates its par value on the adjustment date.
MONEY MARKET INSTRUMENTS
The Fund may invest in the following money market instruments:
oinstruments of domestic and foreign banks and savings associations
having capital, surplus, and undivided profits of over $100,000,000,
or if the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation ("FDIC");
ocommercial paper issued by domestic or foreign corporations rated A-
1 by Standard & Poor's Ratings Group ("S&P") Prime-1 by Moody's
Investors Service, Inc., or F-1 by Fitch Investors Service, Inc. or,
if unrated, of comparable quality as determined by the Fund's
investment adviser;
otime and savings deposits whose accounts are insured by the Bank
Insurance Fund ("BIF") or in institutions whose accounts are insured
by the Savings Association Insurance Fund, which is also
administered by the FDIC, including certificates of deposit issued
by, and other time deposits in, foreign branches of BIF-insured
banks; or
obankers' acceptances.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities
subject to repurchase agreements and these securities will be marked
to market daily. 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. In the event
that a defaulting seller of the securities 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.
STOCK INDEX FUTURES AND OPTIONS
The Fund may utilize stock index futures contracts, options, and
options on futures contracts as discussed in the prospectus.
A stock index futures contract is a bilateral agreement which
obligates the seller to deliver (and the purchaser to take delivery
of) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of
trading of the contract and the price at which the agreement is
originally made. There is no physical delivery of the stocks
constituting the index, and no price is paid upon entering into a
futures contract. In general, contracts are closed out prior to their
expiration. The Fund, when purchasing or selling a futures contract,
will initially be required to deposit in a segregated account in the
broker's name with the Fund's custodian an amount of cash or U.S.
government securities approximately equal to 5-10% of the contract
value. This amount is known as "initial margin," and it is subject to
change by the exchange or board of trade on which the contract is
traded. Subsequent payments to and from the broker are made on a daily
basis as the price of the index or the securities underlying the
futures contract fluctuates. These payments are known as "variation
margins," and the fluctuation in value of the long and short positions
in the futures contract is a process referred to as "marking to
market." The Fund may decide to close its position on a contract at
any time prior to the contract's expiration. This is accomplished by
the Fund taking an opposite position at the then prevailing price,
thereby terminating its existing position in the contract. Because
both the initial and variation margin resemble a performance bond or
good faith deposit on the contract, they are returned to the Fund upon
the termination of the contract, assuming that all contractual
obligations have been satisfied. Therefore, the margin utilized in
futures contracts is readily distinguishable from the margin employed
in security transactions, since futures contracts margin does not
involve the borrowing of funds to finance the transaction.
A put option gives the Fund, in return for a premium, the right to
sell the underlying security to the writer (seller) at a specified
price during the term of the option. Put options on stock indices are
similar to put options on stocks except for the delivery requirements.
Instead of giving the Fund the right to make delivery of stock at a
specified price, a put option on a stock index gives the Fund, as
holder, the right to receive an amount of cash upon exercise of the
option.
The Fund may also write covered call options. As the writer of a call
option, the Fund has the obligation upon exercise of the option during
the option period to deliver the underlying security upon payment of
the exercise price. Writing of call options is intended to generate
income for the Fund and thereby protect against price movements in
particular securities in the Fund's portfolio.
The Fund may only: (1) buy listed put options on stock indices; (2)
buy listed put options on securities held in its portfolio; and (3)
sell listed call options either on securities held in its portfolio or
on securities which it has the right to obtain without payment of
further consideration (or has segregated cash in the amount of any
such additional consideration). The Fund will maintain its positions
in securities, option rights, and segregated cash subject to puts and
calls until the options are exercised, closed, or expired.
REVERSE REPURCHASE AGREEMENTS
The Fund also may enter into reverse repurchase agreements under
certain circumstances. 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. 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.
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.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend portfolio
securities on a short-term or long-term basis, or both, to
broker/dealers, banks, or other institutional borrowers of securities.
The Fund will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the Adviser has determined are
creditworthy and will receive collateral in the form of cash or U.S.
government securities equal to at least 102% of the value of the
securities loaned.
There is the risk that when lending portfolio securities, the
securities may not be available to the Fund on a timely basis and the
Fund may, therefore, lose the opportunity to sell the securities at a
desirable price. In addition, in the event that a borrower of
securities would file for bankruptcy or become insolvent, disposition
of the securities may be delayed pending court action.
The collateral received when the Fund lends portfolio securities must
be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays
the Fund any dividends or interest paid on such securities. Loans are
subject to termination at the option of the Fund or the borrower. The
Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower
or placing broker. The Fund does not have the right to vote securities
on loan. In circumstances where the Fund does not, the Fund would
terminate the loan and regain the right to vote if that were
considered important with respect to the investment.
PORTFOLIO TURNOVER
The Fund may trade or dispose of portfolio securities as considered
necessary to meet its investment objective. It is not anticipated that the
portfolio trading engaged in by the Fund will result in its annual rate of
portfolio turnover exceeding 100%. For the period from September 25, 1995
(date of initial public investment) to April 30, 1996, the Fund's portfolio
turnover rate was 6%.
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 are necessary for
clearance of transactions. The deposit or payment by the Fund of
initial or variation margin in connection with futures contracts or
related options transactions is not considered the purchase of a
security on margin.
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 total assets, including the amount
borrowed. The Fund will not purchase any securities while borrowings
in excess of 5% of the value of the Fund's total assets are
outstanding.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure 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.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. For the purpose of this limitation,
the following are not deemed to be pledges: margin deposits for the
purchase and sale of futures contracts and related options, and
segregation or collateral arrangements made in connection with options
activities.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, 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.
INVESTING IN COMMODITIES, COMMODITY CONTRACTS, OR COMMODITY FUTURES
CONTRACTS
The Fund will not purchase or sell commodities, commodity contracts or
commodity futures contracts except to the extent that the Fund may
engage in transactions involving futures contracts and related
options.
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.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 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. Also, the Fund will not acquire more than 10% of the
voting securities of any one issuer.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets
in any one industry, except that the Fund may invest 25% or more of
the value of its total assets in securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, and repurchase
agreements secured by such instruments.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities
up to one-third of the value of its total assets. This shall not
prevent the Fund from purchasing U.S. government obligations, money
market instruments, bonds, debentures, notes, certificates of
indebtedness, or other debt securities, entering into repurchase
agreements, or engaging in other transactions where permitted by the
Fund's investment objective, policies and limitations.
The above investment limitations cannot be changed without shareholder
approval. The following investment limitations, however, may be changed by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund can acquire up to 3% 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 charge 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. While it is the Fund's policy to waive its
investment advisory fees on Fund assets invested in securities of
other open-end investment companies, it should be noted that
investment companies incur certain expenses, such as custodian and
transfer agent fees, and therefore, any investment by the Fund in
shares of another investment company would be subject to such
duplicate expenses.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 5% of its total assets in
securities subject to restrictions on resale under the federal
securities laws, except for certain restricted securities which meet
the criteria for liquidity as established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets
in illiquid obligations including repurchase agreements providing for
settlement in more than seven days after notice, over-the-counter
options, certain securities not determined by the Trustees to be
liquid, and non-negotiable fixed income time deposits with maturities
over seven days.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, except it may purchase
the securities of issuers which invest in or sponsor such programs.
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 less than three years of
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 .50% of the issuer's securities,
together own more than 5% of the issuer's securities.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, other than put
options on stock indices, unless the securities are held in the Fund's
portfolio and not more than 5% of the value of the Fund's total assets
would be invested in premiums on open put option positions.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or unless the Fund is
entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment.
INVESTING IN WARRANTS
The Fund will not invest more than 5% of its assets in warrants. No
more than 2% of the Fund's net assets , to be included within the
overall 5% limit on investments in warrants, may be warrants which are
not listed on the New York Stock Exchange or the American Stock
Exchange.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for purposes of
exercising control or management.
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.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association, having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be "cash items."
The Fund does not intend to borrow money in excess of 5% of the value of
its total assets during the current year.
To comply with registration requirements in certain states, the Fund (1)
will limit the aggregate value of the assets underlying covered call
options or put options written by the Fund to not more than 25% of its net
assets, (2) will limit the premiums paid for options purchased by the Fund
to 5% of its net assets, and (3) will limit the margin deposits on futures
contracts entered into by the Fund to 5% of its net assets. (If state
requirements change, these restrictions may be revised without shareholder
notification.)
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.
Robert E. Baker
4327 Stoneleigh Road
Bloomfield Hills, MI
Birthdate: May 6, 1930
Trustee
Retired; formerly, Vice Chairman, Chrysler Financial Corporation.
Harold Berry
100 Galleria Offcentre,
Suite 219
Southfield, MI
Birthdate: September 17, 1925
Trustee
Managing Partner, Berry Enterprises; Chairman, Independent Sprinkler
Companies, Inc.; Chairman, Berry, Ziegelman & Company; formerly, Chairman,
Executive Committee, Federal Enterprises, Inc.
Clarence G. Frame+
W-875 First Bank Building
332 Minnesota Street
St. Paul, MN
Birthdate: July 26, 1918
Trustee
Director, Tosco Corporation, Milwaukee Land Company, and Voyageur Funds
Group; formerly, Vice Chairman, First Bank System, Inc., and President, The
First National Bank of St. Paul, a subsidiary of First Bank System, Inc.
Harry J. Nederlander+
231 S. Woodward, Suite 219
Birmingham, MI
Birthdate: September 5, 1917
Trustee
Chairman, Nederlander Enterprises.
Thomas S. Wilson
Two Championship Drive
Auburn Hills, MI
Birthdate: October 9, 1949
Trustee
President and Executive Administrator of the Detroit Pistons; President and
CEO, Palace Sports and Entertainment.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President and Treasurer
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds distributed by Federated Securities Corp.; President,
Executive Vice President and Treasurer of some of the Funds distributed by
Federated Securities Corp.
Jeffrey W. Sterling
Federated Investors Tower
Pittsburgh, PA
Birthdate: February 5, 1947
Vice President and Assistant Treasurer
Vice President and Assistant Treasurer of various Funds distributed by
Federated Securities Corp.
Jay S. Neuman
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 22, 1950
Secretary
Corporate Counsel, Federated Investors.
+ 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.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the outstanding shares of the
Fund. The following list indicates the beneficial ownership of shareholders
who are the beneficial owners of more than 5% of the outstanding shares of
the Equity Plus Fund as of May 31, 1996: Pierson & Co., the nominee for
Michigan National Bank, acting in various capacities for numerous accounts,
owned, of record, approximately 9,987,270 shares (98.90%).
TRUSTEES' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
THE TRUST THE TRUST*
Robert E. Baker $ 9,350
Trustee
Harold Berry $ 9,350
Trustee
Clarence G. Frame$ 9,350
Trustee
Harry J. Nederlander $ 6,800
Trustee
Thomas S. Wilson $ 9,350
Trustee
*Information is furnished for the fiscal year ended April 30, 1996. The
Trust is the only Investment Company in the Fund Complex. The aggregate
compensation is provided for the Trust which is comprised of seven
portfolios.
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.
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
that 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.
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 period
from September 25, 1995 (date of initial public investment) through April
30, 1996, the Adviser earned $208,897, of which $104,448 was voluntarily
waived.
SUB-ADVISER TO THE FUND
The Fund's sub-adviser is Sosnoff Sheridan Corporation (doing business as
Sosnoff Sheridan Group)(the "Sub-Adviser").
SUB-ADVISORY FEES
For its sub-advisory services, the Sub-Adviser receives an annual sub-
advisory fee as described in the prospectus.
For the period from September 25, 1995 (date of initial public investment)
through April 30, 1996, the Sub-Adviser earned $19,633, none of which was
voluntarily waived.
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 Trust 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.
BROKERAGE TRANSACTIONS
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. Research services provided by brokers and dealers may be used by
the Adviser or its affiliates in advising the Fund and 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. 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. For the period
from September 25, 1995 (date of initial public investment) to April 30,
1996, the Fund paid $13,382 in brokerage commissions on brokerage
transactions.
Although investment decisions for the Funds are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Funds may make may also be made by those other accounts. When the
Funds and one or more other accounts managed by the Adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Funds or
the size of the position obtained or disposed of by the Funds. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Funds.
OTHER SERVICES
TRUST ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Funds for the fees
set forth in the prospectus. For the period from September 25 1995 (date of
initial public investment) to April 30, 1996, the administrator earned
$58,574, of which $57,628 was voluntarily waived.
CUSTODIAN
Michigan National Bank, Farmington Hills, Michigan, is custodian for the
securities and cash of the Fund. For the services to be provided to the
Trust pursuant to the Custodian Agreement, the Trust pays the custodian an
annual fee based upon the average daily net assets of the Fund and which is
payable monthly. The custodian will also charge transaction fees and out-
of-pocket expenses.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, Boston, Massachusetts, through its subsidiary
Federated Shareholder Services Company, is transfer agent for the shares of
the Funds and dividend disbursing agent for the Funds.
INDEPENDENT AUDITORS
The independent auditors for the Fund is KPMG Peat Marwick LLP, Pittsburgh,
Pennsylvania.
PURCHASING SHARES
Shares are sold at their net asset value without a sales charge on days
when both the New York Stock Exchange and the Federal Reserve Wire System
are open for business. The procedure for purchasing shares of the Fund is
explained in the prospectus under "Investing in the Fund."
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 before shareholders
begin to earn dividends. Michigan National Bank acts as the shareholder's
agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
The market values of the Fund's portfolio securities are determined as
follows:
o for equity securities, according to the last sale price on a national
securities exchange, if applicable;
o in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked prices;
o for unlisted equity securities, latest bid prices;
o for bonds and other fixed income securities, as determined by an
independent pricing service;
o for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service, or for
short-term obligations with remaining maturities of 60 days or less at
the time of purchase, at amortized cost; or
o for all other securities, at fair value as determined in good faith by
the Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading
in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics, and other market data.
The Fund will value futures contracts and options at their market values
established by the exchanges at the close of options trading on such
exchanges unless the Trustees determine in good faith that another method
of valuing option positions is necessary.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after
Federated Shareholder Services Company receives the redemption request.
Redemption procedures are explained in the prospectus under "Redeeming Fund
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 expects to pay no federal income tax because it intends 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. The dividends received deduction for
corporations will apply to ordinary income distributions to the extent the
distribution represents amounts that would qualify for the dividends
received deduction to the Fund if the Fund were a regular corporation, and
to the extent designated by the Fund as so qualifying. These dividends, and
any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Long-term capital gains distributed to shareholders will be treated as
long-term capital gains regardless of how long shareholders have held
shares.
TOTAL RETURN
Cumulative total return reflects the Fund's total performance over a
specific period. The cumulative total return for the Fund for the period
from September 25, 1995 (date of initial public investment) through April
30, 1996 was 14.96%. This total return is representative of only 7 months
of activity since the date of initial public investment.
The average annual total return for the Fund is the average compounded rate
of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable
value is computed by multiplying the number of shares owned at the end of
the period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, less any
applicable sales charge, adjusted over the period by any additional shares,
assuming the reinvestment of all dividends and distributions.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on nonstandardized base periods. These total
returns also represent the historic change in the value of an investment in
the Fund based on quarterly reinvestment of dividends over a specified
period of time.
YIELD
The Fund's yield for the thirty-day period ended April 30, 1996 was 1.77%.
The yield for the Fund is determined each day by dividing the net
investment income per share (as defined by the SEC) earned by the Fund over
a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the SEC and, therefore, may not correlate to the dividends or
other distributions paid to shareholders. To the extent that financial
institutions and broker/dealers charge fees in connection with services
provided in conjunction with an investment in the Fund, the performance
will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and the maximum offering price per share fluctuate daily. Both net
earnings and offering price per share are factors in the computation of
yield and total return.
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:
o STANDARD & POOR'S COMPOSITE INDEX OF 500 STOCKS AND STANDARD & POOR'S
100 INDEX, a composite indices of common stocks in industry,
transportation, and financial and public utility companies can be used
to compare to the total returns of funds whose portfolios are invested
primarily in common stocks. In addition, the Standard & Poor's index
assumes reinvestments of all dividends paid by stocks listed on its
index. Taxes due on any of these distributions are not included, nor
are brokerage or other fees calculated in Standard & Poor's figures.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in the maximum offering price over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the "index
funds" category in advertising and sales literature.
o MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analysis
on how such developments could affect the Fund. In addition, advertising
and sales literature may quote statistics and give general information
about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute ("ICI"). For example,
according to the ICI, twenty-seven percent of American households are
pursuing their financial goals through mutual funds. These investors, as
well as businesses and institutions, have entrusted over $3 trillion to the
more than 5,500 funds available.
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR THE PERIOD FROM
SEPTEMBER 25, 1995 THROUGH APRIL 30, 1996
MANAGEMENT DISCUSSION & ANALYSIS
---------------------------------------------------------------------------
The shares of Independence One Equity Plus Fund represent interests in
the Fund, which is a diversified portfolio and one of a series of
investment portfolios in Independence One Mutual Funds, an open-end
management investment company. The investment objective of the Fund is
total return. The Fund pursues this objective by attempting to provide
investment results that correspond to or exceed the aggregate price and
dividend performance of the Standard & Poor's 100 Composite Stock Price
Index* (the "S&P 100") by investing primarily in the common stocks
comprising the S&P 100.+
The inception date for the Fund was September 25, 1995. The net asset
value of the Fund has risen from $10.00 at inception to $11.39 on April 30,
1996.** The Fund earned a total return of 14.96%** from September 25, 1995
through April 30, 1996. Total net assets in the Fund are approximately
$112.6 million.
ECONOMIC REVIEW
The U.S. economy over the twelve-month period ended April 30, 1996
could be characterized as one of moderate growth coupled with subdued
inflation. Real Gross Domestic Product grew at a rate of 1.3% in 1995, and
a rate of 2.3% for the first quarter of 1996. The growth was somewhat
uneven because of large fluctuations in the rate of inventory accumulation
and extreme weather conditions experienced in certain regions of the
country (a major heat wave last July and blizzards in January). The
national unemployment rate has been very stable, ranging between 5.4% and
5.8% for the past twenty months.
In terms of monetary policy, the Federal Reserve Board lowered its
federal funds target rate three times during the past twelve months. It
lowered the rate by 25 basis points in July and December 1995, as well as
in January 1996. This key short-term interest rate is currently 5.25%.
It is our opinion that the real Gross Domestic Product will rise at a
3.25% annual growth rate for the remainder of 1996, and the Consumer Price
Index will average 3.0%. While the capital spending and housing sectors
should show some weakness in reaction to the increase in interest rates
observed since the start of the year, the rebuilding of depleted inventory
stocks coupled with a continued strength in consumer sector of the economy
should continue to benefit the economy.
The Fund's investment adviser will continue to monitor economic and
market developments to best serve our shareholders.
*Standards & Poor's 100 Composite Stock Price Index is a composite index
of common stocks in industry, transportation, and financial and public
utility companies and can be used to compare the total returns of funds
whose portfolios are invested primarily in common stocks. This index is
unmanaged and investments cannot be made in an index.
+Standard & Poor's "S&P" and "S&P 100" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by Independence One Equity
Plus Fund. The Fund is not sponsored, endorsed, sold or promoted by or
affiliated with Standard & Poor's.
**Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN INDEPENDENCE ONE EQUITY PLUS FUND
The graph below illustrates the hypothetical investment of $10,000 in
Independence One Equity Plus Fund (the "Fund") from September 25, 1995 (start of
performance) to April 30, 1996 compared to the Standard & Poor's 100 Composite
Stock Price Index.+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX A
CUMULATIVE TOTAL RETURN FOR THE PERIOD ENDED APRIL 30, 1996
Start of Performance (9/25/95) 14.96%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS DATED JUNE
30, 1996, AND, TOGETHER WITH THE FINANCIAL STATEMENTS, CONSTITUTES THE FUND'S
ANNUAL REPORT.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The Standard & Poor's 100 Composite Stock Price Index has been
adjusted to reflect reinvestment of dividends on securities in the index.
+The Standard & Poor's 100 Composite Stock Price Index is not adjusted to
reflect sales charges, expenses, or other fees that the Securities and Exchange
Commission requires to be reflected in the Fund's performance. This index is
unmanaged.
[LOGO OF FEDERATED INVESTORS]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and a subsidiary of Federated Investors.
Cusip 453777872
G01184-13 (6/96)
INDEPENDENCE
ONE/R/
FIXED
INCOME
FUND
ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1996
[LOGO] MICHIGAN NATIONAL BANK
Investment Adviser
[LOGO] FEDERATED INVESTORS [LOGO] INDEPENDENCE ONE
Since 1955 Mutual Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is
the distributor of the fund
and is a subsidiary of
Federated Investors.
Cusip 453777864
G01200-08 (6/96)
[LOGO] RECYCLED PAPER
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Annual Report for Independence One Fixed Income Fund
for the period from October 23, 1995 (date of initial public investment) through
April 30, 1996. Inside, you will find a discussion with the fund's portfolio
manager, a complete list of fund holdings, and the financial statements.
This fund offers a diversified, flexible approach to bond investing. At the end
of the reporting period, 69.9% of fund assets were invested in U.S. Treasury
securities, 7.5% of assets were invested in government agency securities, and
20.5% were invested in corporate bonds, with the remainder invested in a
repurchase agreement.*
During the period ended April 30, 1996, the Fund's performance was impacted by
rising rates in the first quarter of 1996 which caused bond prices to fall. The
Fund produced a total return of 1.15%** and paid $0.30 per share in income
dividends. Total net assets in the Fund at the end of the reporting period stood
at $62.3 million.
Thank you for choosing Independence One Fixed Income Fund to participate in the
income opportunities available from government and corporate bonds. We welcome
your questions, comments, and suggestions.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
June 15, 1996
* Shares of the Fund are not insured or guaranteed by the U.S. government.
** Performance quoted reflects past performance. Investment return and principal
value will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
MANAGEMENT DISCUSSION & ANALYSIS
- --------------------------------------------------------------------------------
Q What is your review of the U.S. economy over the twelve-month period ended
April 30, 1996, and the impact on the bond market overall?
A The U.S. economy over the twelve-month period ended April 30, 1996 could be
characterized as one of moderate growth coupled with subdued inflation.
Real Gross Domestic Product grew at a rate of 1.3% in 1995, and at a rate
of 2.3% for the first quarter of 1996. The growth was somewhat uneven because of
large fluctuations in the rate of inventory accumulation and extreme weather
conditions experienced in certain regions of the country (a major heat wave last
July and blizzards in January). The national unemployment rate has been very
stable, ranging between 5.4% and 5.8% for the past twenty months. (During the
last twelve months it improved from 5.7% to 5.4%.) The inflation rate as
measured by the Consumer Price Index has continued to remain well behaved by
recent historical standards, and rose at a 2.9% year-over-year rate in April
1996.
In terms of monetary policy, the Federal Reserve Board lowered its federal funds
target rate three times during the past twelve months. It lowered the rate by 25
basis points in July and December 1995, as well as in January 1996. This key
short-term interest rate is currently 5.25%. The reaction of the fixed income
markets to these accommodating moves was mixed. The yield on the benchmark
thirty-year Treasury bond fell from 7.35% on May 1, l995, to close the year at
5.95%. Subsequent to the second Federal Reserve Board ease, the market entered
into a bearish trend and yields have risen to the 7.00% level at the time of
this writing.
Q In this environment, how did the Fund perform for shareholders during the
twelve-month reporting period ended April 30, 1996?
A The inception date for the Fund was October 23, 1995. The Fund earned a
total return of 1.15% from October 23, 1995, through April 30, 1996.* This
compares to a total return of 1.16% for the Lehman Brother Intermediate
Government/Corporate Bond Index** during the same period. The Fund maintains a
duration target and sector allocation very similar to the Lehman Brothers
Intermediate Government/Corporate Bond Index, and, therefore, the total returns
are expected to be highly correlated.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
** Lehman Brothers Intermediate Government/Corporate Bond Index is comprised of
approximately 5,000 issues which include non- convertible bonds publicly
issued by the U.S. government or its agencies, corporate bonds guaranteed by
the U.S. government and quasi-federal corporations; and publicly issued fixed
rate non-convertible domestic bonds of companies in industry, public
utilities and finance with maturities between one and 9.99 years. This index
is unmanaged and investments cannot be made in an index.
- --------------------------------------------------------------------------------
Q What is the range of the Fund's current average maturity, and where is the
average maturity now?
A As of April 30, 1996, the Fund had an average maturity of 4.03 years. The
Fund also had a modified adjusted duration of 3.27 years on April 30, 1996.
Since inception, the average maturity of the Fund has fluctuated between
3.87 years and 4.15 years.
Q By investing in a combination of investment-grade corporate bonds and U.S.
government bonds, the Fund offers a quality, highly diversified approach to
bonds. What is the Fund's weighting in corporate, mortgage-backed, and
Treasury bonds, and why?
A As of April 30, 1996, the fund invested 69.9% of its assets in U.S.
Treasury notes and bonds, 20.5% in corporate bonds, 7.5% in federal agency
securities, and 2.6% of its assets were invested in a repurchase agreement
collateralized by U.S. Treasury obligations. This compares to a very similar
asset mix of 68%, 22%, and 10%, respectively, currently found in the Lehman
Brothers Intermediate Government/Corporate Bond Index.** The Fund's investment
adviser believes this asset allocation to be prudent in the current fixed income
environment. The Fund does not engage in futures, options, interest rate swaps
or other types of derivative investments.
Q What is the overall outlook for the economy, interest rates, and government
bonds for the balance of 1996?
A It is our opinion that the real Gross Domestic Product will rise at a 3.25%
annual growth rate for the remainder of 1996, and the Consumer Price Index
will average 3.0%. While the capital spending and housing sectors should
show some weakness in reaction to the increase in interest rates observed since
the start of the year, the rebuilding of depleted inventory stocks coupled with
the continued strength in the consumer sector of the economy should continue to
benefit the economy. While yields in the bond market have risen to compensate
investors for assuming the perceived increase in inflation risk, we feel that
these fears are exaggerated. We feel that fixed income securities have value at
the present levels, and that the bond market will soon reverse its string of
monthly total return declines posted so far this calendar year.
** Lehman Brothers Intermediate Government/Corporate Bond Index is comprised of
approximately 5,000 issues which include non- convertible bonds publicly
issued by the U.S. government or its agencies, corporate bonds guaranteed by
the U.S. government and quasi-federal corporations; and publicly issued fixed
rate non-convertible domestic bonds of companies in industry, public
utilities and finance with maturities between one and 9.99 years. This index
is unmanaged and investments cannot be made in an index.
INDEPENDENCE ONE FIXED INCOME FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN INDEPENDENCE ONE FIXED INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Independence One Fixed Income Fund (the "Fund") from October 23, 1995 (start of
performance) to April 30, 1996 compared to the Lehman Brothers Intermediate
Government/Corporate Bond Index+.
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX A
CUMULATIVE TOTAL RETURN FOR THE PERIOD ENDED APRIL 30, 1996
Start of Performance .................................1.15%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Brothers Intermediate Government/Corporate Bond Index
has been adjusted to reflect reinvestment of dividends on securities in the
index.
+The Lehman Brothers Intermediate Government/Corporate Bond Index is not
adjusted to reflect sales charges, expenses, or other fees that the Securities
and Exchange Commission requires to be reflected in the Fund's performance.
This index is unmanaged.
INDEPENDENCE ONE FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
CORPORATE BONDS--20.5%
- ---------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.5%
-------------------------------------------------------------------------------------
$ 1,000,000 Raytheon Co., Sr. Note, 6.50%, 7/15/2005 $ 961,570
------------------------------------------------------------------------------------- -------------
AUTOMOTIVE--1.5%
-------------------------------------------------------------------------------------
1,000,000 Ford Motor Credit Corp., Unsecured Note, 5.625%, 1/15/1999 975,210
------------------------------------------------------------------------------------- -------------
BANKING--3.1%
-------------------------------------------------------------------------------------
1,000,000 Citicorp, Sr. Note, 5.625%, 2/15/2001 953,820
-------------------------------------------------------------------------------------
1,000,000 NationsBank Corp., Sr. Note, 5.125%, 9/15/1998 969,810
------------------------------------------------------------------------------------- -------------
Total 1,923,630
------------------------------------------------------------------------------------- -------------
FINANCE--COMMERCIAL--1.5%
-------------------------------------------------------------------------------------
1,000,000 General Electric Capital Corporation, Deb., 5.50%, 11/1/2001 937,510
------------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--1.6%
-------------------------------------------------------------------------------------
1,000,000 Merrill Lynch & Co., Inc., Note, 7.00%, 3/15/2006 977,710
------------------------------------------------------------------------------------- -------------
INDUSTRIAL SERVICES--1.6%
-------------------------------------------------------------------------------------
1,000,000 WMX Technologies, Inc., Unsecured Note, 7.00%, 5/15/2005 992,830
------------------------------------------------------------------------------------- -------------
PHARMACEUTICALS--1.8%
-------------------------------------------------------------------------------------
1,000,000 Lilly (Eli) & Co., Unsecured Note, 8.375%, 12/1/2006 1,093,550
------------------------------------------------------------------------------------- -------------
RETAIL--3.2%
-------------------------------------------------------------------------------------
1,000,000 Penney (J.C.) Co., Inc., Medium Term Note, Series A, 6.375%, 9/15/2000 986,540
-------------------------------------------------------------------------------------
1,000,000 Wal-Mart Stores, Inc., Unsecured Note, 6.125%, 10/1/1999 988,010
------------------------------------------------------------------------------------- -------------
Total 1,974,550
------------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--4.7%
-------------------------------------------------------------------------------------
1,000,000 BellSouth Telecommunications, Inc., Note, 6.50%, 6/15/2005 965,650
-------------------------------------------------------------------------------------
1,000,000 MCI Communications Corp., Sr. Note, 7.50%, 8/20/2004 1,022,230
-------------------------------------------------------------------------------------
1,000,000 U.S. West Communications, Inc., Note, 6.625%, 9/15/2005 966,670
------------------------------------------------------------------------------------- -------------
Total 2,954,550
------------------------------------------------------------------------------------- -------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $13,190,450) 12,791,110
------------------------------------------------------------------------------------- -------------
</TABLE>
INDEPENDENCE ONE FIXED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
GOVERNMENT AGENCIES--7.5%
- ---------------------------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK--1.9%
-------------------------------------------------------------------------------------
$ 500,000 4.61%, 12/10/1996 $ 497,805
-------------------------------------------------------------------------------------
300,000 5.96%, 7/14/2003 285,291
-------------------------------------------------------------------------------------
410,000 6.05%, 4/21/2003 393,558
------------------------------------------------------------------------------------- -------------
Total 1,176,654
------------------------------------------------------------------------------------- -------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--4.8%
-------------------------------------------------------------------------------------
1,000,000 5.37%, Medium Term Note, 2/7/2001 953,150
-------------------------------------------------------------------------------------
2,000,000 8.15%, 8/12/1996 2,016,100
------------------------------------------------------------------------------------- -------------
Total 2,969,250
------------------------------------------------------------------------------------- -------------
TENNESSEE VALLEY AUTHORITY--0.8%
-------------------------------------------------------------------------------------
500,000 8.25%, 11/15/1996 507,530
------------------------------------------------------------------------------------- -------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $4,755,952) 4,653,434
------------------------------------------------------------------------------------- -------------
U.S. TREASURY OBLIGATIONS--69.9%
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY BOND--4.0%
-------------------------------------------------------------------------------------
2,000,000 10.75%, 5/15/2003 2,462,200
------------------------------------------------------------------------------------- -------------
U.S. TREASURY NOTES--65.9%
-------------------------------------------------------------------------------------
5,500,000 5.125%, 12/31/1998 5,363,105
-------------------------------------------------------------------------------------
5,000,000 6.00%, 12/31/1997 5,004,000
-------------------------------------------------------------------------------------
5,450,000 6.00%, 8/31/1997 5,458,938
-------------------------------------------------------------------------------------
7,500,000 6.125%, 7/31/2000 7,432,050
-------------------------------------------------------------------------------------
5,750,000 6.375%, 8/15/2002 5,708,658
-------------------------------------------------------------------------------------
6,800,000 6.75%, 6/30/1999 6,897,648
-------------------------------------------------------------------------------------
5,000,000 7.50%, 10/31/1999 5,185,050
------------------------------------------------------------------------------------- -------------
Total 41,049,449
------------------------------------------------------------------------------------- -------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $44,365,508) 43,511,649
------------------------------------------------------------------------------------- -------------
INDEPENDENCE ONE FIXED INCOME FUND
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
(a) REPURCHASE AGREEMENT--2.6%
- ---------------------------------------------------------------------------------------------------
$ 1,621,000 First Chicago Capital Markets, Inc., 5.30%, dated 4/30/96,
due 5/1/96 (AT AMORTIZED COST) $ 1,621,000
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $63,932,910)(b) $ 62,577,193
------------------------------------------------------------------------------------- -------------
(a) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $63,932,910. The
net unrealized depreciation of investments on a federal tax basis amounts to
$1,355,717 which is comprised of $3,977 appreciation and $1,359,694
depreciation at April 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($62,256,494) at April 30, 1996.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $63,932,910) $ 62,577,193
- ---------------------------------------------------------------------------------------------------
Cash 928
- ---------------------------------------------------------------------------------------------------
Income receivable 1,001,868
- ---------------------------------------------------------------------------------------------------
Deferred expenses 13,387
- --------------------------------------------------------------------------------------------------- -------------
Total assets 63,593,376
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $ 981,610
- ---------------------------------------------------------------------------------------
Payable for shares redeemed 3,215
- ---------------------------------------------------------------------------------------
Income distribution payable 294,713
- ---------------------------------------------------------------------------------------
Accrued expenses 57,344
- --------------------------------------------------------------------------------------- ----------
Total liabilities 1,336,882
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 6,342,457 shares outstanding $ 62,256,494
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $ 63,601,039
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (1,355,717)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 11,172
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 62,256,494
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
$62,256,494 / 6,342,457 shares outstanding $9.82
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 23, 1995 (DATE OF INITIAL PUBLIC INVESTMENT)
TO APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest $ 1,774,597
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------------
Investment advisory fee $ 212,343
- --------------------------------------------------------------------------------------
Administrative personnel and services fee 31,636
- --------------------------------------------------------------------------------------
Custodian fees 22,084
- --------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 6,795
- --------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,982
- --------------------------------------------------------------------------------------
Legal fees 2,831
- --------------------------------------------------------------------------------------
Portfolio accounting fees 30,861
- --------------------------------------------------------------------------------------
Printing and postage 4,813
- --------------------------------------------------------------------------------------
Insurance premiums 5,379
- --------------------------------------------------------------------------------------
Miscellaneous 7,078
- -------------------------------------------------------------------------------------- -----------
Total expenses 325,802
- --------------------------------------------------------------------------------------
Waivers--
- -------------------------------------------------------------------------
Waiver of investment advisory fee ($ 141,562)
- -------------------------------------------------------------------------
Waiver of administrative personnel and services fee (30,644)
- ------------------------------------------------------------------------- -----------
Total waivers (172,206)
- -------------------------------------------------------------------------------------- -----------
Net expenses 153,596
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 1,621,001
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments 11,172
- ---------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments (1,355,717)
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized loss on investments (1,344,545)
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 276,456
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30, 1996*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------------------
Net investment income $ 1,621,001
- ----------------------------------------------------------------------------------------------
Net realized gain on investments ($11,172 net gain,
as computed for federal tax purposes) 11,172
- ----------------------------------------------------------------------------------------------
Net change in unrealized depreciation (1,355,717)
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from operations 276,456
- ---------------------------------------------------------------------------------------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------------------------
Distributions from net investment income (1,621,001)
- ---------------------------------------------------------------------------------------------- ------------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------------------------------
Proceeds from sale of shares 64,728,100
- ----------------------------------------------------------------------------------------------
Cost of shares redeemed (1,127,061)
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from share transactions 63,601,039
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets 62,256,494
- ----------------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------------
Beginning of period 0
- ---------------------------------------------------------------------------------------------- ------------------
End of period $ 62,256,494
- ---------------------------------------------------------------------------------------------- ------------------
</TABLE>
*For the period from October 23, 1995 (date of initial public investment) to
April 30, 1996.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 30, 1996(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------
Net investment income 0.30
- -------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.18)
- ------------------------------------------------------------------------------------------- -------
Total from investment operations 0.12
- ------------------------------------------------------------------------------------------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
Distributions from net investment income (0.30)
- ------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.82
- ------------------------------------------------------------------------------------------- -------
TOTAL RETURN (b) 1.15%
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------
Expenses 0.54%*
- -------------------------------------------------------------------------------------------
Net investment income 5.73%*
- -------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.61%*
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $62,256
- -------------------------------------------------------------------------------------------
Portfolio turnover 4%
- -------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 23, 1995 (date of initial
public investment) to April 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) 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 FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
(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 seven portfolios. The financial
statements included herein are only those of Independence One Fixed Income Fund
(the "Fund"), a diversified portfolio. The investment objective of the Fund is
to seek total return. 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 Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--U.S. government securities, listed corporate bonds
(other fixed income and asset-backed securities), and unlisted securities
and private placement securities are generally valued at the mean of the
latest bid and asked price as furnished by an independent pricing service.
Short-term securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining maturities
of sixty days or less at the time of purchase may be valued at amortized
cost, which approximates fair market value.
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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
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 the guidelines and/or
standards reviewed or 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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal
INDEPENDENCE ONE FIXED INCOME FUND
- --------------------------------------------------------------------------------
Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
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
provisions for federal tax are necessary.
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.
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 are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
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).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30, 1996*
<S> <C>
Shares sold 6,455,118
- ----------------------------------------------------------------------------------------------
Shares redeemed (112,661)
- ---------------------------------------------------------------------------------------------- ------------------
Net change resulting from share transactions 6,342,457
- ---------------------------------------------------------------------------------------------- ------------------
</TABLE>
*For the period from October 23, 1995 (date of initial public investment) to
April 30, 1996.
INDEPENDENCE ONE FIXED INCOME FUND
- --------------------------------------------------------------------------------
(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 0.75% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS 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 AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company
("FSSC"), serves as transfer and dividend disbursing agent for the Fund. The fee
paid to FSSC is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Trust's accounting records for
which it receives a fee. The fee is based on the level of the Trust's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Michigan National Bank is the Fund's custodian. The fee is based
on the level of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $21,477 were borne initially
by FAS.
The Fund has agreed to reimburse FAS for the organizational expenses during the
five year period following the effective date. For the period ended April 30,
1996, the Fund paid $1,575 pursuant to this agreement.
GENERAL--Certain of the Officers of the Trust are Officers and/or Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period from
October 23, 1995 (date of initial public investment) to April 30, 1996, were as
follows:
<TABLE>
<S> <C>
PURCHASES $ 64,320,660
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 2,019,922
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
REPORT OF KPMG PEAT MARWICK LLP,
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To 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 Fixed Income Fund (a portfolio
within Independence One Mutual Funds) as of April 30, 1996, and the related
statement of operations, statement of changes in net assets, and the financial
highlights for the period from October 23, 1995 (commencement of operations) to
April 30, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit 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 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. Our
procedures included confirmation of securities owned at April 30, 1996 by
correspondence with the custodian. 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Independence One Fixed Income Fund at April 30, 1996, and the results of its
operations, the changes in its net assets, and the financial highlights for the
period listed above, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
June 14, 1996
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Robert E. Baker Edward C. Gonzales
Harold Berry President and Treasurer
Clarence G. Frame Jeffrey W. Sterling
Harry J. Nederlander Vice President and Assistant Treasurer
Thomas S. Wilson Jay S. Neuman
Secretary
Gail Cagney
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
INDEPENDENCE
ONE/R/
U.S. GOVERNMENT
SECURITIES
FUND
ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1996
[LOGO] MICHIGAN NATIONAL BANK
Investment Adviser
[LOGO] FEDERATED INVESTORS [LOGO] INDEPENDENCE ONE
Since 1955 Mutual Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is
the distributor of the fund
and is a subsidiary of
Federated Investors.
Cusip 453777807
G01200-10 (6/96)
[LOGO] RECYCLED PAPER
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Annual Report for Independence One U.S. Government
Securities Fund for the 12-month period from May 1, 1995 through April 30, 1996.
Inside, you will find a discussion with the Fund's portfolio manager, a complete
list of Fund holdings, and the financial statements.
The Fund is a high-quality approach to investment income through its portfolio
of U.S. government securities. At the end of the reporting period, 82.8% of Fund
assets were invested in U.S. Treasury obligations, while the remaining assets
were invested in government agency securities and in a repurchase agreement
fully backed by U.S. government securities.*
During the 12-month period ended April 30, 1996, the Fund's quality portfolio
produced a total return of 7.97%** which resulted from $0.59 per share in income
dividends and a $0.19 increase in net asset value. Total net assets in the Fund
at the end of the period stood at $72.3 million.
Thank you for choosing Independence One U.S. Government Securities Fund to
participate in the income opportunities available from U.S. government
securities. We welcome your questions, comments, or suggestions.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
June 15, 1996
* Shares of the Fund are not insured or guaranteed by the U.S. government.
** Performance quoted reflects past performance. Investment return and principal
value will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
MANAGEMENT DISCUSSION & ANALYSIS
- --------------------------------------------------------------------------------
Q What is your review of the U.S. economy over the twelve-month period ended
April 30, 1996, and the impact on the bond market overall?
A The U.S. economy over the twelve-month period ended April 30, 1996 could be
characterized as one of moderate growth coupled with subdued inflation.
Real Gross Domestic Product grew at a rate of 1.3% in 1995, and at a rate
of 2.3% for the first quarter of 1996. The growth was somewhat uneven because of
large fluctuations in the rate of inventory accumulation and extreme weather
conditions experienced in certain regions of the country (a major heat wave last
July and blizzards in January). The national unemployment rate has been very
stable, ranging between 5.4% and 5.8% for the past twenty months. (During the
last twelve months it improved from 5.7% to 5.4%.) The inflation rate as
measured by the Consumer Price Index has continued to remain well behaved by
recent historical standards, and rose at a 2.9% year-over-year rate in April
1996.
In terms of monetary policy, the Federal Reserve Board lowered its federal funds
target rate three times during the past twelve months. It lowered the rate by 25
basis points in July and December 1995, as well as in January 1996. This key
short-term interest rate is currently 5.25%. The reaction of the fixed income
markets to these accommodating moves was mixed. The yield on the benchmark
thirty-year Treasury bond fell from 7.35% on May 1, 1995, to close the year at
5.95%. Subsequent to the second Federal Reserve Board ease, the market entered
into a bearish trend and yields have risen to the 7.00% level at the time of
this writing.
Q In this environment, how did the Fund perform for shareholders during the
twelve-month reporting period ended April 30, 1996?
A The Fund earned a total return of 7.97% for the twelve-month period ended
April 30, 1996.* This compares to 8.65% for the Lehman Brothers
Government/Corporate Bond Index**, the 5.90% total return the Fund earned
during the fiscal year which ended April 30, 1995, and the 5.88% annualized
total return the Fund earned for the period from January 11, 1993 (date of
initial public investment) to April 30, 1996. The Fund currently maintains a
duration target and sector allocation very similar to the Lehman Brothers
Government/Corporate Bond Index, and, therefore, their total returns are
expected to be highly correlated. Both this Index and the Fund registered
positive returns for 11 of the 12 months of 1995. The one negative total return
was in July, which happened to
* Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
** Lehman Brothers Government/Corporate Bond Index is composed of approximately
5,000 issues which include non-convertible bonds publicly issued by the U.S.
government or its agencies; corporate bonds guaranteed by the U.S. government
and quasi-federal corporations; and publicly issued, fixed rate,
non-convertible domestic bonds of companies in industry, public utilities,
and finance. This index is unmanaged and investments cannot be made in an
index.
- --------------------------------------------------------------------------------
coincide with the first interest rate cut by the Federal Reserve Board. After
posting a positive return for January 1996, the Lehman Brothers
Government/Corporate Bond Index** and the Fund have suffered three consecutive
months of losses. It is our belief that the fixed income markets are afraid that
the Federal Reserve Board has underestimated the underlying strength of the
economy and that its monetary policies are setting the stage for a resurgence of
inflation.
Q What is the Fund's position on the yield curve, and what does that mean to
shareholders?
A The Fund has its holdings distributed throughout the yield curve.
Approximately 55% of the Fund's securities holdings mature within five
years. Another 26% mature between five and ten years, and the remaining 19%
have final maturities exceeding ten years. This diversification along the yield
curve reduces the impact of changes in the slope of the yield curve. Currently,
the Fund does not own any callable notes or bonds.
Q What is the Fund's current weighting in U.S. Treasury, agency, and
mortgage-backed securities, and why?
A The Fund does not own any mortgage-backed products, and has no intention to
purchase any such investments in the immediate future. As of April 30,
1996, the Fund held 14% of its assets in federal agency securities, which
compares to a weighting of 12% in the Lehman Brothers Government/Corporate Bond
Index.** The Fund invested the bulk of its assets (84%) in U.S. Treasury notes
and bonds, and the remaining 2% of its assets were invested in a repurchase
agreement collateralized by U.S. Treasury obligations. The Fund's investment
adviser believes this asset allocation to be prudent in the current fixed income
environment. The Fund does not engage in futures, options, interest rate swaps
or other types or derivative investments.
** Lehman Brothers Government/Corporate Bond Index is composed of approximately
5,000 issues which include: non-convertible bonds publicly issued by the U.S.
government or its agencies; corporate bonds guaranteed by the U.S. government
and quasi-federal corporations; and publicly issued, fixed rate,
non-convertible domestic bonds of companies in industry, public utilities,
and finance. This index is unmanaged and investments cannot be made in an
index.
- --------------------------------------------------------------------------------
Q What is your overall outlook for the economy, interest rates, and
government bonds for the balance of 1996?
A It is our opinion that the real Gross Domestic Product will rise at a 3.25%
annual growth rate for the remainder of 1996, and the Consumer Price Index
will average 3.0%. While the capital spending and housing sectors should
show some weakness in reaction to the increase in interest rates observed since
the start of the year, the rebuilding of depleted inventory stocks coupled with
a continued strength in the consumer sector of the economy should continue to
benefit the economy. While yields in the bond market have risen to compensate
investors for assuming the perceived increase in inflation risk, we feel that
these fears are exaggerated. We feel that fixed income securities have value at
the present levels, and that the bond market will soon reverse its string of
monthly total return declines posted so far this calendar year.
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
The graph below illustrates the hypothetical investment of $10,000 in
Independence One U.S. Government Securities Fund (the "Fund") from January 11,
1993 (start of performance) to April 30, 1996 compared to the Merrill Lynch
10-Year Treasury Index and the Lehman Brothers Government/ Corporate Bond
Index+.
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX A
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED APRIL 30, 1996
1 Year..............................................7.97%
Start of Performance (1/11/93)......................5.88%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The Merrill Lynch 10-Year Treasury Index and the Lehman Brothers
Government/Corporate Bond Index have been adjusted to reflect reinvestment of
dividends on securities in the indices.
+The Merrill Lynch 10-Year Treasury Index and the Lehman Brothers
Government/Corporate Bond Index are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission requires to
be reflected in the Fund's performance. These indices are unmanaged. The
Investment Adviser has elected to change the benchmark of the Fund from the
Merrill Lynch 10-Year Treasury Index to the Lehman Brothers
Government/Corporate Bond Index. The Lehman Index is a much broader index which
is more representative of the securities typically held by the Fund. It
includes all public obligations of the U.S. Treasury and government agencies
with at least one year to maturity (excluding flower bonds and foreign-targeted
issues). In contrast, the Merrill Index excludes maturities exceeding ten years
as well as all agency issues. Since the Fund regularly has holdings of
longer-maturity bonds as well as government agency securities, the Investment
Adviser believes that the Lehman index is more appropriate.
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
GOVERNMENT AGENCIES--14.3%
- --------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--4.1%
-----------------------------------------------------------------------------------
$ 3,000,000 6.55%, 10/02/2002 $ 2,971,050
----------------------------------------------------------------------------------- -------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--10.2%
-----------------------------------------------------------------------------------
4,000,000 7.65%, 3/10/2005 4,186,280
-----------------------------------------------------------------------------------
3,000,000 8.25%, 12/18/2000 3,199,380
----------------------------------------------------------------------------------- -------------
Total 7,385,660
----------------------------------------------------------------------------------- -------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $10,579,795) 10,356,710
----------------------------------------------------------------------------------- -------------
U.S. TREASURY OBLIGATIONS--82.8%
- --------------------------------------------------------------------------------------------------
U. S. TREASURY BONDS--28.7%
-----------------------------------------------------------------------------------
5,500,000 7.125%, 2/15/2023 5,534,650
-----------------------------------------------------------------------------------
3,000,000 7.25%, 5/15/2016 3,059,610
-----------------------------------------------------------------------------------
4,340,000 8.00%, 11/15/2021 4,803,729
-----------------------------------------------------------------------------------
6,000,000 10.75%, 5/15/2003 7,386,600
----------------------------------------------------------------------------------- -------------
Total 20,784,589
----------------------------------------------------------------------------------- -------------
U. S. TREASURY NOTES--54.1%
-----------------------------------------------------------------------------------
12,000,000 6.375%, 7/15/1999 12,042,000
-----------------------------------------------------------------------------------
5,000,000 6.375%, 8/15/2002 4,964,050
-----------------------------------------------------------------------------------
11,650,000 7.00%, 4/15/1999 11,896,165
-----------------------------------------------------------------------------------
10,000,000 7.25%, 2/15/1998 10,204,200
----------------------------------------------------------------------------------- -------------
Total 39,106,415
----------------------------------------------------------------------------------- -------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $60,466,113) 59,891,004
----------------------------------------------------------------------------------- -------------
</TABLE>
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
(a) REPURCHASE AGREEMENT--1.9%
- --------------------------------------------------------------------------------------------------
$ 1,393,000 First Chicago Capital Markets, Inc., 5.30%, dated 4/30/96, due 5/1/96 (at amortized
cost) $ 1,393,000
----------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $72,438,908)(b) $ 71,640,714
----------------------------------------------------------------------------------- -------------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $72,438,908. The
net unrealized depreciation of investments on a federal tax basis amounts to
$798,194 which is comprised of $214,256 appreciation and $1,012,450
depreciation at April 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($72,291,336) at April 30, 1996.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $72,438,908) $ 71,640,714
- ---------------------------------------------------------------------------------------------------
Cash 976
- ---------------------------------------------------------------------------------------------------
Income receivable 1,268,900
- ---------------------------------------------------------------------------------------------------
Deferred expenses 12,580
- --------------------------------------------------------------------------------------------------- -------------
Total assets 72,923,170
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for shares redeemed $ 226,485
- ---------------------------------------------------------------------------------------
Income distribution payable 391,671
- ---------------------------------------------------------------------------------------
Accrued expenses 13,678
- --------------------------------------------------------------------------------------- ----------
Total liabilities 631,834
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 7,245,275 shares outstanding $ 72,291,336
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 73,025,816
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (798,194)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 63,714
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 72,291,336
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$72,291,336 / 7,245,275 shares outstanding $9.98
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest $ 4,298,938
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee $ 481,848
- ---------------------------------------------------------------------------------------
Administrative personnel and services fee 81,663
- ---------------------------------------------------------------------------------------
Custodian fees 20,238
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 27,672
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 4,406
- ---------------------------------------------------------------------------------------
Auditing fees 11,840
- ---------------------------------------------------------------------------------------
Legal fees 5,300
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 48,323
- ---------------------------------------------------------------------------------------
Share registration costs 20,650
- ---------------------------------------------------------------------------------------
Printing and postage 8,398
- ---------------------------------------------------------------------------------------
Insurance premiums 5,368
- ---------------------------------------------------------------------------------------
Miscellaneous 9,224
- --------------------------------------------------------------------------------------- -----------
Total expenses 724,930
- ---------------------------------------------------------------------------------------
Waivers--
- --------------------------------------------------------------------------
Waiver of investment advisory fee ($394,602)
- --------------------------------------------------------------------------
Waiver of administrative personnel and services fee (57,395)
- -------------------------------------------------------------------------- -----------
Total waivers (451,997)
- --------------------------------------------------------------------------------------- -----------
Net expenses 272,933
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income 4,026,005
- ---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments 1,859,938
- ----------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments (999,752)
- ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments 860,186
- ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 4,886,191
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, 1996 APRIL 30, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------
Net investment income $ 4,026,005 $ 4,075,165
- -----------------------------------------------------------------------------
Net realized gain (loss) on investments ($354,700 net gain and $279,170 net
loss, respectively, as computed for federal tax purposes) 1,859,938 (1,670,661)
- -----------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (999,752) 1,212,851
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from operations 4,886,191 3,617,355
- ----------------------------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------------
Distributions from net investment income (4,026,005) (4,075,165)
- ----------------------------------------------------------------------------- ---------------- ----------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------------------
Proceeds from sale of shares 22,565,389 5,176,596
- -----------------------------------------------------------------------------
Cost of shares redeemed (13,648,382) (15,070,811)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from share transactions 8,917,007 (9,894,215)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets 9,777,193 (10,352,025)
- -----------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------
Beginning of period 62,514,143 72,866,168
- ----------------------------------------------------------------------------- ---------------- ----------------
End of period $ 72,291,336 $ 62,514,143
- ----------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C> <C> <C>
1996 1995 1994 1993(a)
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.79 $ 9.84 $ 10.31 $ 10.00
- ------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------
Net investment income 0.59 0.60 0.55 0.33
- ------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.19 (0.05) (0.47) 0.31
- ------------------------------------------------------------------ --------- --------- --------- -----------
Total from investment operations 0.78 0.55 0.08 0.64
- ------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------
Distributions from net investment income (0.59) (0.60) (0.55) (0.33)
- ------------------------------------------------------------------ --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.98 $ 9.79 $ 9.84 $ 10.31
- ------------------------------------------------------------------ --------- --------- --------- -----------
TOTAL RETURN (b) 7.97% 5.90% 0.66% 4.61 %
- ------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------
Expenses 0.40% 0.35% 0.31% 0.17 %*
- ------------------------------------------------------------------
Net investment income 5.85% 6.23% 5.32% 5.59 %*
- ------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.66% 0.70% 0.70% 0.83 %*
- ------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------
Net assets, end of period (000 omitted) $72,291 $62,514 $72,866 $87,704
- ------------------------------------------------------------------
Portfolio turnover 104% 75% 20% 0 %
- ------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from January 11, 1993 (date of initial
public investment) to April 30, 1993.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) 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 U.S. GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
(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 seven portfolios. The financial
statements included herein are only those of Independence One U.S. Government
Securities Fund (the "Fund"), a diversified portfolio. The investment objective
of the Fund is to seek high current income. 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 Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--U.S. government securities, listed corporate bonds,
(other fixed income and asset-backed securities), and unlisted securities
and private placement securities are generally valued at the mean of the
latest bid and asked price as furnished by an independent pricing service.
Short-term securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining maturities
of sixty days or less at the time of purchase may be valued at amortized
cost, which approximates fair market value.
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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
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 the guidelines and/or
standards reviewed or 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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
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
provisions for federal tax are necessary.
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.
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 are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
RECLASSIFICATION--During the year ended April 30, 1996, the Fund adopted
Statement of Position 93-2 Determination, Disclosure, and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. Accordingly, permanent book and tax
differences have been reclassified to paid-in capital. The Fund
reclassified $4,176 from accumulated net realized gain/loss to paid-in
capital in accordance with SOP 93-2. Net investment, net realized gains,
and net assets were not affected by this charge.
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).
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1996 1995
Shares sold 2,192,059 534,859
- ---------------------------------------------------------------------------------------
Shares redeemed (1,329,593) (1,558,503)
- --------------------------------------------------------------------------------------- ----------- -----------
Net change resulting from share transactions 862,466 (1,023,644)
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</TABLE>
(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 0.70% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
Under the terms of a sub-advisory agreement between the Adviser and Independence
One Capital Management Corporation (the "Sub-Adviser"), the Sub-Adviser will
assist the Adviser in the purchase or sale of the Fund's portfolio instruments.
The Sub-Adviser will perform its duties at no cost to the Adviser or the Fund.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS 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 AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company
("FSSC"), serves as transfer and dividend disbursing agent for the Fund. The fee
paid to FSSC is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Trust's accounting records for
which it receives a fee. The fee is based on the level of the Trust's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Michigan National Bank is the Fund's custodian. The fee is based
on the level of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $49,664 were borne initially
by FAS.
The Fund has agreed to reimburse FAS for the organizational expenses during the
five year period following effective date. For the period ended April 30, 1996,
the Fund paid $6,567 pursuant to this agreement.
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
GENERAL--Certain of the Officers of the Trust are Officers and/or Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
year ended
April 30, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 76,913,772
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 68,264,660
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
REPORT OF KPMG PEAT MARWICK LLP,
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To 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 U.S. Government Securities Fund
(a portfolio within Independence One Mutual Funds) as of April 30, 1996, and the
related statement of operations for the year then ended, statement of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for the years or period from January 11, 1993 (commencement of
operations) to April 30, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit 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 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. Our
procedures included confirmation of securities owned at April 30, 1996 by
correspondence with the custodian. 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Independence One U.S. Government Securities Fund at April 30, 1996, the result
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods listed above in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
June 14, 1996
TRUSTEES OFFICERS
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<TABLE>
<S> <C>
Robert E. Baker Edward C. Gonzales
Harold Berry President and Treasurer
Clarence G. Frame Jeffrey W. Sterling
Harry J. Nederlander Vice President and Assistant Treasurer
Thomas S. Wilson Jay S. Neuman
Secretary
Gail Cagney
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or
any other government agency. Investment in mutual funds involves
investment risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
APPENDIX FOR INDEPENDENCE ONE EQUITY PLUS FUND
A. The graphic presentation here displayed consists of a line graph
titled "Growth of $10,000 Invested in Independence One Equity Plus Fund
(the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a broken line. The Standard &
Poor's 100 Index is represented by a solid line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$10,000 purchase in the Fund and the Standard & Poor's 100 Index. The "y"
axis reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of performance, 9/25/95 through
4/30/96. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the Standard & Poor's 100 Index; the
ending values are $11,496 and $11,475, respectively.
APPENDIX FOR INDEPENDENCE ONE FIXED INCOME FUND
A. The graphic presentation here displayed consists of a line graph
titled "Growth of $10,000 Invested in Independence One Fixed Income Fund
(the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a broken line. The Lehman Brothers
Intermediate Government/Corporate Bond Index is represented by a solid
line. The line graph is a visual representation of a comparison of change
in value of a hypothetical $10,000 purchase in the Fund and the Lehman
Brothers Intermediate Government/Corporate Bond Index. The "y" axis
reflects the cost of the investment. The "x" axis reflects computation
periods from the Fund's start of performance, 10/23/95 through 4/30/96.
The right margin reflects the ending value of the hypothetical investment
in the Fund as compared to the Lehman Brothers Intermediate
Government/Corporate Bond Index; the ending values are $10,115 and $10,116,
respectively.
APPENDIX FOR INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
A. The graphic presentation here displayed consists of a line graph
titled "Growth of $10,000 Invested in Independence One U.S. Government
Securities Fund (the "Fund"). The corresponding components of the line
graph are listed underneath. The Fund is represented by a broken line. The
Lehman Brothers Government/Corporate Bond Index is represented by a dotted
line. The Merrill Lynch 10-Year Treasury Index is represented by a solid
line. The line graph is a visual representation of a comparison of change
in value of a hypothetical $10,000 purchase in the Fund, the Lehman
Brothers Government/Corporate Bond Index and the Merrill Lynch 10-Year
Treasury Index. The "y" axis reflects the cost of the investment. The "x"
axis reflects computation periods from the Fund's start of performance,
1/11/93 through 4/30/96. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to the Lehman Brothers
Government/Corporate Bond Index and the Merrill Lynch 10-Year Treasury
Index; the ending values are $12,040, $11,958 and $12,393, respectively.
