1933 Act File No. 33-26516
1940 Act File No. 811-5752
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ....................
Post-Effective Amendment No. 22 ..................... X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 21 .................................... X
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INDEPENDENCE ONE MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
__ on ______________pursuant to paragraph (b)(1)(v)
60 days after filing pursuant to paragraph (a) (i) __ on
___________________pursuant to paragraph (a) (i) _X 75 days after filing
pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copies To:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of INDEPENDENCE ONE MUTUAL
FUNDS which consists of nine portfolios: (1) Independence One Michigan Municipal
Cash Fund; (2a) Independence One Prime Money Market Fund - Class A Shares; (2b)
Independence One Prime Money Market Fund - Class B Shares; (3) Independence One
U.S. Treasury Money Market Fund; (4) Independence One U.S. Government Securities
Fund, (5) Independence One Equity Plus Fund; (6) Independence One Fixed Income
Fund; (7) Independence One Michigan Municipal Bond Fund; (8) Independence One
Small Cap Fund; and (9) Independence One International Equity Fund, relates only
to portfolio numbers (8) and (9), and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
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Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page....................(1-9) Cover Page.
Item 2. Synopsis......................(1-4,6,7) Synopsis; (1-9) Summary of
Fund Expenses.
Item 3. Condensed Financial
Information (1-7) Financial Highlights;
(1-9) Performance Information.
Item 4. General Description of
Registrant...................(1-4,6,7-9) Investment Information;
(1-4,6,7) Investment Objective of Each
Fund; (1-4,6,7) Portfolio Investments
and Strategies; (5,8,9) General
Information; (5,8,9) Investment
Information; (5,8,9) Investment
Objective; (5,8,9) Investment
Policies; (5,8,9) Acceptable
Investments; (1-9) Investment
Limitations; (5,8) Equity Investment
Considerations (5,8,9) Derivative
Contracts and Securities; (5,8)
Standard & Poor's.
Item 5. Management of the Fund........(1-9)
Independence One Mutual Funds
Information; (1-9) Management of the
Trust; (1-9) Distribution of Fund
Shares; (1-9) Fund Administration
(5,8,9) Brokerage Transactions.
Item 6. Capital Stock and Other
Securities...................(1-9) Dividends; (1-9) Capital Gains;
(1-9) Shareholder Information; (1-9)
Voting Rights; (1-9)
Effect of Banking Laws; (1-9) Tax
Information; (1-9) Federal Income Tax;
(1,7) Michigan Tax
Considerations.
Item 7. Purchase of Securities Being
Offered......................(1-9) Net Asset Value; (1-4,6,7)
Investing in the Funds; (5,8,9)
Investing in the Fund; (1-9) Share
Purchases; (1-9) Minimum Investment
Required; (1-3) Cash Sweep Program;
(1-9) What Shares Cost; (1-9)
Certificates and Confirmations; (1-9)
Systematic Investment Program.
Item 8 Redemption or Repurchase......(1-4,6,7) Redeeming Shares; (5,8,9)
Redeeming Fund Shares; (1-9)
Systematic Withdrawal Program;
(1-9) Accounts with Low Balances;
(1-3) Redemption in Kind (1-9)
Exchange Privilege; (5-9)
Exchanging Securities for Fund Shares.
Item 9. Pending Legal Proceedings.....None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page....................(1-9) Cover Page.
Item 11. Table of Contents (1-9) Table of Contents.
Item 12. General Information and
History......................(1-4,6,7) General Information About
the Funds; (5,8,9) General Information
About the Fund.
Item 13. Investment Objectives and
Policies.....................(1-4,6,7) Investment Objective and
Policies of the Funds; (4,6,7)
Acceptable Investments; (5,8,9) Types
of Investments; (5,8,9) Investment
Objective and Policies; (4-9)
Portfolio Turnover; (1-9) Investment
Limitations; (1-3) Regulatory
Compliance; (1,7) Michigan Investment
Risks.
Item 14. Management of the Fund........(1-9) Independence One Mutual Funds
Management; (1-9) Officers and
Trustees; (1-9) Fund Ownership;
(1-9) Trustee Liability; (1-9)
Trustees Compensation; (1-9)
Massachusetts
Partnership Law.
Item 15. Control Persons and Principal
Holders of Securities Not applicable.
Item 16. Investment Advisory and Other
Services.....................(1-9) Investment Advisory Services;
(1-3,5,8,9) Adviser to the Fund; (9)
Sub-Adviser to the Fund; (4,6-7)
Adviser and Sub-Adviser to the Funds;
(1-3,5) Advisory Fees; (4,6-7-9)
Advisory and Sub-Advisory Fees;(1-9)
Other Services; (1-9) Trust
Administration; (1-9) Custodian; (1-9)
Transfer Agent and Dividend Disbursing
Agent; (1-9) Independent Auditors.
Item 17. Brokerage Allocation..........(1-9) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered......................(1-9) Purchasing Shares; (1-9) Determining Net Asset Value; (1-3)
Use of Amortized Cost Method; (4-9) Determining Market Value of
Securities; (1-9) Redeeming Shares; (1-9) Redemption in Kind;
(1-7) Exchange Privilege; (4-9) Capital Gains.
Item 20. Tax Status....................(1-9) Tax Status; (1-7) The Funds' Tax Status; (8,9) The Fund's Tax
Status; (1-9) Shareholders' Tax Status.
Item 21. Underwriters..................(1,3) Distribution Plan; (2a) Shareholder Services Plan; (1-9)
Conversion to Federal Funds.
Item 22. Calculation of Yield
Quotations of Money Market
Funds.........................(1-9) Performance Comparisons; (1-9) Economic and Market Information;
(1,7) Tax Equivalent Yield;(1-3) Effective Yield; (1-9) Yield; (1-9)
Total Return; (4-7) Appendix.
Item 23. Financial Statements To be filed by amendment.
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Independence One International Equity Fund
(A Portfolio of Independence One Mutual Funds)
Prospectus
The shares of Independence One International Equity 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 has overall
responsibility for professionally managing the Fund's portfolio. The Fund
has an investment sub-adviser, National Australia Asset Management Limited,
that provides active investment management services for the Fund, subject to
oversight by Michigan National Bank.
The investment objective of the Fund is total return. The Fund will pursue
this objective by investing primarily in foreign equity securities. Under
normal market conditions, the Fund will invest substantially all, and at
least 65%, of its total assets in equity securities denominated in foreign
currencies of issuers located in at least three countries outside the U.S.
and options on such equity securities. With respect to the Fund, equity
securities include common and preferred stocks, securities convertible into
common stock, and rights and warrants to purchase common stock.
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 (the
"Statement") dated June __, 1998, 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. This prospectus, the
Statement, material incorporated by reference into these documents, and
other information regarding the Fund are maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated June __, 1998
<PAGE>
TABLE OF CONTENTS
[TO BE ADDED]
<PAGE>
Summary of Fund Expenses
[TO BE ADDED]
<PAGE>
General Information
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated January 9, 1989. The Declaration of Trust permits
the Trust to offer separate series of shares 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 International Equity 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
foreign equity securities. A minimum initial investment of $1,000 is
required. Subsequent investments must be in the amount of at least $100.
Investment Information
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 investing primarily in
equity securities of established companies in the countries shown in the
chart below. Under normal market conditions, the Fund will invest
substantially all, and at least 65%, of its total assets in equity
securities denominated in foreign currencies of issuers located in at least
three countries outside the U.S. and options on such equity securities. The
Fund will invest in such equity securities and options only to the extent
that they are quoted, or to be quoted within three months of the date of
purchase, on any recognized stock exchange in the relevant country.
Initially, the Fund intends to invest in such securities in the following
regions and countries:
--------------------------------------------------------------
Region Country
--------------------------------------------------------------
Europe Federal Republic of Germany, Austria,
Belgium, Denmark, France, Ireland,
Italy, Netherlands, Norway, Spain,
Switzerland, Sweden, Luxembourg,
Portugal, Finland
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UK United Kingdom
--------------------------------------------------------------
S.E. Asia and Oceania Australia, Hong Kong, New Zealand,
Malaysia, Singapore
--------------------------------------------------------------
Japan Japan
--------------------------------------------------------------
The Fund may in the future invest in countries in addition to the foregoing
list at the discretion of Michigan National Bank (the "Adviser") and
National Australia Asset Management Limited ( "NAM," or the "Sub-Adviser")
(collectively, the "Advisers"). Subject to certain limitations described
below, the following securities and instruments are included in the
investments of the Fund that comprise at least 65% of the Fund's total
assets: equity securities (including common and preferred stocks, securities
convertible into common stock, and rights and warrants to purchase common
stock); World Equity Benchmark Shares ("WEBS") and Optimised Portfolios As
Listed Securities ("OPALS") listed on any recognized stock exchange in any
country listed above or in the U.S.; financial futures contracts and options
on financial futures contracts listed on any recognized exchange in any
country listed above; units, options on units and partly paid units listed
on any recognized stock exchange in any country listed above; interests in a
mutual fund or any investment vehicle that is comprised substantially of
listed securities in the countries, or in any individual country, listed
above; and sponsored or unsponsored American Depositary Receipts ("ADRs"),
Global Depositary Receipts ("GDRs"), and European Depositary Receipts
("EDRs"), collectively, "Depositary Receipts."
Investment Strategy
The Fund will seek to approximate or exceed the performance of the Morgan
Stanley Capital International Europe, Australia, and Far East Accumulation
Index (the "EAFE Index") (net) in U.S. Dollars over a rolling three-year
period. The Fund's investment policies are based on the premise that
investing in non-U.S. securities may provide potential benefits over
investing solely in U.S.
securities, including:
o the opportunity to invest in non-U.S. companies believed to have
superior growth potential;
o the opportunity to invest in foreign countries with economic policies
or business cycles different from those of the U.S.; and
o the opportunity to reduce portfolio volatility to the extent that
securities markets inside and outside the U.S. do not move in harmony.
Asset Allocation Among Countries. With respect to asset allocation among
countries, the Sub-Adviser's international equity portfolios are managed by
its asset allocation and international equity teams. The asset allocation
team is responsible for managing regional exposures in Europe, the UK, Japan
and Asia. The international team manages stock portfolios within countries
and undertakes country selection within Asia. Asian equities are managed
with a top-down, growth- based style because of the nature of Asian markets.
For country allocation, the Sub-Adviser uses a three-step value active
process involving the assessment of value, an analysis of economic and
market fundamentals and judgments about market sentiment.
Proprietary value models are used to determine fair value by following a
strictly quantitative process and ranking each market with a value score. An
implied rate of return based on dividend discount analysis and an implied
return based on historical relationships are compared to establish a value
reading for each market. Results from the value models affect the
Sub-Adviser's decision about the attractiveness of each of the major
markets. The models are intended to identify markets that are undervalued,
and therefore may deliver the best returns over time.
The second stage of the Sub-Adviser's process, the active component,
involves analysis of fundamentals. Specialists monitor the key fundamental
factors in each market and provide this input to the asset allocation team.
Interest rates and corporate profits and their drivers are the primary
focus, as well as growth, inflation and other underlying variables. The team
estimates the size and pattern of changes in the forecasts of these factors,
and compares them to market consensus. Political factors are also monitored
for their impact on markets.
Finally, a number of technical and sentiment factors are monitored,
including momentum indicators, flow of funds, put/call ratios and similar
variables. Therefore, the active elements of the Sub-Adviser's process
(fundamental analysis and sentiment) are used to fine tune the
implementation of asset allocation decisions which have been driven by the
value analysis.
An important differentiating feature of the Sub-Adviser's approach is that
the country selection process for regions other than Asia is undertaken by a
dedicated team that is focused full time on this task. Stock selection is a
separate discipline undertaken by specialists in the Sub-Adviser's
international equity team.
Stock Selection. For developed countries, other than Hong Kong, Malaysia and
Singapore, a value approach is used for stock selection. Each stock is
ranked relative to the others within its own market on each of six
variables: (1) price to earnings ratio ("PER"); (2) price to cash flow
ratio; (3) price to book value ratio; (4) dividend yield; (5) cash flow to
total liabilities ratio; and (6) earnings per share growth.
The six factors are then combined into one composite relative value ranking
("RVR"). The current RVR is compared to its historic range and an unusually
high or low RVR triggers the active part of the process, which is
fundamental research that focuses on the reasons why the stock may be
trading cheaply or expensively, to determine whether the stock becomes a
candidate for purchase or sale. The research includes investigating company
strategy, industry competition, management changes and financial data.
The third stage of the value active process uses sentiment indicators to
assist with the timing of buy or sell decisions. Sentiment indicators have
been tailored for each market; they are a mixture of moving average and
momentum indicators.
For Hong Kong, Malaysia and Singapore, because the Sub-Adviser's key
investment criterion is the growth potential of markets and companies, a
top-down approach is employed seeking relative value at each level --
market, sector and stock. The first level leads to decisions about
intra-regional market weightings, including consideration of economic
growth, inflation, interest rates, corporate earnings, money supply, balance
of payments, prospective PER, momentum, volumes, sentiment, and regional and
country specific political developments. That same process also helps
identify favorable sectors within countries. Important factors in sector
selection include government policy, the stage of the economic cycle (or,
even more broadly, the stage of economic development), sensitivity to
interest rates and other micro factors. The third level of assessment is of
individual stocks themselves, including consideration of growth on a 2-3
year outlook, the ability of a company to exploit market positioning,
prospective PER relative to sector and market, price to net asset value,
price to cash flow, relative value ranges, the financial position of the
company, its balance sheet and gearing and its return on equity. Finally,
and most importantly, is consideration of management quality, track record,
connections and directors' dealing activity.
Acceptable Investments
In addition to the investment policies described above, the Fund may invest
in the following investments.
Depositary Receipts. The Fund may invest in Depositary Receipts. ADRs are
depositary receipts typically issued by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs and GDRs are typically issued by foreign banks or trust companies,
although they also may be issued by U.S. banks or trust companies, and
evidence ownership of underlying securities issued by either a foreign or a
U.S. corporation. Generally, Depositary Receipts in registered form are
designed for use in the U.S. securities markets and Depositary Receipts in
bearer form are designed for use in securities markets outside the U.S.
Depositary Receipts may not necessarily be denominated in the same currency
as the underlying securities into which they may be converted. Ownership of
unsponsored Depositary Receipts may not entitle the Fund to financial or
other reports from the issuer of the underlying security, to which it would
be entitled as the owner of sponsored Depositary Receipts.
When-Issued and Delayed Delivery Transactions. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete the
transaction may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may
vary from the purchase prices. This may result in the Fund purchasing
securities at a price either exceeding or below its market value on
settlement date.
The Fund may dispose of a commitment prior to settlement if the Adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
Foreign Currency Transactions. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or
cash basis at prevailing rates or through forward foreign currency exchange
contracts.
The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or
exchange control regulations. Such changes could unfavorably affect the
value of Fund assets which are denominated in foreign currencies, such as
foreign securities or funds deposited in foreign banks, as measured in U.S.
dollars. Although foreign currency transactions may be used by the Fund to
protect against a decline in the value of one or more currencies, such
efforts may also limit any potential gain that might result from a relative
increase in the value of such currencies and might, in certain cases, result
in losses to the Fund.
Forward Foreign Currency Exchange Contracts. A forward foreign currency
exchange contract ("forward contract") is an obligation to purchase or sell
an amount of a particular currency at a specific price and on a future date
agreed upon by the parties.
Generally, no commission charges or deposits are involved. At the time the
Fund enters into a forward contract, Fund assets with a value equal to the
Fund's obligation under the forward contract are segregated on the Fund's
records and are maintained until the forward contract has been settled. The
Fund will not enter into a forward contract with a term of more than one
year. The Fund will generally enter into a forward contract to provide the
proper currency to settle a securities transaction at the time the
transaction occurs ("trade date"). The period between the trade date and
settlement date will vary between 24 hours and 30 days, depending upon local
custom.
The Fund may also protect against the decline of a particular foreign
currency by entering into a forward contract to sell an amount of that
currency approximating the value of all or a portion of the Fund's assets
denominated in that currency ("hedging"). The success of this type of
short-term hedging strategy is highly uncertain due to the difficulties of
predicting short-term currency market movements and of precisely matching
forward contract amounts and the constantly changing value of the securities
involved. Although the Advisers will consider the likelihood of changes in
currency values when making investment decisions, the Advisers believe that
it is important to be able to enter into forward contracts when the Advisers
believe the interests of the Fund will be served. The Fund will not enter
into forward contracts for hedging purposes in a particular currency in an
amount in excess of the Fund's assets denominated in that currency. No more
than 30% of the Fund's assets will be committed to forward contracts for
hedging purposes at any time. (This restriction does not include forward
contracts entered into to settle securities transactions.)
Put and Call Options With Respect to Equity Securities. The Fund may
purchase put and call options on its portfolio of securities. Put and call
options will be used as a hedge to attempt to protect securities that the
Fund holds, or intends to purchase, against decreases or increases in value.
The Fund is also authorized to write (sell) put and call options on all or
any portion of its portfolio of securities to generate income. The Fund may
write call options on securities either held in its portfolio or which it
has the right to obtain without payment of further consideration or for
which it has segregated cash or other liquid assets in the amount of any
additional consideration needed to obtain the securities. In the case of put
options written by the Fund, the Trust's custodian will segregate cash, U.S.
Treasury obligations, or other liquid assets with a value equal to or
greater than the exercise price of the underlying securities.
The Fund is authorized to invest in put and call options that are traded on
securities exchanges. The Fund may also purchase and write over-the-counter
options ("OTC options") on portfolio securities in negotiated transactions
with the buyers or writers of the options since options on some of the
portfolio securities held by the Fund are not traded on an exchange. The
Fund will purchase and write OTC options only with investment dealers and
other financial institutions (such as commercial banks or savings
associations) deemed creditworthy by the Adviser.
OTC options are two-party contracts with price and terms negotiated between
buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are
purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while OTC options may not. Prior to exercise or
expiration, an option position can only be terminated by entering into a
closing purchase or sale transaction. This requires a secondary market on an
exchange which may or may not exist for any particular call or put option at
any specific time. The absence of a liquid secondary market also may limit
the Fund's ability to dispose of the securities underlying an option. The
inability to close options could have an adverse impact on the Fund's
ability to effectively hedge its portfolio.
Financial Futures Contracts and Options on Financial Futures Contracts. The
Fund may purchase and sell financial futures contracts to hedge all or a
portion of its portfolio securities against changes in interest rates or
securities prices. Financial futures contracts on securities call for the
delivery of particular securities at a certain time in the future. The
seller of the contract agrees to make delivery of the type of instrument
called for in the contract, and the buyer agrees to take delivery of the
instrument at the specified future time. A financial futures contract on a
securities index does not involve the actual delivery of securities, but
merely requires the payment of a cash settlement based on changes in the
securities index.
The Fund may write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its
portfolio against decreases in value resulting from anticipated increases in
market interest rates or broad declines in securities prices. When the Fund
writes a call option on a financial futures contract, it is undertaking the
obligation of selling the financial futures contract at a fixed price at any
time during a specified period if the option is exercised. Conversely, as a
purchaser of a put option on a financial futures contract, the Fund is
entitled (but not obligated) to sell a financial futures contract at the
fixed price during the life of the option.
The Fund may write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of securities
eligible for purchase by the Fund. The Fund will use these transactions to
attempt to protect its ability to purchase securities in the future at price
levels existing at the time it enters into the transactions. When the Fund
writes a put option on a futures contract, it is undertaking to buy a
particular futures contract at a fixed price at any time during a specified
period if the option is exercised. As a purchaser of a call option on a
futures contract, the Fund is entitled (but not obligated) to purchase a
futures contract at a fixed price at any time during the life of the option.
The Fund may not enter into futures contracts and options on futures
contracts, for purposes other than "bona fide hedging" as defined in
regulations adopted by the Commodity Futures Trading Commission ("CFTC
Regulations"), for which aggregate initial margin and premiums paid for
unexpired options exceed 5% of the fair market value of the Fund's total
assets, such market value to be determined after taking into account
unrealized profits and losses on futures contracts and options on futures
contracts into which the Fund has entered. For options on futures contracts
that are in-the-money at the time of purchase, the in-the-money amount as
defined in CFTC Regulations may be excluded in computing such 5% limitation.
Second, the Fund will not enter into futures contracts for speculative
purposes. Third, the Fund does not constitute a commodity pool, market
itself as such, or serve as a vehicle for trading in the commodities futures
or commodity options markets. In this regard, the Fund discloses to all
prospective investors the limitations on its futures contracts and options
on futures contracts transactions, and makes clear that these transactions
are entered into only for bona fide hedging purposes, or other permissible
purposes pursuant to CFTC Regulations. Finally, the Fund has claimed an
exclusion from registration as a commodity pool operator under CFTC
Regulations. When the Fund purchases financial futures contracts, an amount
of cash and cash equivalents, equal to the underlying commodity value of the
financial futures contracts (less any related margin deposits), will be
segregated to collateralize the position with the aim to insure that the use
of such financial futures contracts or options thereon is unleveraged.
These futures contracts and options will serve three purposes. First, the
futures contracts, some of which require a margin, and options will allow
the Fund to maintain sufficient liquidity to meet redemption requests,
thereby managing cash flows into and out of the Fund. In addition, the
futures contracts and options will increase the level of Fund assets that
may be devoted to attempting to approximate or exceed the investment return
of the EAFE Index. Third, participation in futures contracts and options
could potentially reduce transaction costs, since transaction costs
associated with futures contracts and options can be lower than costs
stemming from direct investments in stocks.
Forward Commitments. Forward commitments are contracts to purchase
securities for a fixed price at a date beyond customary settlement time. The
Fund may enter into these contracts if liquid securities in amounts
sufficient to meet the purchase price are segregated on the Fund's records
at the trade date and maintained until the transaction has been settled.
Risk is involved that the value of the security will decline before
settlement. Although the Fund enters into forward commitments with the
intention of acquiring the security, it may dispose of the commitment prior
to settlement and realize short-term profit or loss.
Money Market Instruments. The Fund may invest in U.S. and foreign short-term
money market instruments, including interest-bearing call deposits with
banks, government obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate debt securities, and
repurchase agreements. The commercial paper in which the Fund invests will
be rated A-1 by Standard & Poor's ("S&P") or P-1 by Moody's Investors
Service, Inc. ("Moody's"). These investments may be used to temporarily
invest cash received from the sale of Fund shares, to establish and maintain
reserves for temporary defensive purposes, or to take advantage of market
opportunities.
Cash Reserves. The Fund may hold cash reserves. Cash reserves may be
invested in temporary investments as described below.
Other Investments. The Fund may invest in restricted securities, illiquid
securities and securities of other investment companies, and may lend its
portfolio securities, subject to investment limitations described below or
in the Statement.
Temporary Investments. For temporary defensive purposes, the Fund may invest
up to 100% of its total assets in cash and cash items, including money
market instruments as described above; securities issued and/or guaranteed
as to payment of principal and interest by the U.S. government, its agencies
or instrumentalities ("U.S. Government Securities"); 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, to
invest cash receipts in the ordinary course of business and to meet requests
for redemption of Fund shares.
U.S. Government Securities. The U.S. Government Securities in which the
Fund may invest include, but are not limited to, the following:
o direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds;
o notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full faith
and credit of the United States;
o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
o notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.
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 purchase by the Fund. 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
by the Fund.
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 stocks and bonds,
derivatives do not necessarily present greater market risks than traditional
investments. The Fund will use derivative contracts and securities only for
the purposes disclosed in the applicable prospectus sections above. To the
extent that the Fund invests in contracts or securities that could be
characterized as derivatives, it will do so only in a manner consistent with
its investment objective, policies and limitations.
Risk Considerations.
Equity Investments. As described above, the Fund invests primarily in equity
securities and securities convertible into common stock. As with other
mutual funds that invest primarily in such securities, the Fund is subject
to market risks. That is, the possibility exists that such securities will
decline in value over short or even extended periods of time, and the
world's equity markets tend to be cyclical, experiencing both periods when
securities prices generally increase and periods when securities prices
generally decrease.
Foreign Investments. Investing in non-U.S. securities carries substantial
risks in addition to those associated with domestic investments. In an
attempt to reduce some of these risks, the Fund diversifies its investments
broadly among foreign countries. At least three different countries will
always be represented.
The economies of foreign countries may differ from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, currency
depreciation, capital reinvestment, resource self-sufficiency, and balance
of payments position. Furthermore, the economies of foreign countries may be
heavily dependent on international trade and, accordingly, have been, and
may continue to be, adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values, and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
Prior governmental approval for foreign investments may be required under
certain circumstances in some countries, and the extent of foreign
investment in certain companies may be subject to limitation. Foreign
ownership limitations also may be imposed by the charters of individual
companies to prevent, among other concerns, violation of foreign investment
limitations. Repatriation of investment income, capital, and the proceeds of
sales by foreign investors may require governmental registration and/or
approval in some countries. The Fund could be adversely affected by delays
in, or a refusal to grant, any required governmental registration or
approval for such repatriation. Any investment subject to such repatriation
controls will be considered illiquid if it appears reasonably likely that
this process will take more than seven days.
With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
governmental regulation, social instability or diplomatic developments
(including war), which could affect adversely the economies of such
countries or the value of the Fund's investments in those countries.
Brokerage commissions, custodial services, and other costs relating to
investment may be more expensive than in the U.S. Foreign markets may have
different clearance and settlement procedures. In certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, or when certificates for portfolio securities have
been lost, making it difficult to conduct such transactions. The inability
of the Fund to make intended security purchases due to settlement problems
could cause the Fund to miss attractive investment opportunities. Inability
to dispose of a portfolio security due to settlement problems could result
either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
Currency Risks. Because the majority of the securities purchased by the Fund
are denominated in currencies other than the U.S. dollar, changes in foreign
currency exchange rates will affect the Fund's net asset value; the value of
interest earned; gains and losses realized on the sales of securities; and
net investment income and capital gain, if any, to be distributed to
shareholders by the Fund. If the value of a foreign currency rises against
the U.S. dollar, the value of the Fund assets denominated in that currency
will increase; correspondingly, if the value of a foreign currency declines
against the U.S. dollar, the value of Fund assets denominated in that
currency will decrease.
The exchange rates between the U.S. dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. Although the Fund
values its assets daily in U.S. dollars, the Fund will not convert its
holdings of foreign currencies to U.S. dollars daily. When the Fund converts
its holdings to another currency, it may incur conversion costs. Foreign
exchange dealers may realize a profit on the difference between the price at
which they buy and sell currencies.
Foreign Companies. Other differences between investing in foreign and U.S.
companies include:
o less publicly available information about foreign companies;
o the lack of uniform accounting, auditing, and financial reporting
standards and practices or regulatory requirements comparable to those
applicable to U.S. companies;
o less readily available market quotations on foreign companies;
o differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;
o differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments;
o the limited size of many foreign securities markets and limited
trading volume in issuers compared to the volume of trading in U.S.
securities could cause prices to be erratic for reasons apart from
factors that affect the quality of securities;
o the likelihood that foreign securities may be less liquid or more
volatile;
o unreliable mail service between countries;
o certain markets may require payment for securities before delivery;
and
o religious and ethnic instability.
U.S. Government Policies. In the past, U.S. government policies have
discouraged or restricted certain investments abroad by investors such as
the Fund. Investors are advised that when such policies are instituted, the
Fund will abide by them, but such policies may result in lost investment
opportunities or costs of transactions necessary to comply with the
policies.
Risks Associated With Financial Futures Contracts And Options On Financial
Futures Contracts. Financial futures contracts and options on financial
futures contracts can be highly volatile and could result in a reduction of
the Fund's total return. The Fund's attempt to use such investment devices
for hedging purposes may not be successful. Successful futures strategies
require the ability to predict future movements in securities prices,
interest rates and other economic factors. When the Fund uses financial
futures contracts and options on financial futures contracts as hedging
devices, there is a risk that the prices of the securities or stock indices
subject to the financial futures contracts or options on financial futures
contracts may not correlate perfectly with the prices of the securities in
the Fund. This may cause the financial futures contracts or the options on
financial futures contracts to react to market changes differently than the
Fund's portfolio securities. In addition, the Advisers could be incorrect in
their expectations about the direction or extent of market factors, such as
interest rates, securities price movements, and other economic factors. In
these events, the Fund may lose money on the financial futures contract or
the options on financial futures contracts. It is not certain that a
secondary market for positions in financial futures contracts or for options
on financial futures contracts will exist at all times. Although the
Advisers will consider liquidity before entering into financial futures
contracts or options on financial futures contracts transactions, there is
no assurance that a liquid secondary market on an exchange or
over-the-counter will exist for any particular financial futures contract or
option on a financial futures contract at any particular time. The Fund's
ability to establish and close out financial futures contracts and options
on financial futures contract positions depends on this secondary market. If
the Fund is unable to close out its position due to disruptions in the
market or lack of liquidity, the losses to the Fund could be significant.
Investment Limitations
The Fund will not:
o with respect to 75% of the value of its total assets, the Fund
will not invest more than 5% of the value of its total assets in
the securities of any one issuer (other than cash; cash items; U.
S. Government Securities and repurchase agreements collateralized
by such U.S. government securities; and securities of other
investment companies).
o acquire more than 10% of the outstanding voting securities of any
one issuer; or
o 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 at a set price) except, under certain
circumstances, the Fund may borrow up to one-third of the value
of its total assets, including the amount borrowed, and pledge
securities to secure such borrowings.
The above investment limitations and certain other investment limitations
described in the Statement cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Board of Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including securities not determined by the
Board of Trustees to be liquid, including repurchase agreements with
maturities longer than seven days after notice and certain OTC
options.
Independence One Mutual Funds Information
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 and sale of portfolio securities
and instruments, for which the Adviser receives an annual fee from the
assets of the Fund.
Advisory Fees. The Adviser is entitled to receive an annual investment
advisory fee equal to 1.00% 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.
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 fourth largest bank holding company in
terms of total assets, as of December 31, 1997, $9.583 billion, 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 $11.4
billion. Of this amount, IOCM and the Trust Division have investment
discretion over $2.2 billion.
Michigan National Bank has managed mutual funds since May 1989. The
Trust Division has managed pools of commingled funds since 1964.
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 such
securities.
Sharon Dischinger is Second Vice President and Portfolio Manager for
Michigan National Bank 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 National Australia Asset Management Limited, the
Sub-Adviser furnishes, subject to the direction of the Trustees and the
Adviser, certain investment advisory services to the Fund, including active
investment management services, investment research, and identification of
securities and other investments for purchase and/or sale by the Fund's
portfolio. Pursuant to the sub-advisory agreement with the Adviser, the
Sub-Adviser is entitled to receive an annual fee, to be paid by the Adviser,
of 0.30% of the average daily value of the Fund's assets managed by the
Sub-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 333 Collins
Street, Melbourne, Victoria 3000, Australia, is a corporation wholly owned
by National Australia Bank Limited ("NAB"), which is the ultimate parent
corporation of the Adviser. 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.
Alistair Drummond, B.Ec., CPA, Bachelor of Law, Senior Portfolio Manager,
International Equities. Mr. Drummond joined the financial industry in 1984
after having spent four years in taxation and law. He joined NAB Corporate
Advisory in 1989 where he advised on corporate reconstructions, mergers and
acquisitions and valuations. In 1992, he transferred to NAM and was
responsible for Australian equity research and for the management of
balanced funds. His current responsibilities include research and management
of Japanese equities, and with respect to the Sub-Adviser, he has been
responsible for management of the Fund's portfolio since its inception.
Distribution of Fund Shares
Federated Securities Corp. is the principal distributor for shares of the
Fund (the "Distributor"). 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.
<PAGE>
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
services at an annual rate as specified below:
Maximum Average Aggregate Daily
Administrative Fee Net Assets of the Trust
---------------------- ------------------------------------
.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
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, cash and other assets of the Fund.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio securities and instruments, the Advisers look for prompt execution
of the order at a favorable price. In working with dealers, the Advisers
will generally use those who are recognized dealers in specific portfolio
securities or 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 Advisers 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 Advisers make decisions on portfolio
transactions and select 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
Advisers and Federated Administrative Services may voluntarily waive and/or
reimburse some expenses.
Net Asset Value
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 of the Fund outstanding. Trading in foreign securities may be
completed at times which vary from the closing of the New York Stock
Exchange ("NYSE"). As a result, in computing its net asset value, the Fund
values foreign equity securities at the latest closing price on the exchange
on which they are traded immediately prior to the closing of the NYSE.
Foreign securities quoted in foreign currencies are translated into U.S.
dollars at the foreign exchange rate in effect at noon, Eastern time, on the
day the value of the foreign security is determined. Occasionally, events
that effect these values and exchange rates may occur between the times at
which they are determined and the closing of the NYSE. If such events
materially affect the value of portfolio securities, these securities may be
valued at their fair value as determined in good faith by the Trustees,
although the actual calculation may be done by others.
Investing in the Fund
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 contacting directly
their authorized brokers. Payments may be made by either check or wire
transfer of federal funds.
Orders must be received by 4:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price. For shares purchased directly from the
Distributor, payment by wire or check must also be received before 4:00 p.m.
(Eastern time) on that day. It is the responsibility of Michigan National
Bank, Independence One or authorized brokers to transmit orders that were
received before 4:00 p.m. (Eastern time) 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 such a transmitted 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 International Equity 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 International Equity
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.
Authorized brokers may charge customary fees and commissions for handling
shareholders' purchase orders.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the NYSE, 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) the following holidays: New
Year's Day, Martin Luther King, Jr. 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 (the
"Transfer Agent") 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 brokers 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 annually. 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 an 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 by calling
1-800-334-2292.
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, policies and
limitations 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 Equity Plus Fund, Independence One Small Cap
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.
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 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 be completed before the Fund will accept such requests. 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 an 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 from the Fund into a participating 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 10-52, Farmington Hills,
Michigan 48333-9065.
Any shares held in certificate form cannot be exchanged by telephone but
must be forwarded to the Transfer Agent by a Michigan National Bank or
Independence One representative or an authorized broker and deposited to the
shareholder's account before being exchanged.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
Written Exchange. A shareholder wishing to make an exchange by written
request may do so by sending it to: Independence One Mutual Funds, 27777
Inkster Road, Mail Code 10-52, Farmington Hills, Michigan 48333-9065. In
addition, an investor may exchange shares by sending a written request to
its authorized broker directly.
<PAGE>
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 an authorized broker. Although the Transfer Agent
generally 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. Authorized brokers may charge customary fees and
commissions for this service. If at any time, the Fund were to 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 be completed before the Fund will accept such requests. 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 an 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, if any, the account number, and
the share or dollar amount requested. Shareholders redeeming through
Michigan National Bank or Independence One should mail written requests to:
Independence One Mutual Funds, 27777 Inkster Road, Mail Code 10-52,
Farmington Hills, Michigan 48333-9065. Investors redeeming through
authorized brokers should mail written requests directly to their brokers.
If share certificates have been issued, they must be properly endorsed and
must be sent (registered or certified mail is recommended) with the written
request.
<PAGE>
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:
o 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");
o a member of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
o a savings bank or savings association whose deposits are insured
by the Savings Association Insurance Fund, which is administered
by the FDIC; or
o any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934, as amended.
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 redemption 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 made 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, other than retirement accounts subject to required minimum
distributions. A shareholder may apply for participation in this program
through Michigan National Bank by calling 1-800-334-2292.
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 or exchanges. 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.
<PAGE>
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.
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 currently
prohibit a bank holding company registered under the Bank Holding Company
Act of 1956, as amended, 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 the Trust's
counsel, that they may perform these services for the Trust as contemplated
by the agreements 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.
Tax Information
Federal Income Tax
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code of 1986, as amended, 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, paid by the Fund. This applies whether dividends or
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.
Investment income received by the Fund from sources within foreign countries
may be subject to foreign taxes withheld at the source. The United States
has entered into tax treaties with many foreign countries that entitle the
Fund to reduced tax rates or exemptions on this income. The effective rate
of foreign tax cannot be predicted, since the amount of Fund assets to be
invested within various countries is unknown. However, the Fund intends to
operate so as to qualify for treaty-reduced tax rates where applicable.
Due to differences in the book and tax treatment of fixed-income securities
denominated in foreign currencies, it is difficult to project currency
effects on an interim basis. Therefore, to the extent that currency
fluctuations cannot be anticipated, a portion of distributions to
shareholders could later be designated as a return of capital, rather than
income, for income tax purposes, which may be of particular concern to
simple trusts.
If more than 50% of the value of the Fund's assets at the end of the tax
year is represented by stock or securities of foreign corporations, the Fund
intends to qualify for certain Code stipulations that would allow
shareholders to claim a foreign tax credit or deduction on their U.S. income
tax returns. Shareholders must hold Fund shares for a specified period to
claim a foreign tax credit.
The Code may limit a shareholder's ability to claim a foreign tax credit.
Furthermore, shareholders who elect to deduct their portion of the Fund's
foreign taxes rather than take the foreign tax credit must itemize
deductions on their income tax returns.
Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws, including treatment
of distributions as income or return of capital.
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 SEC) 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 semiannual 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, as described in the
Statement.
<PAGE>
Independence One Mutual Funds Independence One
International Equity Fund
Independence One International Equity (A Portfolio of Independence One
Fund Mutual Funds)
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010 Prospectus dated June __, 1998
Investment Adviser Federated Securities Corp.
Michigan National Bank Distributor
27777 Inkster Road A subsidiary of Federated
Mail Code 10-52 Investors
Farmington Hills, Michigan 48333-9065 Federated Investors Tower
Pittsburgh, PA 15222-3779
Sub-Adviser
National Australia Asset Management CUSIP ______
Ltd. G00____ (6/98)
333 Collins Street
Melbourne, Victoria 3000, Australia
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Custodian
Michigan National Bank
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
Transfer Agent and
Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8609
Boston, Massachusetts 02266-8609
Independent Auditors
KPMG Peat Marwick LLP
One Mellon Bank Center
Pittsburgh, Pennsylvania 15219
Independence One International Equity Fund
(A Portfolio of Independence One Mutual Funds)
Statement of Additional Information
This Statement of Additional Information (the "Statement") should be read with
the prospectus of Independence One International Equity Fund (the "Fund"), a
portfolio of Independence One Mutual Funds (the "Trust") dated June __, 1998.
This Statement is not a prospectus.
You may request a copy of a prospectus free of charge by calling 1-800-334-2292.
Independence One International Equity Fund
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Statement dated June __, 1998
FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip _________
GO_______ (6/98)
<PAGE>
Table of Contents
[TO BE ADDED]
<PAGE>
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 Fund's investment
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 Securities
The types of U.S. government securities 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 ("U.S. Government Securities"). These
securities are backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to
purchase certain obligations of agencies or
instrumentalities; or
o the credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities which may not always
receive financial support from the U.S. government are: Farm
Credit 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; Fannie Mae (formerly, the 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:
o instruments 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");
o commercial paper issued by domestic or foreign corporations
rated A-1 by Standard & Poor's ("S&P") P-1 by Moody's
Investors Service, Inc., or F-1 by Fitch, Inc. or, if unrated,
of comparable quality as determined by the Fund's investment
adviser;
o time 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
o bankers' 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 investment adviser to be creditworthy pursuant
to guidelines established by the Trustees.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other than normal transaction costs, are incurred. However, liquid
assets of the Fund sufficient to make payment for the securities to
be purchased are segregated on the Fund's records at the trade date.
These assets are marked to market daily and are maintained until the
transaction has been settled. The Fund does not intend to engage in
when-issued and delayed delivery transactions to an extent that
would cause the segregation of more than 20% of the value of its
total assets.
<PAGE>
Restricted and Illiquid Securities
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission ("SEC") staff position set forth in the adopting release
for Rule 144A under the Securities Act of 1933. The Trustees
consider the following criteria in determining the liquidity of
certain restricted securities:
_ the frequency of trades and quotes for the security;
_ the number of dealers willing to purchase or sell the
security and the number of other potential buyers;
_ dealer undertakings to make a market in the security;
and
_ the nature of the security and the nature of the
marketplace trades.
Futures and Options Transactions
The Fund may engage in futures and options hedging transactions. In
an effort to reduce fluctuations in the net asset value of shares of
the Fund, the Fund may attempt to hedge all or a portion of its
portfolio by buying and selling financial futures contracts, buying
put options on portfolio securities and listed put options on
futures contracts, and writing call options on futures contracts.
The Fund may also write covered call options on portfolio securities
to attempt to increase its current income. 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 have expired. An option position on financial futures contracts
may be closed only on the exchange on which the position was
established.
Futures Contracts
The Fund may engage in transactions in financial futures contracts.
A securities futures contract is a firm commitment by two parties:
the seller who agrees to make delivery of the specific type of
security called for in the contract ("going short") and the buyer
who agrees to take delivery of the security ("going long") at a set
price at a certain time in the future. In contrast, a stock index
futures contract is an agreement pursuant to which two parties agree
to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last
trading day of the contract and the price at which the index
contract was originally written. No physical delivery of the
underlying securities in the index is made.
The purpose of the purchase or sale of a futures contract by the
Fund is to protect the Fund from fluctuations in the value of its
securities caused by anticipated changes in interest rates or market
conditions without necessarily buying or selling the securities. For
example, in the equity securities market, in order to hedge its
holdings of equity securities against a decline in market prices,
the Fund could enter into contracts to deliver securities at a
predetermined price (i.e., "go short") to protect itself against the
possibility that the prices of its equity securities may decline
during the anticipated holding period. The Fund would "go long"
(i.e., agree to purchase securities in the future at a predetermined
price) to hedge against an increase in market prices.
<PAGE>
Put Options on Futures Contracts
The Fund may engage in transactions in put options on futures
contracts. The Fund may purchase listed put options on futures
contracts. Unlike entering directly into a futures contract, which
requires the purchaser to buy a financial instrument on a set date
at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on
or before a future date whether to assume a short position at the
specified price. The Fund would purchase put options on futures
contracts to protect portfolio securities against decreases in value
resulting from market factors, such as an anticipated decrease in
stock prices.
Generally, if the hedged portfolio securities decrease in value
during the term of a put option, the related futures contracts will
also decrease in value and the option will increase in value. In
such an event, the Fund will normally close out its put option by
selling an identical put option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second put option
may be large enough to offset both the premium paid by the Fund for
the original put option plus the decrease in value of the hedged
securities. Alternatively, the Fund may exercise its put option to
close out the position. To do so, it would simultaneously enter into
a futures contract of the type underlying the option (for a price
less than the strike price of the put option) and exercise the put
option. The Fund would then deliver the futures contract in return
for payment of the strike price. If the Fund neither closes out nor
exercises an option, the option will expire on the date provided in
the option contract, and only the premium paid for the contract will
be lost.
When the Fund sells a put option on a futures contract, it receives
a cash premium which can be used in whatever way is deemed most
advantageous to the Fund. In exchange for such premium, the Fund
grants to the purchaser of the put option the right to receive from
the Fund, at the strike price, a short position in such futures
contract, even though the strike price upon exercise of the put
option is greater than the value of the futures position received by
such holder. If the value of the underlying futures position is not
such that exercise of the put option would be profitable to the
option holder, the put option will generally expire without being
exercised. The Fund has no obligation to return premiums paid to it
whether or not the put option is exercised. It will generally be the
policy of the Fund, in order to avoid the exercise of a put option
sold by it, to cancel its obligation under the put option by
entering into a closing purchase transaction, if available, unless
it is determined to be in the Fund's interest to deliver the
underlying futures position. A closing purchase transaction consists
of the purchase by the Fund of a put option having the same term as
the put option sold by the Fund, and has the effect of canceling the
Fund's position as a seller. The premium which the Fund will pay in
executing a closing purchase transaction may be higher than the
premium received when the put option was sold, depending in large
part upon the relative price of the underlying futures position at
the time of each transaction.
Call Options on Futures Contracts
The Fund may engage in transactions in call options on futures
contracts. In addition to purchasing put options on futures, the
Fund may write listed call options on futures contracts to hedge its
portfolio against, for example, a decrease in stock prices. When the
Fund writes a call option on a futures contract, it is undertaking
the obligation of assuming a short futures position (selling a
futures contract) at the fixed strike price at any time during the
life of the call option if the call option is exercised. As stock
prices fall, causing the prices of futures to go down, the Fund's
obligation as seller of a call option on a future (to sell a futures
contract) costs less to fulfill, causing the value of the Fund's
call option position to increase. In other words, as the underlying
future's price goes down below the strike price, the buyer of the
call option has no reason to exercise the call option, so that the
Fund keeps the premium received for the call option. This premium
can help substantially to offset the drop in value of the Fund's
portfolio securities. Prior to the expiration of a call option
written by the Fund, or exercise of it by the buyer, the Fund may
close out the call option by buying an identical call option. If the
hedge is successful, the cost of the second call option will be less
than the premium received by the Fund for the initial call option.
The net premium income of the Fund will then help offset the
decrease in value of the hedged securities.
When the Fund purchases a call option on a financial futures
contract, it receives in exchange for the payment of a cash premium
the right, but not the obligation, to enter into the underlying
futures contract at a strike price determined at the time the call
option was purchased, regardless of the comparative market value of
such futures position at the time the option is exercised. The
holder of a call option has the right to receive a long (or buyer's)
position in the underlying futures contract.
The Fund will not maintain open positions in futures contracts it
has sold or call options it has written on futures contracts if, in
the aggregate, the value of the open positions (marked to market)
exceeds the current market value of its securities portfolio
(including cash or cash equivalents) plus or minus the unrealized
gain or loss on those open positions, adjusted for the correlation
of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will
take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within
this limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract.
Rather, the Fund is required to deposit an amount of "initial
margin" in cash or U.S. Treasury bills with the custodian (or the
broker, if legally permitted). The nature of initial margin in
futures transactions is different from that of margin in securities
transactions in that futures contracts initial margin does not
involve a borrowing by the Fund to finance the transactions. Initial
margin is in the nature of a performance bond or good faith deposit
on the contract which is returned to the Fund upon termination of
the futures contract, assuming all contractual obligations have been
satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is known
as "marking to market." Variation margin does not represent a
borrowing or loan by the Fund but is instead settlement between the
Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value,
the Fund will mark to market its open futures positions. The Fund is
also required to deposit and maintain margin when it writes call
options on futures contracts.
Restrictions On Futures Contracts and Options Thereon
The Fund will not engage in transactions in futures contracts or
options thereon for speculation, but only to attempt to hedge
against changes in market conditions affecting the value of assets
which the Fund holds or intends to purchase. When futures contracts
or options thereon are purchased in order to protect against a price
increase on securities or other assets intended to be purchased
later, it is anticipated that at least 75% of such intended
purchases will be completed. When other futures contracts or options
thereon are purchased, the underlying value of such contracts will
at all times not exceed the sum of (1) accrued profit on such
contracts held by the broker; (2) cash or high-quality money market
instruments set aside in an identifiable manner; and (3) cash
proceeds from investments due in 30 days or less.
Purchasing Put Options on Portfolio Securities
The Fund may purchase put options on portfolio securities to protect
against price movements in particular securities in its portfolio. 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.
Writing Covered Call Options on Portfolio Securities
The Fund may write covered call options to generate income. As a
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. The Fund may only sell
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
additional consideration).
Over-the-Counter Options
The Fund may purchase and write over-the-counter options ("OTC
options") on portfolio securities in negotiated transactions with
the buyers or writers of the options for those options on portfolio
securities held by the Fund and not traded on an exchange.
OTC options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are
third-party contracts with standardized strike prices and expiration
dates and are purchased from a clearing corporation. Exchange-traded
options have a continuous liquid market while over-the-counter
options may not.
Warrants
The Fund may invest in warrants. Warrants are basically options to
purchase common stock at a specific price (usually at a premium
above the market value of the optioned common stock at issuance)
valid for a specific period of time. Warrants may have a life
ranging from less than a year to twenty years or may be perpetual.
However, most warrants have expiration dates after which they are
worthless. In addition, if the market price of the common stock does
not exceed the warrant's exercise price during the life of the
warrant, the warrant will expire as worthless. Warrants have no
voting rights, pay no dividends, and have no rights with respect to
the assets of the corporation issuing them. The percentage increase
or decrease in the market price of the warrant may tend to be
greater than the percentage increase or decrease in the market price
of the optioned common stock.
Reverse Repurchase Agreements
The Fund also may enter into reverse repurchase agreements under
certain circumstances. These transactions are 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 enter into loan arrangements only with
broker/dealers, banks, or other institutions which the Fund's
investment adviser has determined are creditworthy. The Fund 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 were to 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
have the right to vote, the Fund would terminate the loan and regain
the right to vote if that were considered important with respect to
the investment.
Additional Risk Considerations
The Trustees consider at least annually the likelihood of the
imposition by any foreign government of exchange control
restrictions which would affect the liquidity of the Fund's assets
maintained with custodians in foreign countries, as well as the
degree of risk from political acts of foreign governments to which
such assets may be exposed. The Trustees also consider the degree of
risk involved through the holding of portfolio securities in
domestic and foreign securities depositories. However, in the
absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of duties on the part of the Adviser, any losses
resulting from the holding of the Fund's portfolio securities in
foreign countries and/or with securities depositories will be at the
risk of shareholders. No assurance can be given that the Trustees's
appraisal of the risks will always be correct or that such exchange
control restrictions or political acts of foreign governments might
not occur.
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 150%.
<PAGE>
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
investment activities.
Investing in Real Estate
The Fund will not purchase or sell real estate, although it may
invest in the securities of issuers whose business involves the
purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
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,
as amended, 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 total
assets, the Fund will not purchase securities of any one issuer
(other than cash; cash items; U.S. Government Securities and
repurchase agreements collateralized by such U.S. Government
Securities; and securities of other investment companies) if, as a
result, more than 5% of the value of its total assets would be
invested in the securities of that issuer, or it would own more than
10% of the voting securities of that 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 U.S. Government Securities,
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 securities 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 1.5%.
However, these limitations are not applicable if the securities are
acquired in a merger, consolidation, reorganization, or acquisition
of assets. It should be noted that investment companies incur
certain expenses, such as investment advisory, 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 Illiquid and Restricted Securities
The Fund will not invest more than 15% of the value of its net
assets in illiquid securities including certain restricted
securities not determined to be liquid under criteria established by
the Trustees, including non-negotiable time deposits, repurchase
agreements providing for settlement in more than seven days after
notice, and over-the-counter options.
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.
<PAGE>
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 the
investment limitations stated above.
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.
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
Berry Enterprises
290 Franklin Center
29100 Northwestern Highway
Southfield, MI
Birthdate: September 17, 1925
Trustee
Managing Partner, Berry Enterprises; Chairman, Independent Sprinkler Companies,
Inc.; Chairman, Berry, Ziegelman & Company.
Nathan Forbes*
P.O. Box 667
Southfield, Michigan
Birthdate: December 5, 1962
Trustee
President, The Forbes Company.
Harry J. Nederlander+
231 S. Old Woodward, Suite 219
Birmingham, MI
Birthdate: September 5, 1917
Trustee
Chairman, Nederlander Enterprises.
Thomas S. Wilson+
Two Championship Drive
Auburn Hills, MI
Birthdate: October 8, 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.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
Fund Ownership
Officers and Trustees own less than 1% of the outstanding shares of the Fund.
Trustees' Compensation
- -------------------------------------------------------------------------------
NAME, AGGREGATE COMPENSATION
POSITION WITH FROM
THE TRUST THE TRUST*
- -------------------------------------------------------------------------------
Robert E. Baker $
Trustee
Harold Berry $
Trustee
Nathan Forbes $
Trustee
Harry J. Nederlander $
Trustee
Thomas S. Wilson $
Trustee
- -------------------------------------------------------------------------------
* Information is furnished for the fiscal year ended April 30, 1998. The
Trust is the only Investment Company in the Fund Complex. The aggregate
compensation is provided for the Trust which is comprised of nine
portfolios. The Fund had not commenced operations as of April 30, 1998 and
did not pay any compensation to the Trustees prior to commencing
operations. Each of the portfolios of the Trust, including the Fund, pays
a portion of the aggregate compensation of the Trustees in direct
proportion to its respective average net assets.
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 of the Fund 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.
<PAGE>
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 the Adviser, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon the Adviser 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.
Sub-Adviser to the Fund
The Fund's sub-adviser is National Australia Asset Management Limited (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.
Brokerage Transactions
The Advisers may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Advisers 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 Advisers or their
affiliates in advising the Fund and other accounts. To the extent that receipt
of these services may supplant services for which the Advisers or their
affiliates might otherwise have paid, it would tend to reduce their expenses.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers to execute securities transactions for the Fund, including
brokers that offer brokerage and research services in connection with executing
transactions. The Advisers and their affiliates determine in good faith that
commissions charged by such brokers are reasonable in relation to the value of
the brokerage and research services provided.
Although investment decisions for the Funds are made independently from those of
the other accounts managed by the Advisers, investments of the type the Funds
may make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Advisers are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for
investments or sales will be allocated in a manner believed by the Advisers to
be equitable to each. In some cases, this procedure may adversely affect the
price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
<PAGE>
Other Services
Trust Administration
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for the fees set forth in the
prospectus.
Custodian
Michigan National Bank, Farmington Hills, Michigan, is custodian for the
securities, cash and other assets of the Fund. For the services to be provided
to the Fund pursuant to the Custodian Agreement between the Trust and the
custodian, the Fund pays the custodian an annual fee that is based upon the
average daily net assets of the Fund and is payable monthly. The Fund will also
pay the custodian 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 the transfer agent for the shares of
the Fund and dividend disbursing agent for the Fund.
Independent Auditors
The firm of independent auditors for the Fund is KPMG Peat Marwick LLP,
Pittsburgh, Pennsylvania.
Purchasing Shares
Shares of the Fund 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
income 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 business day. The business 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, according to the latest bid prices;
o for bonds and other fixed income securities, other than short-term
obligations, 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 traded on an exchange at their
market values established by the exchanges on which they trade 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. The market value
for futures contracts and options which are not traded on an exchange will be
determined by an independent pricing service.
Trading in Foreign Securities
Trading in foreign cities may be completed at times which vary from the closing
of the NYSE. In computing the net asset values, the Fund values foreign
securities at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the NYSE. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at the foreign exchange rate
in effect at noon, Eastern time, on the day the value of the foreign security is
determined.
Occasionally, events that affect values and exchange rates may occur between the
times at which they are determined and the closing of the NYSE. If such events
materially affect the value of portfolio securities, these securities may be
valued at their fair value as determined in good faith by the Trustees, although
the actual calculation may be done by others.
Redeeming Shares
The Fund redeems its 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 its 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 it deems appropriate from the Fund's portfolio.
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 for
the Fund 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 under the Investment Company
Act of 1940, as amended, under which the Fund is obligated to redeem shares
during any 90-day period for any one shareholder in cash only up to the lesser
of $250,000 or 1% of the Fund's net asset value at the beginning of such period.
<PAGE>
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 of 1986, as amended,
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:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o invest in securities within certain statutory limits for
diversification purposes; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
Foreign Taxes
Investment income on certain foreign securities in which the Fund may invest may
be subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject.
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
Once the Fund has a longer operating history, the average annual total returns
for the Fund for the 1-year, 5-year and 10-year periods or the period from the
date of initial public investment in the Fund, if less than such periods, will
be disclosed here.
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 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 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; or
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, which is a
composite index of common stocks in industry, transportation, and
financial and public utility companies, can be compared to the total
returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's index assume reinvestment
of all dividends paid by stocks listed on the 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 and 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.
o Morgan Stanley Capital International EAFE Index, an arithmetic,
market value-weighted average of the performance of over 1,000
securities on the stock exchanges of countries in Europe, Australia
and the Far East.
o Morgan Stanley Capital International Europe Index, an unmanaged
index of common stocks that includes 14 countries throughout Europe.
o Morgan Stanley Capital International Japan Index, an unmanaged index
of common stocks.
o Morgan Stanley Capital International World Index, an arithmetic,
market value-weighted average of the performance of over 1,470
securities listed on the stock exchanges of countries in Europe,
Australia, the Far East, Canada and the United States.
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 effects on the
securities markets. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analyses 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,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.
Independence One Small Cap Fund
(A Portfolio of Independence One Mutual Funds)
Prospectus
The shares of Independence One Small Cap 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 has overall responsibility for professionally
managing 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 SmallCap 600 Index (the "S&P SmallCap 600") by investing primarily in
a representative sample of the common stocks comprising the S&P SmallCap
600. 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 (the
"Statement") dated June __, 1998, 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. This prospectus, the
Statement, material incorporated by reference into these documents, and
other information regarding the Fund are maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated June __, 1998
<PAGE>
TABLE OF CONTENTS
[TO BE ADDED]
<PAGE>
Summary of Fund Expenses
[TO BE ADDED]
<PAGE>
General Information
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated January 9, 1989. The Declaration of Trust permits
the Trust to offer separate series of shares 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 Small Cap 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 selected companies with small market capitalizations. A
minimum initial investment of $1,000 is required. Subsequent investments
must be in the amount of at least $100.
Investment Information
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 SmallCap 600 by investing primarily in a
representative sample of the common stocks comprising the S&P SmallCap 600.
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 SmallCap 600 is a capitalization-weighted index of 600 common
stocks. It is designed to provide a measure of overall small capitalization
company performance, and includes common stocks of companies from a variety
of economic sectors and industry groups. S&P's selection criteria go beyond
merely including companies based solely on market capitalization, and
include market size, capitalization, trading activity and liquidity,
soundness of financial and operating conditions, industry representation and
public ownership. The S&P SmallCap 600 reflects a diversified market
portfolio, although it has fewer securities than other comparable indices.
For example, it does not include initial public offering issues, which
experience high volatility in market value and are often illiquid. It also
does not include real estate investment trusts, which are generally viewed
as real estate investments. According to S&P, the spreads between bids and
asking prices are generally lower for stocks in the S&P SmallCap 600, and
average daily trading volume is usually higher than with other comparable
small-cap indices.
The S&P SmallCap 600 also exhibits a lower issuer turnover rate than other
comparable small-cap indices. Higher turnover can prove particularly costly
to funds that, like the Fund, are based to some extent on an index. Managers
must sell stocks deleted from the index and purchase stocks that are added,
thus increasing a fund's expenses. The higher turnover may also cause higher
tax consequences for a fund's shareholders. S&P adds and deletes companies
throughout the year, as necessary, with a view toward minimizing disruption.
Unlike other small-cap indices, S&P does not automatically remove a company
from the S&P SmallCap 600 when the company's market capitalization rises
above or falls below the market capitalization selection criteria. Also, S&P
does not determine the market capitalization parameters based on a range of
the dollar amounts of such capitalizations. Instead, S&P defines the
small-cap range as percentiles of the entire market's value. S&P selected a
small-cap range of from approximately the 50th percentile down to
approximately the 83rd percentile of the entire market from the largest
capitalized to the smallest capitalized companies. The percentiles represent
divisions by capitalization, not by number of companies. While the
percentile range for the index remains constant, the capitalization range in
dollar amounts will rise or fall with the market.
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 600 stocks
and divided by a predetermined base value. The base value for the S&P
SmallCap 600 is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights and substitutions.
Inclusion of a particular stock in the S&P SmallCap 600 in no way implies an
opinion by S&P as to its investment attractiveness. S&P is not a sponsor of
or in any way affiliated with the Fund.
As noted above, the Fund will limit its stock selections to those stocks
included in the S&P Small Cap 600. Michigan National Bank (the "Adviser")
and Sosnoff Sheridan Corporation (the "Sub-Adviser") (collectively, the
"Advisers") intend to invest the Fund's holdings in approximately 200 of
these stocks. In selecting which of the S&P Small Cap 600 stocks to purchase
for the Fund, the Advisers will seek to achieve a representative sampling of
the various industry groups contained in that index. Any stock selected for
the Fund must also meet the following criteria: the stock must have a
history of price volatility ("beta") similar to the average beta of all
stocks in the index; the stock's price must be equal to or greater than the
average index stock price; the number of outstanding shares of the stock
must be equal to or greater than that of the average index stock; and the
stock must have a total capitalization equal to or greater than the average
index stock capitalization. The Advisers believe that application of these
criteria will help focus the Fund's holdings on stocks that are relatively
more liquid and that can be bought and sold with relatively lower
transaction costs.
The Fund's ability to provide investment results that correspond to or
exceed the aggregate price and dividend performance of the S&P SmallCap 600
will depend partly on the size and timing of cash flows into and out of the
Fund, as well as on the particular stocks selected by the Advisers. From
time to time, adjustments may be made in the Fund because of changes in the
composition of the S&P SmallCap 600 as announced by S&P, which will result
in accompanying costs, including brokerage fees, custodial expenses, and
transfer taxes. Portfolio turnover is also expected to be lower than for
many 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 SmallCap 600. 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 transaction costs. The Fund
will enter into stock index futures contracts only for the purpose of
offsetting risks from other positions.
The Fund may hold cash reserves. Cash reserves 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 invest in
restricted securities, illiquid securities and securities of other
investment companies, and may lend its portfolio securities, subject to
investment limitations described in the Statement.
Stock Index Futures and Options. The Fund may utilize stock index futures
contracts, options, and options on stock index 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 and the Fund's
investment in futures contracts and options thereon will be limited as
described below.
These futures contracts and options will serve three purposes. First, the
futures contracts, some of which require a margin, and options will allow
the Fund to maintain sufficient liquidity to meet redemption requests,
thereby managing cash flows into and out of the Fund. Secondly, the futures
contracts and options will increase the level of Fund assets that may be
devoted to attempting to approximate or exceed the investment return of the
S&P SmallCap 600. Third, participation in futures contracts and options
could potentially reduce transaction costs, since transaction costs
associated with futures contracts and options 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 an active market
will exist for the contracts at a specified time. The Fund's ability
to establish and close out futures contracts 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 price levels, market circumstances may result in there
being a discrepancy between the price of a futures contract and the
price movement in the underlying 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 contracts 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 Advisers'
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 contracts and options prices could cause
the Fund to be unable to timely liquidate its futures contracts or
options positions and cause the Fund 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 contracts
transactions. The Statement includes a further discussion of futures
contracts 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 may not enter into futures contracts and options on
futures contracts, for purposes other than "bona fide hedging" as
defined in regulations adopted by the Commodity Futures Trading
Commission ("CFTC Regulations"), for which aggregate initial margin
and premiums paid for unexpired options exceed 5% of the fair market
value of the Fund's total assets, such market value to be determined
after taking into account unrealized profits and losses on futures
contracts and options on futures contracts into which the Fund has
entered. For options on futures contracts that are in-the-money at the
time of purchase, the in-the-money amount as defined in CFTC
Regulations may be excluded in computing such 5% limitation. Second,
the Fund will not enter into futures contracts for speculative
purposes. Third, the Fund does not constitute a commodity pool, market
itself as such, or serve as a vehicle for trading in the commodities
futures or commodity options markets. In this regard, the Fund
discloses to all prospective investors the limitations on its futures
contracts and options on futures contracts transactions, and makes
clear that these transactions are entered into only for bona fide
hedging purposes, or other permissible purposes pursuant to CFTC
Regulations. Finally, the Fund has claimed an exclusion from
registration as a commodity pool operator under CFTC Regulations. When
the Fund purchases financial futures contracts, an amount of cash and
cash equivalents, equal to the underlying commodity value of the
financial futures contracts (less any related margin deposits), will
be segregated to collateralize the position and, thereby, insure that
the use of such financial futures contracts or options thereon is
unleveraged.
<PAGE>
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 ("U.S. Government Securities"); 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, to
invest cash receipts in the ordinary course of business and to meet requests
for redemption of Fund shares.
U.S. Government Securities. The U.S. Government Securities in which
the Fund may invest include, but are not limited to, the following:
o direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds;
o notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full faith
and credit of the United States;
o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
o notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.
Some of the short-term U.S. Government Securities the Fund may
purchase may 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 purchase by the Fund.
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 by the Fund.
Equity Investment Considerations
As described above, the Fund invests primarily in the common stocks
comprising the S&P SmallCap 600. 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 in value over short
or even extended periods of time, and the U.S. equity market tends to be
cyclical, experiencing both periods when stock prices generally increase and
periods when stock prices generally decrease.
Furthermore, because the Fund invests primarily in small capitalization
stocks, there are some additional risk factors associated with investments
in this Fund. Small capitalization stocks have historically been more
volatile in price than larger capitalization stocks, such as those included
in the Standard & Poor's Daily Stock Price Index of 500 Common Stocks (the
"S&P 500 Index"). This is because, among other things, smaller companies
have a lower degree of liquidity in the equity market and tend to have a
greater sensitivity to changing economic conditions. In addition to
exhibiting greater volatility, these stocks may, to some degree, fluctuate
independently of the stocks of large companies. That is, the stocks of small
capitalization companies may decline in price as the price of large company
stocks rise, or vice versa. Therefore, investors should expect that there
will be periods of time when the Fund will exhibit greater volatility than
broad stock market indices such as the S&P 500 Index.
<PAGE>
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 stocks and bonds,
derivatives do not necessarily present greater market risks than traditional
investments. The Fund will use derivative contracts and securities only for
the purposes disclosed in the applicable prospectus sections above. To the
extent that the Fund invests in contracts or securities that could be
characterized as derivatives, it will do so only in a manner consistent with
its investment objective, 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 at a set price) except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets, including the
amount borrowed, and pledge securities to secure such borrowings.
With respect to 75% of the value of its total assets, the Fund will not
invest more than 5% of the value of its total assets in the securities of
any one issuer (other than cash; cash items; U. S. Government Securities and
repurchase agreements collateralized by such U.S. government securities; and
securities of other investment companies).
The above investment limitations and certain other investment limitations
described in the Statement cannot be changed without shareholder approval.
Independence One Mutual Funds Information
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 and sale of portfolio securities
and instruments, for which the Adviser receives an annual fee from the
assets of the Fund.
Advisory Fees. The Adviser is entitled to receive an annual investment
advisory fee equal to 0.50% 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.
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 fourth largest bank holding company in
terms of total assets, as of December 31, 1997, $9.583 billion, 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 $11.4
billion. Of this amount, IOCM and the Trust Division have investment
discretion over $2.2 billion.
Michigan National Bank has managed mutual funds since May 1989. The
Trust Division has managed pools of commingled funds since 1964.
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 such
securities.
Sharon Dischinger is Second Vice President and Portfolio Manager for
Michigan National Bank and IOCM 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 analyses,
and assists the Adviser in identifying securities for potential purchase
and/or sale by the Fund's portfolio. For the services provided and the
expenses incurred by the Sub-Adviser pursuant to the sub-advisory agreement
with the Adviser, the Sub-Adviser is entitled to receive an annual fee, to
be paid by the Adviser, of 0.05% of the average daily value of the Fund's
equity securities. 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 Tom Sosnoff, its Director and President, and Scott Sheridan,
its Director, Executive Vice-President and Secretary. Messrs. Sosnoff and
Sheridan are experienced in providing index management services to numerous
clients, including investment companies. 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 (the "Distributor"). 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
services at an annual rate as specified below:
Maximum Average Aggregate Daily
Administrative Fee Net Assets of the Trust
---------------------- ------------------------------------
.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
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, cash and other assets of the Fund.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio securities and 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
securities or 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
Advisers and Federated Administrative Services may voluntarily waive and/or
reimburse some expenses.
Net Asset Value
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 of the Fund outstanding.
Investing in the Fund
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 contacting directly
their authorized broker. Payments may be made by either check or wire
transfer of federal funds.
Orders must be received by 4:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price. For shares purchased directly from the
Distributor, payment by wire or check must also be received before 4:00 p.m.
(Eastern time) on that day. It is the responsibility of Michigan National
Bank, Independence One or authorized brokers to transmit orders that were
received before 4:00 p.m. (Eastern time) 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 such a transmitted 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 Small Cap 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 Small Cap 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.
Authorized brokers may charge customary fees and commissions for handling
shareholders' purchase orders.
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) the
following holidays: New Year's Day, Martin Luther King, Jr. 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 (the
"Transfer Agent") 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 brokers 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 semi-annually. 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 an 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 by calling
1-800-334-2292.
<PAGE>
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, policies and
limitations 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 Equity Plus Fund, Independence One
International Equity 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.
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 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 be completed before the Fund will accept such requests. 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 an 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 from the Fund into a participating 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 10-52, Farmington Hills,
Michigan 48333-9065.
Any shares held in certificate form cannot be exchanged by telephone but
must be forwarded to the Transfer Agent by a Michigan National Bank or
Independence One representative or an authorized broker and deposited to the
shareholder's account before being exchanged.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
Written Exchange. A shareholder wishing to make an exchange by written
request may do so by sending it to: Independence One Mutual Funds, 27777
Inkster Road, Mail Code 10-52, Farmington Hills, Michigan 48333-9065. In
addition, an investor may exchange shares by sending a written request to
its 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 an authorized broker. Although the Transfer Agent
generally 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. Authorized brokers may charge customary fees and
commissions for this service. If at any time, the Fund were to 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 be completed before the Fund will accept such requests. 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 an 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, if any, the account number, and
the share or dollar amount requested. Shareholders redeeming through
Michigan National Bank or Independence One should mail written requests to:
Independence One Mutual Funds, 27777 Inkster Road, Mail Code 10-52,
Farmington Hills, Michigan 48333-9065. Investors redeeming through
authorized brokers should mail written requests directly to their brokers.
If share certificates have been issued, they must be properly endorsed and
must be sent (registered or certified mail is recommended) 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:
o 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");
o a member of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
o a savings bank or savings association whose deposits are insured
by the Savings Association Insurance Fund, which is administered
by the FDIC; or
o any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934, as amended.
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 redemption 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 made 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, other than retirement accounts subject to required minimum
distributions. A shareholder may apply for participation in this program
through Michigan National Bank by calling 1-800-334-2292.
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 or exchanges. 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.
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 currently
prohibit a bank holding company registered under the Bank Holding Company
Act of 1956, as amended, 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 the Trust's
counsel, that they may perform these services for the Trust as contemplated
by the agreements 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.
Tax Information
Federal Income Tax
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code of 1986, as amended, 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, paid by the Fund. This applies whether dividends or
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 SEC) 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 semiannual 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, as described in the
Statement.
Standard & Poor's
"Standard & Poor's(R)", "S&P(R)", and "S&P SmallCap 600(R)" are trademarks
of the McGraw-Hill Companies, Inc. and have been authorized for use by
Michigan National Bank ("MNB"). 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 SmallCap 600 Index ("S&P SmallCap 600") to track
general stock market performance. S&P's only relationship to MNB is
permitting the use of certain trademarks and trade names of S&P and of the
S&P SmallCap 600 which is determined, composed and calculated by S&P without
regard to MNB or the Fund. S&P has no obligation to take the needs of MNB or
the owners of the Fund into consideration in the determination of the timing
of, prices at, or quantities of, shares of the Fund to be issued or in the
determination or calculation of the equation by which the Fund may 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
SMALLCAP 600 OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY MNB, OWNERS OF THE FUND, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P SMALLCAP 600 OR ANY DATA
INCLUDED THEREIN IN CONNECTION WITH THE USES PERMITTED 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 SMALLCAP 600 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.
<PAGE>
Independence One Mutual Funds Independence One
Small Cap Fund
Independence One Small Cap Fund (A Portfolio of Independence One
5800 Corporate Drive Mutual Funds)
Pittsburgh, Pennsylvania 15237-7010
Prospectus dated June __, 1998
Investment Adviser
Michigan National Bank Federated Securities Corp.
27777 Inkster Road Distributor
Mail Code 10-52 A subsidiary of Federated
Farmington Hills, Michigan 48333-9065 Investors
Federated Investors Tower
Sub-Adviser Pittsburgh, PA 15222-3779
Sosnoff Sheridan Corporation
440 South LaSalle Street CUSIP ______
Suite 2301 G00____ (6/98)
Chicago, Illinois 60605
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Custodian
Michigan National Bank
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
Transfer Agent and
Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8609
Boston, Massachusetts 02266-8609
Independent Auditors
KPMG Peat Marwick LLP
One Mellon Bank Center
Pittsburgh, Pennsylvania 15219
Independence One Small Cap Fund
(A Portfolio of Independence One Mutual Funds)
Statement of Additional Information
This Statement of Additional Information (the "Statement") should be read
with the prospectus of Independence One Small Cap Fund (the "Fund"), a
portfolio of Independence One Mutual Funds (the "Trust") dated June __,
1998. This Statement is not a prospectus.
You may request a copy of a prospectus free of charge by calling
1-800-334-2292.
Independence One Small Cap Fund
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Statement dated June __, 1998
FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip _________
GO_______ (6/98)
<PAGE>
Table of Contents
[TO BE ADDED]
<PAGE>
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 Fund's investment
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 Securities
The types of U.S. government securities 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 ("U.S.
Government Securities"). These securities are backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to
purchase certain obligations of agencies or
instrumentalities; or
o the credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities which may not always
receive financial support from the U.S. government are: Farm
Credit 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; Fannie Mae (formerly, the 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:
o instruments 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");
o commercial paper issued by domestic or foreign
corporations rated A-1 by Standard & Poor's ("S&P")
Prime-1 by Moody's Investors Service, Inc., or F-1 by
Fitch, Inc. or, if unrated, of comparable quality as
determined by the Fund's investment adviser;
o time 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
o bankers' 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 investment 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 margin," 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. These transactions are 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 enter into loan arrangements only
with broker/dealers, banks, or other institutions which the
Fund's investment adviser has determined are creditworthy. The
Fund 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 were to 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 have the right to vote,
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%.
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 investment activities.
Investing in Real Estate
The Fund will not purchase or sell real estate, although it may
invest in the securities of issuers whose business involves the
purchase or sale of real estate or in securities which are
secured by real estate or interests in real estate.
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, as amended, 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
total assets, the Fund will not purchase securities of any one
issuer (other than cash; cash items; U.S. Government Securities
and repurchase agreements collateralized by such U.S. Government
Securities; and securities of other investment companies) if, as
a result, more than 5% of the value of its total assets would be
invested in the securities of that issuer, or it would own more
than 10% of the voting securities of that 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 U.S. Government
Securities, 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 1.5%. However, these limitations are not applicable if
the securities are acquired in a merger, consolidation,
reorganization, or acquisition of assets. It should be noted
that investment companies incur certain expenses, such as
investment advisory, 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 Illiquid and Restricted Securities
The Fund will not invest more than 15% of the value of its net
assets in illiquid securities including certain restricted
securities not determined to be liquid under criteria
established by the Trustees including non-negotiable time
deposits, repurchase agreements providing for settlement in more
than seven days after notice, and over-the-counter options.
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.
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 the investment limitations stated above.
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.
<PAGE>
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
Berry Enterprises
290 Franklin Center
29100 Northwestern Highway
Southfield, MI
Birthdate: September 17, 1925
Trustee
Managing Partner, Berry Enterprises; Chairman, Independent Sprinkler
Companies, Inc.; Chairman, Berry, Ziegelman & Company.
Nathan Forbes*
P.O. Box 667
Southfield, Michigan
Birthdate: December 5, 1962
Trustee
President, The Forbes Company.
Harry J. Nederlander+
231 S. Old Woodward, Suite 219
Birmingham, MI
Birthdate: September 5, 1917
Trustee
Chairman, Nederlander Enterprises.
Thomas S. Wilson+
Two Championship Drive
Auburn Hills, MI
Birthdate: October 8, 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.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
Fund Ownership
Officers and Trustees own less than 1% of the outstanding shares of the
Fund.
<PAGE>
Trustees' Compensation
---------------------------------------------------------------------------
NAME, AGGREGATE COMPENSATION
POSITION WITH FROM
THE TRUST THE TRUST*
---------------------------------------------------------------------------
Robert E. Baker $
Trustee
Harold Berry $
Trustee
Nathan Forbes $
Trustee
Harry J. Nederlander $
Trustee
Thomas S. Wilson $
Trustee
---------------------------------------------------------------------------
* Information is furnished for the fiscal year ended April 30, 1998. The
Trust is the only Investment Company in the Fund Complex. The
aggregate compensation is provided for the Trust which is comprised of
nine portfolios. The Fund had not commenced operations as of April 30,
1998 and did not pay any compensation to the Trustees prior to
commencing operations. Each of the portfolios of the Trust, including
the Fund, pays a portion of the aggregate compensation of the Trustees
in direct proportion to its respective average net assets.
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 of the Fund 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 the Adviser,
except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon the Adviser 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.
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.
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 to execute securities transactions
for the Fund, including brokers that offer brokerage and research services
in connection with executing transactions. The Adviser and its affiliates
determine in good faith that commissions charged by such brokers are
reasonable in relation to the value of the brokerage and research services
provided.
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 Fund
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 investments or 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 Fund or the
size of the position obtained or disposed of by the Fund. In other cases,
however, it is believed that coordination and the ability to participate in
volume transactions will be to the benefit of the Fund.
Other Services
Trust Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for the fees set
forth in the prospectus.
Custodian
Michigan National Bank, Farmington Hills, Michigan, is custodian for the
securities, cash and other assets of the Fund. For the services to be
provided to the Fund pursuant to the Custodian Agreement between the Trust
and the custodian, the Fund pays the custodian an annual fee that is based
upon the average daily net assets of the Fund and is payable monthly. The
Fund will also pay the custodian 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 the transfer agent for the shares
of the Fund and dividend disbursing agent for the Fund.
Independent Auditors
The firm of independent auditors for the Fund is KPMG Peat Marwick LLP,
Pittsburgh, Pennsylvania.
Purchasing Shares
Shares of the Fund 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
income 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 business day. The business 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, according to the latest bid prices;
o for bonds and other fixed income securities, other than short-term
obligations, 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.
<PAGE>
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 on which they trade 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 its 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 its 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 it deems appropriate from the Fund's
portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission ("SEC") rules, taking such securities at the same value
employed in determining net asset value for the Fund 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 under the Investment
Company Act of 1940, as amended, under which the Fund is obligated to redeem
shares during any 90-day period for any one shareholder in cash only up to
the lesser of $250,000 or 1% of the Fund's net asset value at the beginning
of such 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 of 1986, as
amended, 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:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o invest in securities within certain statutory limits for
diversification purposes; and
o 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.
<PAGE>
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
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 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 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; or
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 SmallCap 600 Composite Stock Price Index, and
Standard & Poor's Composite Index of 500 Stocks, which are
composite indices of common stocks in industry, transportation,
and financial and public utility companies, can be compared to
the total returns of funds whose portfolios are invested
primarily in common stocks. In addition, the Standard & Poor's
indices assume reinvestment of all dividends paid by stocks
listed on the 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 and 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 effects on the
securities markets. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analyses
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, thirty-seven percent of American households are pursuing their
financial goals through mutual funds. These investors, as well as businesses
and institutions, have entrusted over $3.5 trillion to the more than 6,000
funds available.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements: To be filed by amendment.
(b) Exhibits:
(1) Conformed Copy of Declaration of Trust of the Registrant;
(1.)
(i) Conformed Copy of Amendment No. 1 to the Declaration of Trust dated
January 9, 1989; (2.)
(ii) Conformed Copy of Amendment No. 2 to the Declaration of Trust dated
January 9, 1989; (2.)
(iii) Conformed Copy of Amendment No. 3 to the Declaration of Trust dated
January 9, 1989; (4.)
(iv) Conformed Copy of Amendment No. 4 to the Declaration of Trust. dated
April 8, 1991; (6.)
(v) Conformed Copy of Amendment No. 5 to the Declaration of Trust. dated
September 26, 1991; (6.)
(vi) Conformed Copy of Amendment No. 6 to the Declaration of Trust. dated
December 9, 1991; (10.)
(vii) Conformed Copy of Amendment No. 8 to the Declaration of Trust, dated
December 6, 1994; (10.)
(viii) Conformed Copy of Certification dated December 6, 1994; (10.)
(ix) Conformed Copy of Amendment No. 9 to the Declaration of Trust dated
May 4, 1995; (12.)
- --------------------
+All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed on January 13, 1989. (File Nos. 33-26516 and
811-5752)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed on May 5, 1989. (File Nos. 33-26516 and
811-5752)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed on June 27, 1990. (File Nos. 33-26516
and 811-5752)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed June 24, 1992. (File Nos. 33-26516 and
811-5752)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed February 8, 1995. (File Nos. 33-26516
and 811-5752)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on June 28, 1995. (File Nos. 33-26516
and 811-5752)
<PAGE>
(2) Copy of By-Laws of the Registrant; (1.)
(3) Not applicable;
(4) (i) Copy of Specimen Certificate for Shares of Beneficial Interest of
Independence One U.S. Government Securities
Fund; (7.)
(ii) Copy of Specimen Certificate for Shares of
Beneficial Interest of Independence One Equity
Plus Fund, Independence One Fixed Income Fund,
and Independence One Michigan Municipal Bond
Fund; (14.)
(iii) Copy of Specimen Certificate for Shares of
Beneficial Interest of Independence One U.S.
Treasury Money Market Fund; (2.)
(iv) Copy of Specimen Certificates for Shares of
Beneficial Interest of Independence One Michigan
Municipal Cash Fund and Independence One Prime
Money Market Fund-Class A Shares and Class B
Shares; (16.)
(iv) Copy of Specimen Certificates for Shares of Beneficial Interest of
Independence One Small Cap Fund and
Independence One International Equity Fund ;+
(5) Conformed copy of Investment Advisory Contract of the
Registrant as amended; (8.)
(i) Conformed copy of Investment Sub-Advisory Contract for Independence
One U.S. Government Securities Fund; (8.)
(ii) Conformed copy of Exhibit G to the Present Investment Advisory
Contract of the Registrant to add Independence
One Fixed Income Fund to the Present Investment Advisory
Contract of the Registrant; (14.)
(iii) Conformed copy of Exhibit H to the Present Investment Advisory
Contract of the Registrant to add Independence
One Michigan Municipal Bond Fund to the Present
Investment Advisory Contract of the Registrant; (14.)
- --------------------
+All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed on January 13, 1989. (File Nos. 33-26516 and
811-5752)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed on May 5, 1989. (File Nos. 33-26516 and
811-5752)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed September 2, 1992. (File Nos. 33-26516
and 811-5752)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed June 24, 1993. (File Nos. 33-26516 and
811-5752)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed on August 29, 1995. (File Nos. 33-26516
and 811-5752)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on June 28, 1996. (File Nos. 33-26516
and 811-5752)
<PAGE>
(iv) Conformed copy of Exhibit I to the Present
Investment Advisory Contract of the Registrant to
add Independence One Equity Plus Fund to the
Present Investment Advisory Contract of the
Registrant; (14.)
(v) Conformed copy of Exhibit H to the Present Investment Advisory
Contract of the Registrant to add Independence
One International Equity Fund; +
(vi) Conformed copy of Exhibit I to the Present Investment Advisory
Contract of the Registrant to add Independence
One Small Cap Fund; +
(vii) Conformed copy of Investment Sub-Advisory
Agreement for Independence One Equity Plus Fund; (14.) (6)
Conformed Copy of Distributor's Contract of Registrant
through and including Exhibit C; (16.)
(i) Conformed Copy of Exhibit D to the Distributor's
Contract; (10.) (ii) Conformed Copy of Exhibit E to the
Distributor's Contract; (10.)
(iii) Conformed copy of Exhibit F to the Distributor's
Contract; (13.) (iv) Conformed copy of Exhibit G to the
Distributor's Contract; (13.)
(v) Conformed copy of Exhibit H to the Distributor's Contract; (13.)
(vi) Conformed copy of Exhibit I to the Distributor's Contract; (13.)
(vii) Conformed copy of Exhibit J to the Distributor's Contract; (13.) +
(viii) Conformed copy of Exhibit K to the Distributor's Contract; (13.) +
(7) Not applicable;
(8) (i) Conformed Copy of Custodian Agreement of the Registrant through and
including Exhibit A; (16.)
(a) Conformed Copy of Amendment No. 2 to Exhibit A of the Custodian
Agreement; +
(ii) Conformed Copy of the Agency Agreement of the
Registrant; (3.) (iii) Conformed Copy of the
Administrative Services Agreement of the Registrant;
(16.)
(iv) Conformed Copy of Amendment No. 1 to Exhibit A of Agency Agreement
of the Registrant; (7.)
- --------------------
+All exhibits have been filed electronically.
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed on December 12, 1989. (File Nos.
33-26516 and 811-5752)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed September 2, 1992. (File Nos. 33-26516
and 811-5752)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed February 8, 1995. (File Nos. 33-26516
and 811-5752)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed on July 25, 1995. (File Nos. 33-26516
and 811-5752)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed on August 29, 1995. (File Nos. 33-26516
and 811-5752)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on June 28, 1996. (File Nos. 33-26516
and 811-5752)
<PAGE>
(9) (i) Conformed Copy of Agreement for Fund
Accounting, Shareholder Recordkeeping, and
Custody Services Procurement;(10.)
(a) Amendment to Exhibit 1 of the Agreement for Fund
Accounting, Shareholder Recordkeeping, and
Custody Services Procurement; +
(ii) Conformed copy of Shareholder Services Plan; (13.)
(iii) Conformed Copy of Exhibit 1 to the Shareholder
Services Plan of the Registrant; (12.) (iv) Conformed
copy of of Shareholder Services Agreement (Amended and
Restated 9/19/95); (15.)
(v) Conformed Copy of Exhibit 1 to the Shareholder
Services Agreement of the Registrant; (12.) (10) Conformed
Copy of Opinion and Consent of Counsel as to legality of
shares being registered; (16.)
(11) Conformed Copy of Independent Auditors Consent;(18.)
(12) Not applicable;
(13) Conformed Copy of Initial Capital Understanding; (16.)
(14) Not applicable;
(15) (i) Conformed Copy of Distribution Plan through and
including Exhibit A; (16.)
(ii) Copy of Sales Agreement with Federated Securities Corp. and
Administrative Agreement - Appendix B; (2.)
(iii) Conformed copy of Exhibit B of Distribution Plan; (8.)
(iv) Copy of Schedule A of Sales Agreement with Federated Securities
Corp.; (7.)
(v) Copy of Fee Schedule for Rule 12b-1 Agreement with Federated Securities
Corp.; (7.)
- -
+All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed on May 5, 1989. (File Nos. 33-26516 and
811-5752)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed September 2, 1992. (File Nos. 33-26516
and 811-5752)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed June 24, 1993. (File Nos. 33-26516 and
811-5752)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed February 8, 1995. (File Nos. 33-26516
and 811-5752)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on June 28, 1995. (File Nos. 33-26516
and 811-5752)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed on July 25, 1995. (File Nos. 33-26516
and 811-5752)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed on December 5, 1995. (File Nos.
33-26516 and 811-5752)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on June 28, 1996. (File Nos. 33-26516
and 811-5752)
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed on June 25, 1997. (File Nos. 33-26516
and 811-5752)
<PAGE>
(16) (i) Copy of Schedule for Computation of
Performance Data (Return) for Independence One
Equity Plus Fund;(15.)
(ii) Copy of Schedule for Computation of Performance
Data (SEC Yield) for Independence One Equity Plus
Fund; (15.)
(iii) Copy of Schedule for Computation of Performance
Data (Return) for Independence One Fixed Income
Fund; (15.)
(iv) Copy of Schedule for Computation of Performance
Data (SEC Yield) for Independence One Fixed
Income Fund; (15.)
(v) Copy of Schedule for Computation of Performance
Data (Return) for Independence One Michigan
Municipal Bond Fund; (16.)
(vi) Copy of Schedule for Computation of Performance
Data (SEC Yield) for Independence One Michigan
Municpal Bond Fund; (16.)
(vii) Copy of Schedule for Computation of Performance
Data for Independence One Money Market Funds and
Independence One U.S. Government Securities Fund;
(3.)
(17) Copy of Financial Data Schedules; (18.) (18) Conformed
Copy of 18f-3 Plan; (17.) (19) Conformed Copy of Power of
Attorney; (16.)
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
- --------------------
+All exhibits have been filed electronically.
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed on December 12, 1989. (File Nos.
33-26516 and 811-5752)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed on June 27, 1990. (File Nos. 33-26516
and 811-5752)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed on December 5, 1995. (File Nos.
33-26516 and 811-5752)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed on June 28, 1996. (File Nos. 33-26516
and 811-5752)
17. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed on August 26, 1996. (File Nos. 33-26516
and 811-5752)
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed on June 25, 1997. (File Nos. 33-26516
and 811-5752)
<PAGE>
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class Portfolio name as of February 12, 1998
-------------- -------------- ------------------------
Shares of Independence One Prime
beneficial Money Market Fund (Class A) 3,174
interest
Independence One Prime
Money Market Fund (Class B) 21
Independence One U.S. 860
Treasury Money Market Fund
Independence One Michigan 843
Municipal Cash Fund
Independence One U.S. 16
Government Securities Fund
Independence One Michigan 9
Municipal Bond Fund
Independence One Equity 130
Plus Fund
Independence One Fixed 10
Income Fund
Independence One Small Cap Fund Not yet effective
Independence One International
Equity Fund Not yet
effective
Item 27. Indemnification: (4.)
Item 28. Business and Other Connections of Investment Adviser:
Michigan National Bank, a national banking association (the
"Adviser"), is a wholly owned subsidiary of Michigan National
Corporation ("MNC"). Through its subsidiaries and affiliates, MNC,
Michigan's fifth largest bank holding company in terms of total
assets, as of December 31, 1996, offers a full range of financial
services to the public including commercial lending, depository
services, cash management, brokerage services, retail banking,
credit card services, mortgage banking, investment advisory services
and trust services. Independence One Capital Management Corporation
("IOCM"), a nationally recognized investment advisory subsidiary of
MNC, provides investment advisory services for trust and other
managed assets. IOCM and the Trust Division have 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. For more information on the business of
the Adviser, see the Prospectus under the heading "Management of the
Trust--Investment Adviser."
The officers and directors of the Adviser and any other business,
profession, vocation or employment of a substantial nature in which
each such officer and director is or has been engaged during the
past two years is set forth below. Unless otherwise noted, the
position listed under Other Business, Profession, Vocation or
Employment is with Michigan National Bank. The business address of
each such director and officer is 27777 Inkster Road, Farmington
Hills, Michigan, 48333-9065.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Other Substantial Business
Position with Profession,Vocation or
Name the Adviser Employment
John S. Carton Director Director, Michigan National Corporation; Chairman,
President, and CEO, Development Company.
Sidney E. Forbes Director Director, Michigan National Corporation; Partner,
Forbes/Cohen Properties.
Other Substantial
William F. Pickard Director Director, Michigan National Corporation, Chairman
and Chief Executive Officer, Regal Plastics
Company.
Douglas E. Ebert Director, Chief Executive Officer,
and Chief Michigan National Corporation
Executive Officer
Stephen A. VanAndel Director Director, Michigan National Corporation; Vice President
and Chairman, Amway Corporation.
James A. Williams Chairman Chairman, Michigan National Corporation; Chairman and
President Williams, Schaefer, Ruby &
Williams.
Lawrence L. Gladchun General General Counsel and
Counsel and Secretary, Michigan National
Secretary Corporation.
Richard C. Webb Head CFS Head, Commercial Financial
Services, Michigan National
Corporation.
Robert V. Panizzi Controller Michigan National
Corporation.
Kuldeep Kishore Head of Strategic Head of Strategic
Brian Black Head of Consume Head of Consumer Financial
Financial Services Services, Michigan National
Corporation
Susan Barbour Head of Business Head of Business Financial
Services Services, Michigan National
Corporation
Robert Hutchinson Head of Channel Michigan National Corporation
Management
Wayne Rees Chief Operating Chief Operating Officer,
Officer Michigan National Corporation.
Charles Van Swearingen Chief Financial Chief Financial Officer,
Officer Michigan National Corporation.
Errol Talbott Head/Risk Head of Risk Management,
Management Michigan National Corporation.
Joseph L. Fritzsche Head/Human Head of Human Resources,
Resources Michigan National Corporation.
Kay Thawley Head/Marketing Head of Marketing, Michigan
National Corporation
Mickey Brown Head/Operations Head of Operations and
and Information Information Technology,
Technology Michigan National Corporation.
Ronald R. Dobbins Director Director, Michigan National
Corporation, CEO United
Healthcare Corp.
James B. Meyer Director Director, Michigan National
Corporation, President and
Chief Operating Officer,
Spartan Stores, Inc.
Robert E. Prowse Director Director, Michigan National
Corporation, Group General
Manager, U.S.A. & Asia-NAB
</TABLE>
National Australia Bank Limited ("NAB") is a transnational banking
organization headquartered at 500 Bourke Street, Melbourne, Australia. NAB is a
publicly owned company, whose shares are widely held and traded on the
Australian Stock Exchange Limited. On February 4, 1995, the Board of Directors
of MNC approved a definitive agreement for the acquisition (the "Merger") of MNC
by NAB. Shareholders of MNC approved the Merger on June 2, 1995. As a result,
MNC and its subsidiaries, including the Adviser, would become direct or indirect
subsidiaries of NAB upon completion of the Merger. The Merger was completed on
November 2, 1995 and Operations will continue to be conducted under the Michigan
National Corporation and Michigan National Bank names.
On May 4, 1995, the Trust's Board of Trustees approved the present
investment advisory contract (the "Present Advisory Contract") between the
Trust, on behalf of Independence Once Equity Plus Fund, Independence One Fixed
Income Fund and Independence One Michigan Municipal Bond Fund (collectively, the
"Portfolios"), and Michigan National Bank, as a subsidiary of MNC. Under the
provisions of the Investment Company Act of 1940, completion of the Merger
resulted in an assignment, and termination of the Portfolios' Present Advisory
Contract with the Adviser. Also on May 4, 1995, the Portfolios' Board of
Trustees approved a new investment advisory contract (the "New Advisory
Contract") between the Trust, on behalf of the Portfolios, and Michigan National
Bank, as a subsidiary of NAB. The New Advisory Contract became effective upon
consummation of the Merger.
The following information appeared in NAB's Annual Report for its fiscal
year ended September 30, 1995.
NAB, together with its subsidiaries (collectively, the "Group"), is one of
the four major Australian commercial banks ("trading banks" in Australian
terminology) which together account for approximately 67.7% of commercial
banking assets in Australia as of September 1995, according to the Reserve Bank
of Australia Bulletin. The Group undertakes a range of banking, financial and
related activities in Australia and elsewhere in the world, including commercial
banking, savings banking, finance and life insurance and merchant and investment
banking. As of September 30, 1996, Group assets totalled A$173.7 billion, of
which approximately 54.1% was domiciled in Australia, and Group deposits and
borrowings totalled A$90.8 billion, of which approximately 50.4% was domiciled
in Australia+.
NAB was established as "The National Bank of Australasia" in 1858 in
Victoria, Australia. Through internal expansion and the acquisition of other
banks, NAB developed into a national commerical bank. In its present form, NAB
is the product of the merger in 1981 of The National Bank of Australasia Limited
and Commerical Banking Company of Sydney Limited, the latter Bank being
established in 1834 in New South Wales, Australia.
At September 30, 1996 the Group had 52,567 full-time and part-time
employees worldwide.
Banking, the Group's principal business activity, is conducted in
Australia by NAB and internationally by NAB and certain subsidiaries. As of
September 30, 1995, NAB was the second largest commercial bank in Australia
(according to the Reserve Bank of Australia Bulletin) based on domestic assets
of $85 billion. The Group is the largest Australian banking group based on its
global assets of A$147.1 billion+.
Consistent with its philosophy of providing customers with a comprehensive
range of financial products and services, in 1985 the Group established a life
insurance and funds management entity, National Australia Financial Management
Limited. This entity and its subsidiaries provide the Australian market with a
range of personal financial planning services, personal life and disability
insurance, personal superannuation and managed investments, corporate
superannuation, group life insurance and various investment management services.
At September 30, 1995, funds under managment amounted to A$3.7 billion. Two of
the Group's banking subsidiaries in the United Kindom, Yorkshire Bank and
Northern Bank, offer certain insurance and investment products through
subsidiaries, mainly in the areas of funds managment and other investment
related products.
At November 11, 1995, the directors* and principal executive officer of
NAB were as follows:
- ----------------
+These figures reflect Australian dollars.
*The Directors of NAB are classified as either Executive or Non-Executive,
with the former being those Directors engaged in the
full-time employment of NAB. Mr. Donald Argus is the only Executive Director.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Position Position/Directorship Principal
with NAB Held Since Occupation(s)
William Robert 1992/1979 Barrister and Chairman and
Mitchel Irvine Director/Solicitor; Director,
Bank of New Zealand; Chairman,
National Australia Financial Managment
Limited and National Australia Group
(UK) Limited; former Partner,
Hedderwick Fookes & Alston,
Solicitors.
Brian Thorley Loton 1992/1988 Chairman, The
Vice-Chariman Broken Hill and Director
Proprietary Company Limited; Director,
Amcor Limited and Australian
Foundation Investment Company Limited;
Alternate Director, National Australia
Group (UK) Limited; former Managing
Director, The Broken Hill Proprietary
Company Limited.
David Kennedy Macfarlane 1992/1985 Chairman
NAB's Principal Board Audit Committee;
Chairman of National Australia Asset
Management Limited and Alternate
Director, National Australia Group
(UK)) Limited; 33 years' experience
with James Hardie Industries Limited,
12 years of which as Managing
Director.
Donald Robert Argus 1990/1989 National Bank of New Zealand, Managing Director and Clydesdale Bank PLC National
Chief Executive Officer Australia Financial Management Limited, National Australia Group
(UK) Limited, National Irish Bank , Limited Northern Bank Limited and Yorkshire
Bank PLC.
David Charles 1992 Director, Woodside Petroleum Keith Allen Limited and a member of the
Principal Board Audit
Committee.
Peter John Waraker 1985 Chairman, Director Email
Cottrell Limited.
Dr. Christopher Michael 1992 Non-Executive Director
Deeley North Limited; former Managing Director and Chairman Director and Chief Executive,
ICI Australia Limited.
David Alexander Tange 1981 Alternate Director, Bank of
Dickens New Zealand; former Partner,
Director Court & Co. Chartered
Accountants; former Director, The
Commercial Banking Company of
Sydney Limited.
<PAGE>
The Lord Nickson 1991 Chairman, Director, Clydesdale Bank PLC; Director,
National Australia Group (UK) Limited.
Mark Richard Rayner 1985 Director and
Director Group Executive, CRA Limited; Deputy
Chairman and former Managing Director,
Comalco Limited, Chairman, Pasminco
Limited; member of NAB's Principal
Board Audit Committee.
Joseph Charles Trethowan 1984 Vice Chairman
Director of Directors and Chairman, Audit
Committee of National Australia
Financial Managment Limited; member of
NAB's Principal Board Audit Committee;
former Chairman and General Manager,
State Electricity Commission of
Victoria.
Andrew Trunbull 1992 Non-Executive
Director Chairman and former Managing Director and Chief Executive
Officer, Burns Philip and Company
Limited.
Sir Bruce Dunstan Watson 1992 Former
Director Chairman, Director, and Chief Executive Officer, MIM Holdings
Limited.
CM Walter 1995 Solicitor, former Partner, Clayton Utz; Director of Ampolex
Limited, SGIO Insurance Limited and Melbourne Business School
Limited; Commissioner of City of Melbourne.
</TABLE>
The address of the Directors and principal executive officer of NAB is c/o 500
Bourke Street, Melbourne, Australia.
<PAGE>
Item 29. Principal Underwriters:
(a) Federated Securities Corp. the Distributor for shares of the Registrant,
acts as principal underwriter for the following open-end investment
companies, including the Registrant:
111 Corcoran Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The Virtus
Funds; The Wachovia Funds; The Wachovia Municipal Funds; Tower Mutual Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
Vision Group of Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Richard B. Fisher Director, Chairman, Chief
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice President and Treasurer
Federated Investors Tower President, Federated,
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promulgated thereunder are maintained at one of the following
locations:
Independence One Mutual Funds 5800 Corporate Drive
(Registrant) Pittsburgh, PA 15237-7010
Federated Services Company P.O. Box 8609
("Transfer Agent, Dividend Boston, Massachusetts 02266-
Disbursing Agent and Portfolio 8609
Recordkeeper")
Federated Administrative Services Federated Investors Tower
(Administrator) 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michigan National Bank 27777 Inkster Road
(Adviser) Mail Code 10-52
Farmington Hills, MI 48333
Michigan National Bank........ 27777 Inkster Road
Mail Code 10-52
(Custodian) Farmington Hills, MI 48333
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus for any portfolio in the Trust is delivered with a copy
of the Registrant's latest annual report to shareholders, upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, INDEPENDENCE ONE MUTUAL FUNDS,
has duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 2nd day of April, 1998.
INDEPENDENCE ONE MUTUAL FUNDS
BY: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
Attorney in Fact for Edward C. Gonzales
April 2, 1998
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman
Jay S. Neuman Attorney In Fact April 2, 1998
SECRETARY For the Persons
Listed Below
NAME TITLE
Edward C. Gonzales* President and Treasurer
(Chief Executive Officer
and Principal Financial and
Accounting Officer)
Robert E. Baker.* Trustee
Harrold Berry* Trustee
Nathan Forbes Trustee
Harry J. Nederlander* Trustee
Thomas S. Wilson* Trustee
* By Power of Attorney
Exhibit 5(v) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
EXHIBIT H
to the
Investment Advisory Contract
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to 1.00% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of 1.00% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 4th day of March, 1998.
MICHIGAN NATIONAL BANK
By: /s/ Robert J. Stapleton
Name: Robert J. Stapleton
Title: Senior Vice President
INDEPENDENCE ONE MUTUAL FUNDS
By: /s/ Edward C. Gonzales
Name: Edward C. Gonzales
Title: President
Exhibit 5(vi) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
EXHIBIT I
to the
Investment Advisory Contract
INDEPENDENCE ONE SMALL CAP FUND
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to 0.50% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of 0.50% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 4th day of March, 1998.
MICHIGAN NATIONAL BANK
By: /s/ Robert J. Stapleton
Name: Robert J. Stapleton
Title: Senior Vice President
INDEPENDENCE ONE MUTUAL FUNDS
By: /s/ Edward C. Gonzales
Name: Edward C. Gonzales
Title: President
Exhibit 8(i)(a) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AMENDMENT NO 2 TO
EXHIBIT A
CUSTODIAN CONTRACT
PORTFOLIOS OF INDEPENDENCE ONE MUTUAL FUNDS
Independence One Mutual Funds (the "Trust") consists of the following
portfolios (the "Funds") effective as of the dates set forth below:
Name Date
Independence One Prime Money Market Fund June 1, 1989 Independence One Michigan
Municipal Cash Fund June 1, 1989 (formerly Independence One Tax-Free Money
Market Fund) Independence One U.S. Treasury Money Market Fund June 1, 1989
Independence One U.S. Government Securities Fund January 8, 1993 Independence
One Equity Plus Fund September 25, 1995 Independence One Fixed Income Fund
October 23, 1995 Independence One Michigan Municipal Bond Fund November 20,1995
Independence One International Equity Fund March 4, 1998 Independence One Small
Cap Fund March 4, 1998
INDEPENDENCE ONE MUTUAL FUNDS
By: /s/ Edward C. Gonzales
Title: President
Date: March 4, 1998
MICHIGAN NATIONAL BANK
By: /s/ Robert J. Stepleton
Title: Senior Vice President
Date: March 4, 1998
Exhibit 6(vii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit J
to the
Distributor's Contract
INDEPENDENCE ONE MUTUAL FUNDS
Independence One International Equity Fund
In consideration of the mutual covenants set forth in the Distributor's
Contract dated September 26, 1991 between Independence One Mutual Funds and
Federated Securities Corp., Independence One Mutual Funds executes and delivers
this Exhibit on behalf of the Fund, first set forth in this Exhibit.
Witness the due execution hereof this 4th day of March, 1998.
INDEPENDENCE ONE MUTUAL FUNDS
By: /s/ Edward C. Gonzales
Name: Edward C. Gonzales
Title: President
FEDERATED SECURITIES CORP.
By: /s/ Byron F. Bowman
Name: Byron F. Bowman
Title: Vice President
Exhibit 6(viii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit K
to the
Distributor's Contract
INDEPENDENCE ONE MUTUAL FUNDS
Independence One Small Cap Fund
In consideration of the mutual covenants set forth in the Distributor's
Contract dated September 26, 1991 between Independence One Mutual Funds and
Federated Securities Corp., Independence One Mutual Funds executes and delivers
this Exhibit on behalf of the Fund, first set forth in this Exhibit.
Witness the due execution hereof this 4th day of March, 1998.
INDEPENDENCE ONE MUTUAL FUNDS
By: /s/ Edward C. Gonzales
Name: Edward C. Gonzales
Title: President
FEDERATED SECURITIES CORP.
By: /s/ Byron F. Bowman
Name: Byron F. Bowman
Title: Vice President
Exhibit 9(i)(a) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
Amendment to EXHIBIT 1
FA=Fund Accounting
SR=Shareholder Recordkeeping
CONTRACT SERVICES
DATE INVESTMENT COMPANY PROVIDED
Independence One Mutual Funds
6/21/94 Independence One Michigan Municipal Cash Fund SR,FA
Investment Shares
Trust Shares
6/21/94 Independence One Prime Money Market Fund SR, FA
Class A Shares
Class B Shares
6/21/94 Independence One U.S. Government Securities Fund SR, FA
6/21/94 Investment Shares
6/21/94 Trust Shares
6/21/94 Independence One U.S. Treasury Money Market Fund SR, FA
9/25/95 Independence One Equity Plus Fund SR, FA
10/23/95 Independence One Fixed Income Fund SR, FA
11/20/95 Independence One Michigan Municipal Bond Fund SR, FA
3/4/98 Independence One International Equity Fund SR, FA
3/4/98 Independence One Small Cap Fund SR, FA
Exhibit 4(v) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K
INDEPENDENCE ONE MUTUAL FUNDS
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
Number Shares
- ----- -----
Account No. Alpha Code See Reverse Side For
Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP- Applied For
Fully Paid and Non-Assessable Shares of Beneficial Interest of INDEPENDENCE ONE
INTERNATIONAL EQUITY FUND a portfolio of INDEPENDENCE ONE MUTUAL FUNDS hereafter
called the Trust, transferable on the books of the Trust by the owner in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed.
The shares represented hereby are issued and shall be held subject to the
provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed in
its name by its proper officers and to be sealed with its seal.
Dated: INDEPENDENCE ONE MUTUAL FUNDS
Corporate Seal
(1989)
Massachusetts
/s/ Edward C. Gonzales /s/ Edward C. Gonzales
Treasurer President
Countersigned:
Federated Shareholder Services Company(Boston)
Transfer Agent
By:
Authorized Signature
<PAGE>
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations; TEN COM - as tenants in common UNIF
GIFT MIN ACT-...Custodian... TEN ENT - as tenants by the entireties (Cust)
(Minors) JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received__________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
- --------------------------------------
- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
______________________________________________________________________ shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ------------------------------------------ -------------------------------------
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated______________________
NOTICE:______________________________
The signature to this assignment must
correspond with the name as written upon the
face of the certificate in every particular,
without alteration or enlargement or any
change whatever.
All persons dealing with INDEPENDENCE ONE MUTUAL FUNDS, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any claim
against the Trust, as the Trustees, officers, agents or shareholders of the
Trust assume no personal liability whatsoever for obligations entered into on
behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE>
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the page.
Page Two
The social security or other identifying number of the assignee appears in
a box in the top-third upper-left area of the page.
Exhibit 4(v) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K
INDEPENDENCE ONE MUTUAL FUNDS
INDEPENDENCE ONE SMALL CAP FUND
Number Shares
----- -----
Account No. Alpha Code See Reverse Side For
Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP-Applied For
Fully Paid and Non-Assessable Shares of Beneficial Interest of INDEPENDENCE ONE
SMALL CAP FUND a portfolio of INDEPENDENCE ONE MUTUAL FUNDS hereafter called the
Trust, transferable on the books of the Trust by the owner in person or by duly
authorized attorney upon surrender of this certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to the
provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed in
its name by its proper officers and to be sealed with its seal.
Dated: INDEPENDENCE ONE MUTUAL FUNDS
Corporate Seal
(1989)
Massachusetts
/s/ Edward C. Gonzales /s/ Edward C. Gonzales
Treasurer President
Countersigned:
Federated Shareholder Services Company(Boston)
Transfer Agent
By:
Authorized Signature
<PAGE>
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations; TEN COM - as tenants in common UNIF
GIFT MIN ACT-...Custodian... TEN ENT - as tenants by the entireties (Cust)
(Minors) JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received__________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
- --------------------------------------
- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
______________________________________________________________________ shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated______________________
NOTICE:______________________________
The signature to this assignment must
correspond with the name as written upon the
face of the certificate in every particular,
without alteration or enlargement or any
change whatever.
All persons dealing with INDEPENDENCE ONE MUTUAL FUNDS, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any claim
against the Trust, as the Trustees, officers, agents or shareholders of the
Trust assume no personal liability whatsoever for obligations entered into on
behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE>
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the page.
Page Two
The social security or other identifying number of the assignee appears in
a box in the top-third upper-left area of the page.
