PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Annual Report of Independence One U.S. Government
Securities Fund, Independence One Fixed Income Fund, and Independence One
Michigan Municipal Bond Fund, which covers the 12-month reporting period from
May 1, 1997 through April 30, 1998. The report begins with a discussion by the
funds' portfolio managers, followed by a complete list of each fund's holdings
and the financial statements.
The following highlights summarize fund performance over the 12-month reporting
period:
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
This fund's portfolio of U.S. government bonds produced a total return of
10.37%.* Contributing to the total return were an income stream totaling $0.58
per share and a $0.43 increase in the fund's net asset value. At the end of the
reporting period, more than 66% of the holdings consisted of U.S. Treasury
securities, with another 28% invested in U.S. government agency securities. Fund
net assets totaled $70.9 million at the end of the reporting period.
INDEPENDENCE ONE FIXED INCOME FUND
This fund provides a diversified approach to bond investing through a portfolio
that, at the end of the reporting period, consisted of U.S. Treasury securities
(51.6% of portfolio), U.S. government agency bonds, (18.6% of portfolio) and
corporate bonds (26% of portfolio). This diversified bond portfolio produced a
total return of 8.56%.* Contributing to the total return were an income stream
totaling $0.59 per share and a net asset value increase of $0.23. At the end of
the reporting period, fund net assets reached $80.3 million.
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
Designed for tax-sensitive Michigan investors, this fund invests in
investment-grade Michigan municipal bonds to pursue double-tax-free income.+ The
fund's portfolio produced a tax-free income stream totaling $0.42 per share,
while net asset value increased by $0.31. Through income and share price
increase, the fund achieved a total return of 7.38%.* At the end of the
reporting period, fund net assets totaled $21 million.
Thank you for selecting one or more of these Independence One Mutual Funds to
pursue your financial goals. We look forward to keeping you informed about the
progress of your investment.
Sincerely,
LOGO
Edward C. Gonzales
President
June 15, 1998
* Performance quoted reflects past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
+Income may be subject to the alternative minimum tax.
MANAGEMENT DISCUSSION & ANALYSIS
- -------------------------------------------------------------------------------
Overall, the funds' fiscal year was a positive environment for the bond Q
market. What were the significant influences?
A The United States' economy continues to grow robustly with few signs of
inflation pressures. Real gross domestic product grew 3.7% during 1997,
and 4.8% in the first quarter of 1998. The unemployment rate fell to a 28-year
low of 4.3%. Consumer prices and producer prices rose 1.7% and 0.40%
respectively, in 1997. The Federal Reserve Board has left short-term interest
rates unchanged since it raised the Federal Funds target rate to 5.5% in March
1997, but longer maturity interest rates have fallen significantly during the
period. For example, after trading as high as 7.17% in April of last year, the
30-year Treasury bellwether bond fell to an all time low yield of 5.70% in
January of this year.
Q How did the Independence One Bond Funds perform during the 12-month
reporting period ended April 30, 1998?
A The Independence One U.S. Government Securities Fund had a total return of
10.37% for the 12-month period ended April 30, 1998.* The Independence One
Fixed Income Fund earned a total return of 8.56% for the reporting period, and
the Independence One Michigan Municipal Bond Fund earned a total return of 7.38%
for the reporting period.*
Q As we reach mid-year, inflation remains negligible and the U.S. economy
remains strong, while the degree of Asia's impact on the U.S. financial
markets seems uncertain. Could these factors add up to a favorable 1998 for
bonds?
A Yes. Many investors have under-weighted the bond positions in their
portfolio because of the strong equity market performance during the past
three years. In addition, others have taken a wait-and-see approach as they try
to determine whether the recent improvements in the federal deficit and
inflation are sustainable longer term. A continuation of favorable economic
trends should attract more bond investors, especially if the stock markets show
signs of correction. Long-term interest rates have room to fall further in the
year ahead.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so than an
investors' shares, when redeemed may be worth more or less than their original
cost.
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
The graph below illustrates the hypothetical investment of $10,000* in the
Independence One U.S. Government Securities Fund (the "Fund") from January 11,
1993 (start of performance) to April 30, 1998, compared to the Lehman Brothers
Government Bond Index.+
[GRAPHIC REPRESENTATION "A" OMITTED. SEE APPENDIX.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THE ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Brothers Government Bond Index has been adjusted to
reflect reinvestment of dividends on securities in the index.
+The Lehman Brothers Government Bond Index is not adjusted to reflect sales
charges, expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. This index is unmanaged.
INDEPENDENCE ONE FIXED INCOME FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN INDEPENDENCE ONE FIXED INCOME FUND
The graph below illustrates the hypothetical investment of $10,000* in the
Independence One Fixed Income Fund (the "Fund") from October 23, 1995 (start of
performance) to April 30, 1998, compared to the Lehman Brothers Intermediate
Government/Corporate Bond Index.+
[GRAPHIC REPRESENTATION "B" OMITTED. SEE APPENDIX.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THE ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Brothers Intermediate Government/Corporate Bond
Index has been adjusted to reflect reinvestment of dividends on securities in
the index.
+The Lehman Brothers Intermediate Government/Corporate Bond Index is not
adjusted to reflect sales charges, expenses, or other fees that the Securities
and Exchange Commission requires to be reflected in the Fund's performance.
This index is unmanaged.
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
The graph below illustrates the hypothetical investment of $10,000* in the
Independence One Michigan Municipal Bond Fund (the "Fund") from November 20,
1995 (start of performance) to April 30, 1998, compared to the Lehman Brothers
7-Year General Obligations Bond Index.+
[GRAPHIC REPRESENTATION "C" OMITTED. SEE APPENDIX.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THE ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Brothers 7-Year General Obligations Bond Index has
been adjusted to reflect reinvestment of dividends on securities in the index.
+The Lehman Brothers 7-Year General Obligations Bond Index is not adjusted to
reflect sales charges, expenses, or other fees that the Securities and Exchange
Commission requires to be reflected in the Fund's performance. This index is
unmanaged.
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------------------------------------------ -----------
<C> <S> <C>
GOVERNMENT AGENCIES--28.2%
------------------------------------------------------------
FEDERAL HOME LOAN BANK--6.2%
------------------------------------------------
$ 4,000,000 7.20%, Bond, 6/14/2011 $ 4,407,480
------------------------------------------------ -----------
FEDERAL HOME LOAN MORTGAGE CORPORATION--4.4%
------------------------------------------------
3,000,000 6.55%, Bond, 10/2/2002 3,086,280
------------------------------------------------ -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--17.6%
------------------------------------------------
2,500,000 5.82%, Bond, 2/12/2003 2,475,200
------------------------------------------------
1,000,000 6.70%, Bond, 8/10/2001 1,009,660
------------------------------------------------
3,000,000 6.80%, Bond, 1/10/2003 3,116,670
------------------------------------------------
1,500,000 7.12%, Bond, 4/19/2002 1,520,970
------------------------------------------------
4,000,000 7.65%, Bond, 3/10/2005 4,374,520
------------------------------------------------ -----------
Total 12,497,020
------------------------------------------------ -----------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST
$19,277,166) 19,990,780
------------------------------------------------ -----------
U.S. TREASURY OBLIGATIONS--66.1%
------------------------------------------------------------
U.S. TREASURY BONDS--26.1%
------------------------------------------------
8,000,000 6.50%, 11/15/2026 8,523,600
------------------------------------------------
5,500,000 7.125%, 2/15/2023 6,263,785
------------------------------------------------
3,000,000 8.125%, 8/15/2019 3,743,610
------------------------------------------------ -----------
Total 18,530,995
------------------------------------------------ -----------
U.S. TREASURY NOTES--40.0%
------------------------------------------------
8,000,000 6.125%, 5/15/1998 8,004,640
------------------------------------------------
10,000,000 6.375%, 3/31/2001 10,192,800
------------------------------------------------
10,000,000 7.00%, 4/15/1999 10,141,600
------------------------------------------------ -----------
Total 28,339,040
------------------------------------------------ -----------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST
$44,655,073) 46,870,035
------------------------------------------------ -----------
</TABLE>
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -------------------------------------------------- -----------
<C> <S> <C>
(A) REPURCHASE AGREEMENT--4.7%
-------------------------------------------------------------
$3,316,000 First Chicago Capital Markets, Inc., 5.52%, dated
4/30/1998, due 5/1/1998 (AT AMORTIZED COST) $ 3,316,000
-------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $67,248,239)(B) $70,176,815
-------------------------------------------------- -----------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $67,248,239. The
net unrealized appreciation of investments on a federal tax basis amounts to
$2,928,576 which is comprised of $2,952,712 appreciation and $24,136
depreciation at April 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($70,866,783) at April 30, 1998.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------
Total investments in securities, at
value (identified and tax cost
$67,248,239) $70,176,815
- -------------------------------------
Cash 52
- -------------------------------------
Income receivable 963,795
- -------------------------------------
Receivable for shares sold 14,200
- ------------------------------------- -----------
Total assets 71,154,862
- -------------------------------------
LIABILITIES:
- ---------------------------
Payable for shares redeemed $ 468
- ---------------------------
Income distribution payable 278,641
- ---------------------------
Accrued expenses 8,970
- --------------------------- --------
Total liabilities 288,079
- ------------------------------------- -----------
Net Assets for 6,807,039 shares
outstanding $70,866,783
- ------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------
Paid in capital $68,425,283
- -------------------------------------
Net unrealized appreciation of
investments 2,928,576
- -------------------------------------
Accumulated net realized loss on
investments (487,076)
- ------------------------------------- -----------
Total Net Assets $70,866,783
- ------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------
$70,866,783 / 6,807,039 shares
outstanding $10.41
- ------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------
Interest $4,552,418
- -------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------
Investment advisory fee $ 507,916
- --------------------------------------------------------
Administrative personnel and services fee 77,385
- --------------------------------------------------------
Custodian fees 23,398
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 35,996
- --------------------------------------------------------
Directors'/Trustees' fees 4,234
- --------------------------------------------------------
Auditing fees 12,061
- --------------------------------------------------------
Legal fees 5,285
- --------------------------------------------------------
Portfolio accounting fees 51,102
- --------------------------------------------------------
Share registration costs 17,336
- --------------------------------------------------------
Printing and postage 13,451
- --------------------------------------------------------
Insurance premiums 3,338
- --------------------------------------------------------
Miscellaneous 15,256
- -------------------------------------------------------- ---------
Total expenses 766,758
- --------------------------------------------------------
Waivers--
- --------------------------------------------------------
Waiver of investment advisory fee (326,518)
- -------------------------------------------------------- ---------
Net expenses 440,240
- ------------------------------------------------------------------- ----------
Net investment income 4,112,178
- ------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------
Net realized gain on investments 567,403
- -------------------------------------------------------------------
Net change in unrealized appreciation of investments 2,548,205
- ------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 3,115,608
- ------------------------------------------------------------------- ----------
Change in net assets resulting from operations $7,227,786
- ------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------
OPERATIONS--
- ------------------------------------------------
Net investment income $ 4,112,178 $ 4,232,243
- ------------------------------------------------
Net realized gain (loss) on investments ($567,403 net gain and $1,054,816 net
loss, respectively, as computed for federal tax
purposes) 567,403 (1,052,708)
- ------------------------------------------------
Net change in unrealized appreciation 2,548,205 1,178,565
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from operations 7,227,786 4,358,100
- ------------------------------------------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------
Distributions from net investment income (4,112,178) (4,232,243)
- ------------------------------------------------
Distributions from net realized gains -- (63,376)
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from
distributions to shareholders (4,112,178) (4,295,619)
- ------------------------------------------------ ------------ ------------
SHARE TRANSACTIONS--
- ------------------------------------------------
Proceeds from sale of shares 10,388,208 18,183,268
- ------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 404,801 428,510
- ------------------------------------------------
Cost of shares redeemed (14,925,104) (19,082,325)
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from share
transactions (4,132,095) (470,547)
- ------------------------------------------------ ------------ ------------
Change in net assets (1,016,487) (408,066)
- ------------------------------------------------
NET ASSETS:
- ------------------------------------------------
Beginning of period 71,883,270 72,291,336
- ------------------------------------------------ ------------ ------------
End of period $ 70,866,783 $ 71,883,270
- ------------------------------------------------ ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------------------------
1998 1997 1996 1995 1994 1993(A)
- ----------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.98 $ 9.98 $ 9.79 $ 9.84 $10.31 $10.00
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.58 0.59 0.59 0.60 0.55 0.33
- -----------------------
Net realized and
unrealized gain (loss)
on investments 0.43 0.01 0.19 (0.05) (0.47) 0.31
- ----------------------- ------- ------- ------- ------- ------- -------
Total from investment
operations 1.01 0.60 0.78 0.55 0.08 0.64
- ----------------------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
- -----------------------
Distributions from net
investment income (0.58) (0.59) (0.59) (0.60) (0.55) (0.33)
- -----------------------
Distributions from net
realized gain on
investments -- (0.01) -- -- -- --
- ----------------------- ------- ------- ------- ------- ------- -------
Total distributions (0.58) (0.60) (0.59) (0.60) (0.55) (0.33)
- ----------------------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD $10.41 $ 9.98 $ 9.98 $ 9.79 $ 9.84 $10.31
- ----------------------- ------- ------- ------- ------- ------- -------
TOTAL RETURN (B) 10.37% 6.15% 7.97% 5.90% 0.66% 4.61%
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 0.61% 0.57% 0.40% 0.35% 0.31% 0.17%*
- -----------------------
Net investment income 5.67% 5.82% 5.85% 6.23% 5.32% 5.59%*
- -----------------------
Expense waiver (c) 0.45% 0.45% 0.66% 0.70% 0.70% 0.83%*
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
Net assets, end of
period (000 omitted) $70,867 $71,883 $72,291 $62,514 $72,866 $87,704
- -----------------------
Portfolio turnover 28% 73% 104% 75% 20% 0%
- -----------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from January 11, 1993 (date of initial
public investment) to April 30, 1993.
(b) Based on net asset value.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--26.0%
---------------------------------------------------------------
AUTOMOTIVE--1.2%
----------------------------------------------------
$1,000,000 Ford Motor Credit Corp., Note, 6.125%, 1/9/2006 $ 987,220
---------------------------------------------------- -----------
BANKING--5.2%
----------------------------------------------------
1,000,000 Banc One Corp., Sub. Note, 8.740%, 9/15/2003 1,115,240
----------------------------------------------------
1,000,000 Citicorp, Sr. Note, 5.625%, 2/15/2001 990,880
----------------------------------------------------
1,000,000 First Chicago NBD Corp., Sub. Note, 8.100%, 3/1/2002 1,064,540
----------------------------------------------------
1,000,000 NationsBank Corp., Sr. Note, 7.000%, 9/15/2001 1,028,150
---------------------------------------------------- -----------
Total 4,198,810
---------------------------------------------------- -----------
COMMERCIAL--2.5%
----------------------------------------------------
1,000,000 Associates Corp. of North America, Sr. Note, 6.260%,
2/15/2006 994,230
----------------------------------------------------
1,000,000 General Electric Financial Services, Inc., Deb.,
5.500%, 11/1/2001 985,860
---------------------------------------------------- -----------
Total 1,980,090
---------------------------------------------------- -----------
ENTERTAINMENT--1.3%
----------------------------------------------------
1,000,000 Disney (Walt) Co., Bond, Series B, 6.750%, 3/30/2006 1,037,840
---------------------------------------------------- -----------
FINANCIAL SERVICES--2.6%
----------------------------------------------------
1,000,000 Merrill Lynch & Co., Inc., Note, 7.000%, 3/15/2006 1,041,070
----------------------------------------------------
1,000,000 Morgan Stanley, Dean Witter & Co., Note, 7.750%,
6/1/2001 1,047,340
---------------------------------------------------- -----------
Total 2,088,410
---------------------------------------------------- -----------
FOOD & BEVERAGE--1.3%
----------------------------------------------------
1,000,000 Sara Lee Corp., Note, 6.300%, 11/7/2005 1,012,840
---------------------------------------------------- -----------
INDUSTRIAL SERVICES--1.5%
----------------------------------------------------
1,000,000 General Mills, Inc., Note, 8.900%, 6/15/2006 1,170,830
---------------------------------------------------- -----------
OFFICE EQUIPMENT--1.3%
----------------------------------------------------
1,000,000 Xerox Corp., Deb., 9.750%, 3/15/2000 1,066,150
---------------------------------------------------- -----------
PHARMACEUTICALS--1.4%
----------------------------------------------------
1,000,000 Lilly (Eli) & Co., Unsecured Note, 8.375%, 12/1/2006 1,150,800
---------------------------------------------------- -----------
</TABLE>
INDEPENDENCE ONE FIXED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
---------------------------------------------------------------
RETAIL--5.1%
----------------------------------------------------
$1,000,000 Gap (The), Inc., Note, 6.900%, 9/15/2007 $ 1,041,070
----------------------------------------------------
1,000,000 May Department Stores Co., Deb., 9.875%, 6/15/2000 1,074,440
----------------------------------------------------
1,000,000 Penney (J.C.) Co., Inc., Sr. Note, Series A, 6.375%,
9/15/2000 1,006,500
----------------------------------------------------
1,000,000 Wal-Mart Stores, Inc., Unsecured Note, 6.125%,
10/1/1999 1,005,190
---------------------------------------------------- -----------
Total 4,127,200
---------------------------------------------------- -----------
TELECOMMUNICATIONS--2.6%
----------------------------------------------------
1,000,000 AT&T Corp., Note, 7.500%, 6/1/2006 1,077,720
----------------------------------------------------
1,000,000 U.S. West Communications, Inc., Note, 6.625%,
9/15/2005 1,015,740
---------------------------------------------------- -----------
Total 2,093,460
---------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $20,572,875) 20,913,650
---------------------------------------------------- -----------
GOVERNMENT AGENCIES--18.6%
---------------------------------------------------------------
FEDERAL HOME LOAN BANK--10.1%
----------------------------------------------------
4,000,000 6.028%, Bond, 5/7/2003 3,991,240
----------------------------------------------------
650,000 7.570%, Bond, 8/19/2004 705,361
----------------------------------------------------
500,000 6.340%, Bond, 10/19/2005 510,900
----------------------------------------------------
2,000,000 5.530%, Bond, 1/15/2003 1,974,820
----------------------------------------------------
880,000 7.460%, Bond, 9/9/2004 950,321
---------------------------------------------------- -----------
Total 8,132,642
---------------------------------------------------- -----------
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.9%
----------------------------------------------------
700,000 7.900%, Bond, 1/27/2000 725,662
---------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--7.6%
----------------------------------------------------
490,000 6.160%, Bond, 4/3/2001 494,895
----------------------------------------------------
1,500,000 5.820%, Bond, 2/12/2003 1,485,120
----------------------------------------------------
1,000,000 7.490%, Bond, 3/2/2005 1,084,570
----------------------------------------------------
1,000,000 5.370%, Medium Term Note, 2/7/2001 990,130
----------------------------------------------------
</TABLE>
INDEPENDENCE ONE FIXED INCOME FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -------------------------------------------------- -----------
<C> <S> <C>
GOVERNMENT AGENCIES--CONTINUED
--------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--CONTINUED
--------------------------------------------------
$2,000,000 6.690%, Bond, 8/7/2001 $ 2,052,740
-------------------------------------------------- -----------
Total 6,107,455
-------------------------------------------------- -----------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST
$14,768,379) 14,965,759
-------------------------------------------------- -----------
U.S. TREASURY OBLIGATIONS--51.6%
-------------------------------------------------------------
U.S. TREASURY BOND--3.0%
--------------------------------------------------
2,000,000 10.750%, 5/15/2003 2,437,660
-------------------------------------------------- -----------
U.S. TREASURY NOTES--48.6%
--------------------------------------------------
4,500,000 5.125%, 12/31/1998 4,490,865
--------------------------------------------------
8,250,000 6.125%, 7/31/2000 8,341,080
--------------------------------------------------
4,750,000 6.250%, 2/15/2007 4,906,038
--------------------------------------------------
9,000,000 6.375%, 8/15/2002 9,236,520
--------------------------------------------------
6,800,000 6.750%, 6/30/1999 6,895,811
--------------------------------------------------
5,000,000 7.500%, 10/31/1999 5,139,800
-------------------------------------------------- -----------
Total 39,010,114
-------------------------------------------------- -----------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST
$41,510,004) 41,447,774
-------------------------------------------------- -----------
(A) REPURCHASE AGREEMENT--5.4%
-------------------------------------------------------------
4,365,000 First Chicago Capital Markets, Inc., 5.520%, dated 4/30/1998, due
5/1/1998 (AT AMORTIZED COST) 4,365,000
-------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $81,216,258)(B) $81,692,183
-------------------------------------------------- -----------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $81,216,258. The
net unrealized appreciation of investments on a federal tax basis amounts to
$475,925 which is comprised of $1,097,838 appreciation and $621,913
depreciation at April 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($80,342,224) at April 30, 1998.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------
Total investments in securities, at value
(identified and tax cost $81,216,258) $81,692,183
- ------------------------------------------------
Cash 933
- ------------------------------------------------
Income receivable 1,090,330
- ------------------------------------------------
Receivable for investments sold 1,065,002
- ------------------------------------------------
Receivable for shares sold 575,595
- ------------------------------------------------
Deferred organizational costs 13,204
- ------------------------------------------------
Other assets 7,088
- ------------------------------------------------ -----------
Total assets 84,444,335
- ------------------------------------------------
LIABILITIES:
- -----------------------------------
Payable for investments purchased $ 3,970,000
- -----------------------------------
Payable for shares redeemed 70,286
- -----------------------------------
Income distribution payable 47,629
- -----------------------------------
Accrued expenses 14,196
- ----------------------------------- ------------
Total liabilities 4,102,111
- ------------------------------------------------ -----------
Net Assets for 8,008,395 shares outstanding $80,342,224
- ------------------------------------------------ -----------
NET ASSETS CONSIST OF:
- ------------------------------------------------
Paid in capital $80,085,396
- ------------------------------------------------
Net unrealized appreciation of investments 475,925
- ------------------------------------------------
Accumulated net realized loss on investments (219,097)
- ------------------------------------------------ -----------
Total Net Assets $80,342,224
- ------------------------------------------------ -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- ------------------------------------------------
$80,342,224 / 8,008,395 shares outstanding $10.03
- ------------------------------------------------ -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE FIXED INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------
Interest $4,966,452
- -------------------------------
EXPENSES:
- ---------------------
Investment advisory
fee $ 574,565
- ---------------------
Administrative
personnel and
services fee 81,673
- ---------------------
Custodian fees 20,569
- ---------------------
Transfer and dividend
disbursing agent fees
and expenses 31,158
- ---------------------
Directors'/Trustees'
fees 3,500
- ---------------------
Auditing fees 13,500
- ---------------------
Legal fees 5,600
- ---------------------
Portfolio accounting
fees 45,822
- ---------------------
Share registration
costs 14,222
- ---------------------
Printing and postage 12,559
- ---------------------
Insurance premiums 3,000
- ---------------------
Miscellaneous 6,100
- --------------------- ---------
Total expenses 812,268
- ---------------------
Waivers--
- -------------
Waiver of
investment
advisory fee (383,043)
- --------------------- ---------
Net expenses 429,225
- ------------------------------- ----------
Net investment income 4,537,227
- ------------------------------- ----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
- -------------------------------
Net realized loss on
investments (16,975)
- -------------------------------
Net change in unrealized
appreciation of investments 1,766,893
- ------------------------------- ----------
Net realized and unrealized
gain on investments 1,749,918
- ------------------------------- ----------
Change in net assets
resulting from operations $6,287,145
- ------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------
OPERATIONS--
- ------------------------------------------------
Net investment income $ 4,537,227 $ 3,892,231
- ------------------------------------------------
Net realized gain (loss) on investments ($102,986 net loss and $72,088 net loss,
respectively, as computed for federal tax
purposes) (16,975) (202,277)
- ------------------------------------------------
Net change in unrealized
appreciation/depreciation 1,766,893 64,749
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from operations 6,287,145 3,754,703
- ------------------------------------------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------
Distributions from net investment income (4,537,227) (3,892,231)
- ------------------------------------------------
Distributions from net realized gains -- (11,017)
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from
distributions to shareholders (4,537,227) (3,903,248)
- ------------------------------------------------ ------------ ------------
SHARE TRANSACTIONS--
- ------------------------------------------------
Proceeds from sale of shares 19,644,568 18,128,850
- ------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 3,881,214 3,100,848
- ------------------------------------------------
Cost of shares redeemed (15,817,021) (12,454,102)
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from share
transactions 7,708,761 8,775,596
- ------------------------------------------------ ------------ ------------
Change in net assets 9,458,679 8,627,051
- ------------------------------------------------
NET ASSETS:
- ------------------------------------------------
Beginning of period 70,883,545 62,256,494
- ------------------------------------------------ ------------ ------------
End of period $ 80,342,224 $ 70,883,545
- ------------------------------------------------ ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------
1998 1997 1996(A)
- ------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.80 $ 9.82 $10.00
- -------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------
Net investment income 0.59 0.57 0.30
- -------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.23 (0.02) (0.18)
- ------------------------------------------- ------- ------- -------
Total from investment operations 0.82 0.55 0.12
- ------------------------------------------- ------- ------- -------
LESS DISTRIBUTIONS
- -------------------------------------------
Distributions from net investment income (0.59) (0.57) (0.30)
- -------------------------------------------
Distributions from net realized gain on
investments -- 0.00(b) --
- ------------------------------------------- ------- ------- -------
Total distributions (0.59) (0.57) (0.30)
- ------------------------------------------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.03 $ 9.80 $ 9.82
- ------------------------------------------- ------- ------- -------
TOTAL RETURN (C) 8.56% 5.79% 1.15%
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 0.56% 0.55% 0.54%*
- -------------------------------------------
Net investment income 5.92% 5.83% 5.73%*
- -------------------------------------------
Expense waiver/reimbursement (d) 0.50% 0.50% 0.61%*
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) $80,342 $70,884 $62,256
- -------------------------------------------
Portfolio turnover 21% 23% 4%
- -------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 23, 1995 (date of initial
public investment) to April 30, 1996.
(b) Distribution from net realized gain on investments was less than one cent
per share.
(c) Based on net asset value.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
(A) LONG-TERM MUNICIPALS--94.9%
--------------------------------------------------------
MICHIGAN--94.9%
---------------------------------------------
$ 825,000 Allegan, MI Public School District, GO UT
Bonds, 5.55%, Michigan State GTD (Q-SBLF),
(AMBAC INS)/(Original Issue Yield: 5.60%),
5/1/2010 AAA/Aaa $ 883,814
---------------------------------------------
100,000 Auburn Hills, MI Local Development Financial
Authority, Tax Increment Revenue Bonds
(Series A), 7.00% (Dai-Ichi Kangyo Bank Ltd.,
Tokyo LOC), 11/1/2000 NR/A1 102,383
---------------------------------------------
400,000 Beaverton, MI Rural Schools, GO UT Bonds, 4.70%, Michigan State GTD
(Q-SBLF), (FGIC
INS)/(Original Issue Yield: 4.75%), 5/1/2008 AAA/Aaa 398,612
---------------------------------------------
485,000 Central Michigan University, Revenue Bonds,
5.30% (FGIC LOC)/(Original Issue Yield:
5.40%), 10/1/2011 AAA/Aaa 496,247
---------------------------------------------
150,000 Clare County, MI, GO UT Refunding Bonds,
5.00% (Sewage Disposal System No. 3)/(AMBAC
INS)/(Original Issue Yield: 5.10%), 11/1/2003 AAA/Aaa 153,995
---------------------------------------------
480,000 Detroit, MI City School District, GO UT Bonds (Series A), 6.50%,
Michigan State GTD (Q- SBLF), (AMBAC INS)/(Original Issue Yield:
5.40%), 5/1/2008 AAA/Aaa 546,883
---------------------------------------------
500,000 East Detroit Michigan School District, GO UT Refunding Bonds, 6.50%,
Michigan State GTD (Q-SBLF), (FGIC INS)/(Original Issue Yield:
5.45%), 5/1/2006 AAA/Aaa 561,225
---------------------------------------------
175,000 Grand Haven, MI Area Public Schools, GO UT Refunding Bonds, 5.50%
(MBIA INS)/(Original
Issue Yield: 5.55%), 5/1/2005 AAA/Aaa 184,767
---------------------------------------------
100,000 Grand Rapid & Kent County, MI Joint Building
Authority, Revenue Bonds, 6.40%, 10/1/1998 AAA/Aa3 101,091
---------------------------------------------
680,000 Grand Rapids, MI Community College, GO UT Bonds, 5.30% (MBIA
INS)/(Original Issue
Yield: 5.35%), 5/1/2009 AAA/Aaa 707,853
---------------------------------------------
400,000 Greater Detroit Resource Recovery Authority,
MI, Refunding Revenue Bonds (Series A), 4.30%
(AMBAC INS)/(Original Issue Yield: 4.35%),
12/13/1998 AAA/Aaa 401,272
---------------------------------------------
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
(A) LONG-TERM MUNICIPALS--CONTINUED
--------------------------------------------------------
MICHIGAN--CONTINUED
---------------------------------------------
$ 500,000 Greater Detroit Resource Recovery Authority,
MI, Refunding Revenue Bonds (Series A), 5.00%
(AMBAC INS)/(Original Issue Yield: 4.75%),
12/13/2000 AAA/Aaa $ 510,550
---------------------------------------------
550,000 Holland, MI Area Community Swimming Pool
Authority, GO UT Bonds, 5.125% (FGIC
INS)/(Original Issue Yield: 5.40%), 5/1/2010 AAA/Aaa 558,509
---------------------------------------------
1,000,000 Kenowa Hills Michigan Public Schools, GO UT
Bonds, 5.60% (MBIA INS), 5/1/2009 AAA/Aaa 1,056,720
---------------------------------------------
500,000 Kent County, MI, GO, 4.50% (Original Issue
Yield: 5.00%), 11/1/2011 AAA/Aa2 482,330
---------------------------------------------
600,000 Lakewood, Mi Public Schools, GO UT Bonds, 5.30% (MBIA INS)/(Original
Issue Yield:
5.45%), 5/1/2009 AAA/Aaa 620,544
---------------------------------------------
100,000 Lapeer, MI, GO LT Refunding Bonds, 6.10%
(AMBAC INS)/(Original Issue Yield: 6.25%),
10/1/1999 AAA/Aaa 102,923
---------------------------------------------
1,055,000 Lincoln Park, Mi School District, GO UT
Bonds, 5.70% (FGIC INS), 5/1/2008 AAA/Aaa 1,129,778
---------------------------------------------
600,000 Marquette, MI Hospital Finance Authority,
Refunding Revenue Bonds (Series D), 4.95%
(Marquette General Hospital, MI)/(FSA INS),
4/1/2002 AAA/Aaa 612,390
---------------------------------------------
1,000,000 Michigan Municipal Bond Authority, Revenue
Bonds (Series B), 5.35% (Original Issue
Yield: 5.45%), 10/1/2007 AA+/Aa1 1,045,100
---------------------------------------------
400,000 Michigan Municipal Bond Authority, Revenue
Bonds, 4.60% (AMBAC INS), 11/1/2003 AAA/Aaa 403,676
---------------------------------------------
500,000 Michigan Municipal Bond Authority, Revenue
Bonds, 5.25% (Local Government Loan
Program)/(AMBAC INS), 5/1/2006 AAA/Aaa 519,855
---------------------------------------------
100,000 Michigan State Building Authority, Revenue
Bonds (Series I), 5.50% (Original Issue
Yield: 5.60%), 10/1/2004 AA/A1 105,632
---------------------------------------------
150,000 Michigan State Building Authority, Revenue
Bonds, 6.20% (Grand Rapids Center)/(BIG INS),
3/1/2001 AAA/Aaa 157,667
---------------------------------------------
460,000 Michigan State Hospital Finance Authority,
Refunding Revenue Bonds, 5.60% (Oakwood
Hospital Obligated Group)/(FGIC
INS)/(Original Issue Yield: 5.70%), 5/1/1999 AAA/Aaa 467,967
---------------------------------------------
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
(A) LONG-TERM MUNICIPALS--CONTINUED
--------------------------------------------------------
MICHIGAN--CONTINUED
---------------------------------------------
$ 100,000 Michigan State Housing Development Authority,
Refunding Revenue Bonds (Series A), 6.40%
(FHA/VA mtgs GTD), 6/1/2000 AA+/NR $ 103,370
---------------------------------------------
500,000 Michigan State Housing Development Authority,
Refunding Revenue, 4.85% (AMBAC INS),
10/1/2002 AAA/Aaa 506,865
---------------------------------------------
150,000 Michigan Strategic Fund, Small Business
Refunding Revenue Bonds (Series A1-A2), 5.90%
(SBA GTD), 10/1/2000 NR/Aaa 156,413
---------------------------------------------
500,000 Novi, MI, Refunding G.O. Bonds, 5.25%,
10/1/2009 A+/A1 522,495
---------------------------------------------
600,000 Ottawa County, MI Building Authority, Revenue
Bonds, 4.90%, 11/1/2009 AA/Aa3 606,486
---------------------------------------------
100,000 Portage, MI, GO LT City Share Bonds, 5.90%,
12/1/2003 AA-/NR 107,271
---------------------------------------------
700,000 Redford, MI University School District, GO UT Bonds, 6.25%, Michigan
State GTD (Q-SBLF), (FGIC INS)/(Original Issue Yield: 5.35%),
5/1/2007 AAA/Aaa 785,729
---------------------------------------------
390,000 Rochester, MI, GO UT Refunding Bonds, 4.90%
(FSA INS), 10/1/2006 AAA/NR 397,531
---------------------------------------------
400,000 St. Clair County, MI, GO LT Water Supply
System Bonds, 5.00% (Burtchville)/(MBIA
INS)/(Original Issue Yield: 5.10%), 11/1/2009 AAA/Aaa 407,864
---------------------------------------------
500,000 Three Rivers Michigan Community Schools, GO
UT Bonds, 5.40% (Michigan State GTD)/(MBIA
INS), 5/1/2008 AAA/Aaa 533,290
---------------------------------------------
765,000 University of Michigan, Revenue Bonds (Series
A), 5.40%, 11/15/2008 AA/Aa1 808,001
---------------------------------------------
350,000 University of Michigan, Revenue Bonds (Series
A), 5.60% (Original Issue Yield: 5.70%),
11/15/2012 AA/Aa1 367,538
---------------------------------------------
500,000 Washtenaw Community College, MI, GO UT, 5.00%
(Original Issue Yield: 5.10%), 4/1/2008 AA/Aa3 510,135
---------------------------------------------
500,000 Washtenaw Community College, MI, GO UT, 5.00%
(Original Issue Yield: 5.35%), 4/1/2011 AA/Aa3 501,600
---------------------------------------------
100,000 Wayne County, MI Community College, GO UT
Refunding Bonds, 6.15% (FGIC INS), 4/1/1999 AAA/Aaa 101,954
---------------------------------------------
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
---------- -------------------------------------------- ------- -----------
<C> <S> <C> <C>
(A) LONG-TERM MUNICIPALS--CONTINUED
-------------------------------------------------------
MICHIGAN--CONTINUED
--------------------------------------------
$ 750,000 Western Michigan University, Revenue
Refunding Bonds, 5.00% (FGIC INS)/(Original
Issue Yield: 5.15%), 11/15/2012 AAA/Aaa $ 739,320
--------------------------------------------
500,000 Wixon, MI, UT GO Bonds, 4.70% (AMBAC
INS)/(Original Issue Yield: 4.85%), 5/1/2009 AAA/Aaa 495,595
-------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPALS (IDENTIFIED COST
$19,220,946) 19,963,240
-------------------------------------------- -----------
MUTUAL FUND--1.9%
-------------------------------------------------------
402,000 Goldman Sachs Tax Exempt Fund (AT NET ASSET
VALUE) 402,000
-------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST
$19,622,946)(B) $20,365,240
-------------------------------------------- -----------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) At April 30, 1998, 2.5% of the total investments at market value were
subject to alternative minimum tax.
(b) The cost of investments for federal tax purposes amounts to $19,622,946. The
net unrealized appreciation of investments on a federal tax basis amounts to
$742,294 which is comprised of $742,884 appreciation and $590 depreciation
at April 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($21,026,518) at April 30, 1998.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond GTD--Guaranty
Assurance Corporation INS--Insured
BIG--Bond Investors Guaranty LOC--Letter of Credit
FGIC--Financial Guaranty Insurance Company LT--Limited Tax
FHA/VA--Federal Housing Administration/ MBIA--Municipal Bond Investors
Veterans Administration Assurance
FSA--Financial Security Assurance SBA--Small Business Association
GO--General Obligation UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------
Total investments in securities, at
value (identified and tax cost
$19,622,946) $20,365,240
- -------------------------------------
Cash 414
- -------------------------------------
Income receivable 421,481
- -------------------------------------
Receivable for investments sold 1,010,240
- -------------------------------------
Receivable for shares sold 5,000
- -------------------------------------
Deferred organizational costs 14,862
- -------------------------------------
Other assets 3,422
- ------------------------------------- -----------
Total assets 21,820,659
- -------------------------------------
LIABILITIES:
- ---------------------------
Payable for shares redeemed $703,413
- ---------------------------
Income distribution payable 71,117
- ---------------------------
Accrued expenses 19,611
- --------------------------- --------
Total liabilities 794,141
- ------------------------------------- -----------
Net Assets for 2,041,080 shares
outstanding $21,026,518
- ------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------
Paid in capital $20,261,694
- -------------------------------------
Net unrealized appreciation of
investments 742,294
- -------------------------------------
Accumulated net realized gain on
investments 22,530
- ------------------------------------- -----------
Total Net Assets $21,026,518
- ------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------
$21,026,518 / 2,041,080 shares
outstanding $10.30
- ------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------
Interest $1,202,794
- ------------------------------------------------------------
EXPENSES:
- -------------------------------------------------
Investment advisory fee $ 184,611
- -------------------------------------------------
Administrative personnel and services fee 50,000
- -------------------------------------------------
Custodian fees 14,099
- -------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 26,854
- -------------------------------------------------
Directors'/Trustees' fees 1,278
- -------------------------------------------------
Auditing fees 13,578
- -------------------------------------------------
Legal fees 5,006
- -------------------------------------------------
Portfolio accounting fees 46,125
- -------------------------------------------------
Share registration costs 12,688
- -------------------------------------------------
Printing and postage 11,105
- -------------------------------------------------
Insurance premiums 2,982
- -------------------------------------------------
Miscellaneous 7,520
- ------------------------------------------------- ---------
Total expenses 375,846
- -------------------------------------------------
Waivers--
- ---------------------------------------
Waiver of investment advisory fee $(129,534)
- ---------------------------------------
Waiver of administrative personnel and
services fee (46,548)
- --------------------------------------- ---------
Total waivers (176,082)
- ------------------------------------------------- ---------
Net expenses 199,764
- ------------------------------------------------------------ ----------
Net investment income 1,003,030
- ------------------------------------------------------------ ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------
Net realized gain on investments 91,171
- ------------------------------------------------------------
Net change in unrealized appreciation of investments 709,048
- ------------------------------------------------------------ ----------
Net realized and unrealized gain on investments 800,219
- ------------------------------------------------------------ ----------
Change in net assets resulting from operations $1,803,249
- ------------------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------
OPERATIONS--
- ------------------------------------------------
Net investment income $ 1,003,030 $ 1,000,032
- ------------------------------------------------
Net realized gain (loss) on investments ($92,311
net gain and $69,400 net loss, respectively, as
computed for federal tax purposes) 91,171 (68,257)
- ------------------------------------------------
Net change in unrealized
appreciation/depreciation 709,048 152,405
- ------------------------------------------------ ----------- -----------
Change in net assets resulting from operations 1,803,249 1,084,180
- ------------------------------------------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------
Distributions from net investment income (1,003,030) (1,000,032)
- ------------------------------------------------
Distributions from net realized gains -- (3,117)
- ------------------------------------------------ ----------- -----------
Change in net assets resulting from
distributions to shareholders (1,003,030) (1,003,149)
- ------------------------------------------------ ----------- -----------
SHARE TRANSACTIONS--
- ------------------------------------------------
Proceeds from sale of shares 3,693,948 3,957,232
- ------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 13,837 15,386
- ------------------------------------------------
Cost of shares redeemed (6,964,431) (5,693,966)
- ------------------------------------------------ ----------- -----------
Change in net assets resulting from share
transactions (3,256,646) (1,721,348)
- ------------------------------------------------ ----------- -----------
Change in net assets (2,456,427) (1,640,317)
- ------------------------------------------------
NET ASSETS:
- ------------------------------------------------
Beginning of period 23,482,945 25,123,262
- ------------------------------------------------ ----------- -----------
End of period $21,026,518 $23,482,945
- ------------------------------------------------ ----------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------
1998 1997 1996(A)
- ------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 9.95 $10.00
- -------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------
Net investment income 0.42 0.41 0.17
- -------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.31 0.04 (0.05)
- ------------------------------------------- ------- ------- -------
Total from investment operations 0.73 0.45 0.12
- ------------------------------------------- ------- ------- -------
LESS DISTRIBUTIONS
- -------------------------------------------
Distributions from net investment income (0.42) (0.41) (0.17)
- -------------------------------------------
Distributions from net realized gain on
investments -- 0.00(b) --
- ------------------------------------------- ------- ------- -------
Total distributions (0.42) (0.41) (0.17)
- ------------------------------------------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.30 $ 9.99 $ 9.95
- ------------------------------------------- ------- ------- -------
TOTAL RETURN (C) 7.38% 4.62% 1.21%
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 0.81% 0.70% 0.57%*
- -------------------------------------------
Net investment income 4.07% 4.12% 3.83%*
- -------------------------------------------
Expense waiver (d) 0.72% 0.94% 0.76%*
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) $21,027 $23,483 $25,123
- -------------------------------------------
Portfolio turnover 11% 48% 39%
- -------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from November 20, 1995 (date of initial
public investment) to April 30, 1996.
(b) Distribution from net realized gain on investments was less than one cent
per share.
(c) Based on net asset value.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MUTUAL FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
- -------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end management investment
company. The Trust consists of nine portfolios. The financial statements of the
following portfolios (individually referred to as the "Fund", or collectively as
the "Funds") are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
<C> <S>
Independence One U.S. Government Securities To seek high current income.
Fund ("U.S. Government Securities Fund")(d)
- -------------------------------------------------------------------------------
Independence One Fixed Income Fund To seek total return.
("Fixed Income Fund")(d)
- -------------------------------------------------------------------------------
Independence One Michigan Municipal Bond To provide current income which
Fund ("Michigan Municipal Bond Fund")(n) is exempt from federal regular
income tax and the personal
income taxes imposed by the state
of Michigan and Michigan
municipalities.
</TABLE>
(d) Diversified portfolio
(n) Non-diversified portfolio
The financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are generally valued at the mean of the
latest bid and asked price as furnished by an independent pricing service.
Short-term securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value.
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--It is the policy of the Funds to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Funds to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Funds' adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Funds could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Distributions
to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their income. Accordingly, no
provisions for federal tax are necessary.
At April 30, 1998, the Funds, for federal tax purposes, had capital loss
carryforwards, as noted below, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve each Fund of any
liability for federal tax. Pursuant to the Code, such capital loss
carryforwards will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION EXPIRATION
YEAR YEAR TOTAL TAX LOSS
FUND NAME 2005 2006 CARRYFORWARD
------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Securities Fund $487,414 -- $487,414
------------------------------------------------------------------------
Fixed Income Fund $72,088 $102,986 $175,074
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in
when-issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
DEFERRED EXPENSES--The costs incurred by each Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being amortized
over a period not to exceed five years from each Fund's commencement date.
Organizational expenses were borne initially by Federated Administrative
Services ("FAS"). The Funds have reimbursed FAS for these expenses. These
expenses have been deferred by the Funds and are being amortized over the
five-year period following the Fund's effective date.
<TABLE>
<CAPTION>
ORGANIZATIONAL
EXPENSES PAID FOR
ORGANIZATIONAL THE YEAR ENDED
PORTFOLIO NAME EXPENSES APRIL 30, 1998
--------------------------------------------------------------------
<S> <C> <C>
U.S. Government Securities Fund $49,664 $12,466
--------------------------------------------------------------------
Fixed Income Fund 21,477 4,196
--------------------------------------------------------------------
Michigan Municipal Bond Fund 24,175 4,724
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ
from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
Fund. Transactions in shares were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT
SECURITIES FUND
----------------------
YEAR ENDED APRIL 30,
----------------------
1998 1997
- -------------------------------------------- ---------- ----------
<S> <C> <C>
Shares sold 1,008,867 1,820,631
- --------------------------------------------
Shares issued to shareholders in payment of
distributions declared 39,277 42,792
- --------------------------------------------
Shares redeemed (1,447,352) (1,902,451)
- -------------------------------------------- ---------- ----------
Net change resulting from share transactions (399,208) (39,028)
- -------------------------------------------- ---------- ----------
</TABLE>
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED INCOME FUND
----------------------
YEAR ENDED APRIL 30,
----------------------
1998 1997
- -------------------------------------------- ---------- ----------
<S> <C> <C>
Shares sold 1,968,892 1,843,716
- --------------------------------------------
Shares issued to shareholders in payment of
distributions declared 388,432 314,984
- --------------------------------------------
Shares redeemed (1,583,847) (1,266,239)
- -------------------------------------------- ---------- ----------
Net change resulting from share transactions 773,477 892,461
- -------------------------------------------- ---------- ----------
<CAPTION>
MICHIGAN MUNICIPAL
BOND FUND
----------------------
YEAR ENDED APRIL 30,
----------------------
1998 1997
- -------------------------------------------- ---------- ----------
<S> <C> <C>
Shares sold 358,787 394,505
- --------------------------------------------
Shares issued to shareholders in payment of
distributions declared 1,340 1,535
- --------------------------------------------
Shares redeemed (669,163) (570,983)
- -------------------------------------------- ---------- ----------
Net change resulting from share transactions (309,036) (174,943)
- -------------------------------------------- ---------- ----------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Michigan National Bank, the Funds' investment adviser
(the "Adviser") earns for its services an annual investment advisory fee based
on a percentage of each Fund's average daily net assets (see below).
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT ADVISORY FEE
-----------------------------------------------------------
<S> <C>
U.S. Government Securities Fund 0.70%
-----------------------------------------------------------
Fixed Income Fund 0.75%
-----------------------------------------------------------
Michigan Municipal Bond Fund 0.75%
</TABLE>
The Adviser may voluntarily choose to waive any portion of its fee. The
Adviser can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--FAS provides the Funds with certain administrative
personnel and services. The fee paid to FAS is based on the level of average
aggregate net assets of the Trust for the period. The administrative fee
received during any fiscal year shall be at least $50,000 for each portfolio
in the Trust.
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the Funds. The
fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Funds' accounting records for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Michigan National Bank is the Funds' custodian. The fee is
based on the level of each Fund's average daily net assets for the period,
plus out-of-pocket expenses.
GENERAL--Certain of the Officers of the Trust are Officers and/or Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
year ended April 30, 1998, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO NAME PURCHASES SALES
- ----------------------------------------------------------
<S> <C> <C>
U.S. Government Securities Fund $20,078,267 $26,477,256
- ----------------------------------------------------------
Fixed Income Fund 21,591,207 15,284,232
- ----------------------------------------------------------
Michigan Municipal Bond Fund 2,576,258 6,408,340
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
Since Michigan Municipal Bond Fund invests a substantial portion of its assets
in issuers located in one state, it will be more susceptible to factors
adversely affecting issuers of that state than would be a comparable tax-exempt
mutual fund that invests nationally. In order to reduce the credit risk
associated with such factors, at April 30, 1998, 72.7% of the securities in the
portfolio of investments are backed by letters of credit or bond insurance of
various financial institutions and financial guaranty assurance agencies. The
value of investments insured by or supported (backed) by a letter of credit from
any one institution or agency did not exceed 25.7% of total investments.
(7) YEAR 2000
Similar to other financial organizations, the Funds could be adversely affected
if the computer systems used by the Funds' service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Funds' Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Funds' other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Funds.
INDEPENDENCE ONE MUTUAL FUNDS
- --------------------------------------------------------------------------------
(8) SUBSEQUENT EVENT
Subsequent to the year ended April 30, 1998, the Trust added Independence One
Small Cap Fund and Independence One International Equity Fund, which will become
effective June 16, 1998.
REPORT OF KPMG PEAT MARWICK LLP,
INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
To the Board of Trustees and Shareholders INDEPENDENCE ONE MUTUAL FUNDS:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of Independence One Mutual Funds listed below, as
of April 30, 1998, and the related statements of operations and changes in net
assets, and the financial highlights for each of the periods listed below:
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND--statement of operations for
the year ended April 30, 1998, the statement of changes in net assets for each
of the years in the two-year period then ended, and the financial highlights
for each of the years or period from January 11, 1993 (commencement of
operations) to April 30, 1998.
INDEPENDENCE ONE FIXED INCOME FUND--statement of operations for the year ended
April 30, 1998, the statement of changes in net assets for each of the years
in the two-year period then ended, and the financial highlights for each of
the years or period from October 23, 1995 (commencement of operations) to
April 30, 1998.
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND--statement of operations for the
year ended April 30, 1998, the statement of changes in net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years or period from November 20, 1995 (commencement of
operations) to April 30, 1998.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at April
30, 1998 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Independence One U.S. Government Securities Fund, Independence One Fixed Income
Fund and Independence One Michigan Municipal Bond Fund as of April 30, 1998, and
the results of their operations, changes in their net assets, and their
financial highlights for each of the periods listed above, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
June 12, 1998
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
Robert E. Baker Edward C. Gonzales
President and Treasurer
Harold Berry Jeffrey W. Sterling
Vice President and Assistant Treasurer
Nathan Forbes Jay S. Neuman
Secretary
Harry J. Nederlander Timothy S. Johnson
Assistant Secretary
Thomas S. Wilson
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U. S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Funds' prospectus which contains facts concerning
their objectives and policies, management fees, expenses and other information.
INDEPENDENCE ONE
MUTUAL FUNDS
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
INVESTMENT ADVISER
Michigan National Bank
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
CUSTODIAN
Michigan National Bank
27777 Inkster Road
Mail Code 10-30
Farmington Hills, Michigan 48333-9065
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, Massachusetts 02266-8600
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
One Mellon Bank Center
Pittsburgh, Pennsylvania 15219
Cusip 453777856
Cusip 453777807
Cusip 453777864LOGO
G01200-11 (6/98)
INDEPENDENCE ONE(R)
MUTUAL FUNDS
(DISTRIBUTED BY FEDERATED SECURITIES CORP.)
COMBINED
ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1998
Independence One U.S. Government
Securities Fund
Independence One Fixed Income Fund
Independence One Michigan
Municipal Bond Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOGO
PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Annual Report for Independence One Prime Money
Market Fund, Independence One U.S. Treasury Money Market Fund and Independence
One Michigan Municipal Cash Fund, which covers the 12-month reporting period
from May 1, 1997 through April 30, 1998. The report begins with a discussion
with each fund's portfolio manager, which is followed by a complete listing of
fund holdings and the financial information.
During the reporting period, each fund continued to give shareholders a
convenient, stable way to put their ready cash to work earning daily income--
with daily access to their money.* Please note the following highlights:
INDEPENDENCE ONE PRIME MONEY MARKET FUND, a high-quality, diversified portfolio
of money market securities, paid competitive dividends of $0.05 per share for
Class A Shares and Class B Shares over the reporting period-- translating to
total returns of 5.20% and 5.46%, respectively.** The 7-day net yield for Class
A Shares and Class B Shares of the fund ended the reporting period on April 30,
1998 at 5.03% and 5.28%, respectively.** Total net assets reached $471 million
on the last day of the reporting period.
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND, which invests exclusively in a
portfolio of U.S. Treasury money market securities, paid dividends totaling
$0.05 per share--resulting in a total return of 5.03%.** The 7-day net yield for
the fund ended the reporting period on April 30, 1998 at 4.91%.** The fund's net
assets totaled $320.5 million on the last day of the reporting period.
Designed for tax-sensitive investors, INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH
FUND paid a total of $0.03 in double-tax-free dividends per share, which
resulted in a total return of 3.24%.**+ The 7-day net yield for the fund ended
the reporting period on April 30, 1998 at 3.40%.** Total net assets in the
fund's high-quality portfolio of Michigan municipal money market securities
reached $102.8 million at the end of the reporting period.
Thank you for keeping your ready cash earning daily income through one of the
Independence One Money Market Funds. As always, we welcome your questions,
comments, or suggestions.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
June 15, 1998
*Money market funds seek to maintain a stable net asset value of $1.00 per
share. There is no assurance that they will be able to do so. An investment
in the fund is not insured or guaranteed by the U.S. government.
**Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Yields quoted for money market funds most closely
reflect the funds' current earnings.
+Income may be subject to the federal alternative minimum tax.
MANAGEMENT DISCUSSION & ANALYSIS
- -------------------------------------------------------------------------------
Q What are your comments on the economy and short-term interest rates during
the funds' fiscal year?
The United States' economy continues to grow robustly with few signs of
inflation pressures. Real gross domestic product grew at a 3.7% during
1997, and 4.8% in the first quarter of 1998. The unemployment rate fell to a
28-year-low of 4.3%. The Federal Reserve Board (the "Fed") has left short-term
interest rates unchanged since it raised the Federal Funds target rate to 5.5%
in March 1997, but longer maturity interest rates have fallen significantly
during the reporting period. For example, after trading as high as 7.17% in
April of last year, the 30-year Treasury bellwether bond fell to an all time low
yield of 5.70% in January of this year.
Q In this environment, how did the Independence One Money Market Funds perform
for shareholders in terms of income and 7-day net yield during the
12-month reporting period ended April 30, 1998? And what was the average
maturity of each fund?
A INDEPENDENCE ONE PRIME MONEY MARKET FUND.
Independence One Prime Money Market Fund earned a total return of 5.20% for
Class A Shares and 5.46% for Class B Shares during the twelve-month reporting
period ended April 30, 1998.* The 7-day net yield for Class A Shares began the
reporting period on May 1, 1997 at 4.95% and ended the reporting period on April
30, 1998 at 5.03%.* The 7-day net yield for Class B Shares began the reporting
period on May 1, 1997 at 5.20% and ended the reporting period on April 30, 1998
at 5.28%.* The average maturity of the fund as of April 30, 1998 was 56 days.
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
Independence One U.S. Treasury Money Market Fund earned a total return of 5.03%
during the twelve-month reporting period ended April 30, 1998.* The 7- day net
yield began the reporting period May 1, 1997 at 4.81% and ended the reporting
period on April 30, 1998 at 4.91%.* The average maturity of the fund as of April
30, 1998 was 63 days.
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
Independence One Michigan Municipal Cash Fund earned a total return of 3.24%
during the twelve-month reporting period ended April 30, 1998.* The 7-day net
yield began the reporting period on May 1, 1997 at 3.73% and ended the reporting
period on April 30, 1998 at 3.40%.* The average maturity of the fund as of April
30, 1998 was 31 days.
*Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Yields quoted for money market funds most closely
reflect the fund's current earnings.
MANAGEMENT DISCUSSION & ANALYSIS
- -------------------------------------------------------------------------------
Q As we reach mid-year, what is your overall outlook for short-term interest
rates?
A While the U.S. is currently enjoying strong performance in its economic
markets and its capital markets, other parts of the world are not as
fortunate. In particular, the Asian financial crisis is sharply slowing the
economies of Indonesia, Thailand, Korea, and Japan. This, coupled with the fact
that inflation rates have declined to long-term lows virtually across the
industrialized world, will allow the Fed to maintain stable short-term interest
rates for the immediate future. However, if evidence of domestic wage inflation
and widespread consumer price increases were to emerge, investors should be
alert to a likely tightening move before the year is over.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
----------- --------------------------------------------------- ------------
CERTIFICATE OF DEPOSIT--31.2%
---------------------------------------------------------------
FINANCE--31.2%
---------------------------------------------------
$10,000,000 ABN-AMRO Bank NV, Chicago, 5.740%, 3/12/1999 $ 9,989,768
---------------------------------------------------
15,000,000 Abbey National Bank PLC, London, 5.530%, 6/12/1998 15,000,345
---------------------------------------------------
20,000,000 Bank of Montreal, 5.540%-5.550%, 5/11/1998-
7/24/1998 20,000,311
---------------------------------------------------
20,000,000 Banque National De Paris, Chicago, 5.640%-5.820%,
6/4/1998-7/2/1998 20,000,832
---------------------------------------------------
10,000,000 Bayerische Landesbank Girozentrale, 5.560%,
6/30/1998 10,000,246
---------------------------------------------------
5,000,000 Canadian Imperial Bank of Commerce, Toronto,
5.610%, 1/11/1999 4,999,327
---------------------------------------------------
10,000,000 First Chicago NBD Corp., 5.490%, 6/4/1998 10,000,085
---------------------------------------------------
15,000,000 Rabobank Nederland, Utrecht, 5.540%, 9/15/1998 15,001,111
---------------------------------------------------
17,000,000 Societe Generale, 5.690%-5.970%, 10/21/1998-
3/22/1999 16,997,561
---------------------------------------------------
15,000,000 Svenska Handelsbanken, Stockholm, 5.550%, 5/26/1998 15,000,205
---------------------------------------------------
10,000,000 Swiss Bank Corp., Basle, 5.570%, 8/20/1998 9,999,335
--------------------------------------------------- ------------
TOTAL CERTIFICATES OF DEPOSIT 146,989,126
--------------------------------------------------- ------------
(A) COMMERCIAL PAPER--45.6%
---------------------------------------------------------------
AGRICULTURE--3.2%
---------------------------------------------------
15,000,000 Cargill, Inc., 5.507%, 5/8/1998 14,984,017
--------------------------------------------------- ------------
BANKS--5.7%
---------------------------------------------------
22,000,000 Banca CRT Financial Corp., 5.596%-5.636%,
6/30/1998-9/4/1998 21,662,507
---------------------------------------------------
5,000,000 Commerzbank U.S. Finance, Inc., 5.515%, 5/20/1998 4,985,644
--------------------------------------------------- ------------
Total 26,648,151
--------------------------------------------------- ------------
CHEMICALS--1.5%
---------------------------------------------------
7,000,000 Monsanto Co., 5.512%, 6/22/1998 6,945,299
--------------------------------------------------- ------------
CONSUMER LOAN RECEIVABLES--6.8%
---------------------------------------------------
15,108,000 Fleet Funding Corp., 5.549%, 5/29/1998 15,043,254
---------------------------------------------------
17,000,000 Receivables Capital Corp., 5.535%, 5/14/1998 16,966,175
--------------------------------------------------- ------------
Total 32,009,429
--------------------------------------------------- ------------
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------------------------------------------- ------------
<C> <S> <C>
(A) COMMERCIAL PAPER--CONTINUED
-------------------------------------------------------------
FINANCE--7.4%
-------------------------------------------------
$ 5,000,000 General Electric Capital Corp., 5.489%, 5/13/1998 $ 4,990,967
-------------------------------------------------
15,000,000 Toronto Dominion Holdings (USA), Inc., 5.566%,
6/30/1998 14,862,750
-------------------------------------------------
15,000,000 Transamerica Finance Corp., 5.517%, 6/5/1998 14,920,083
------------------------------------------------- ------------
Total 34,773,800
------------------------------------------------- ------------
MISCELLANEOUS RECEIVABLES--4.2%
-------------------------------------------------
20,000,000 Asset Securitization Cooperative Corp., 5.560%-
5.561%, 5/8/1998-5/19/1998 19,953,328
------------------------------------------------- ------------
OFFICE/BUSINESS MACHINES--3.1%
-------------------------------------------------
15,000,000 Pitney Bowes Credit Corp., 5.508%, 6/15/1998 14,897,812
------------------------------------------------- ------------
SECURITIES SERVICES--9.5%
-------------------------------------------------
15,000,000 Goldman Sachs & Co., 5.524%, 5/13/1998 14,972,500
-------------------------------------------------
15,000,000 J.P. Morgan & Co., Inc., 5.515%, 5/21/1998 14,954,667
-------------------------------------------------
15,000,000 Merrill Lynch & Co., Inc., 5.586%, 5/15/1998 14,967,742
------------------------------------------------- ------------
Total 44,894,909
------------------------------------------------- ------------
UTILITIES--4.2%
-------------------------------------------------
20,000,000 Pacificorp, 5.558%-5.581%, 5/5/1998-6/1/1998 19,925,757
------------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 215,032,502
------------------------------------------------- ------------
CORPORATE NOTES--3.2%
-------------------------------------------------------------
BANKING--3.2%
-------------------------------------------------
15,000,000 Fifth Third Bank, Cincinnati, 5.54%, 5/20/1998 15,000,000
------------------------------------------------- ------------
GOVERNMENT AGENCY--2.1%
-------------------------------------------------------------
FEDERAL HOME LOAN BANK--2.1%
-------------------------------------------------
10,000,000 5.750%, 4/27/1999 10,000,000
------------------------------------------------- ------------
</TABLE>
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------------------------------------------- ------------
<C> <S> <C>
(B) REPURCHASE AGREEMENTS--17.6%
--------------------------------------------------------------
$43,171,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.500%, dated 4/30/1998, due 5/1/1998 $ 43,171,000
--------------------------------------------------
40,000,000 First Chicago Capital Markets, Inc., 5.520%, dated
4/30/1998, due 5/1/1998 40,000,000
-------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 83,171,000
-------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $470,192,628
-------------------------------------------------- ------------
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase.
(b) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($471,245,069) at April 30, 1998.
The following acronym is used throughout this portfolio:
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------
Investments in repurchase agreements $ 83,171,000
- ------------------------------------
Total investments in securities 387,021,628
- ------------------------------------ ------------
Total investments in securities,
at amortized cost and value $470,192,628
- --------------------------------------------------
Cash 59
- --------------------------------------------------
Income receivable 1,812,624
- --------------------------------------------------
Receivable for shares sold 142,467
- -------------------------------------------------- ------------
Total assets 472,147,778
- --------------------------------------------------
LIABILITIES:
- ------------------------------------
Payable for shares redeemed $ 77,714
- ------------------------------------
Income distribution payable 766,027
- ------------------------------------
Accrued expenses 58,968
- ------------------------------------ ------------
Total liabilities 902,709
- -------------------------------------------------- ------------
NET ASSETS for 471,245,069 shares outstanding $471,245,069
- -------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- --------------------------------------------------
CLASS A SHARES:
- --------------------------------------------------
$389,521,875 / 389,521,875 shares outstanding $1.00
- -------------------------------------------------- ------------
CLASS B SHARES:
- --------------------------------------------------
$81,723,194 / 81,723,194 shares outstanding $1.00
- -------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------
Interest $26,325,908
- ------------------------------------------------------------
EXPENSES:
- -----------------------------------------------
Investment advisory fee $ 1,861,933
- -----------------------------------------------
Administrative personnel and services fee 495,020
- -----------------------------------------------
Custodian fees 72,461
- -----------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 97,805
- -----------------------------------------------
Directors'/Trustees' fees 22,500
- -----------------------------------------------
Auditing fees 16,500
- -----------------------------------------------
Legal fees 8,299
- -----------------------------------------------
Portfolio accounting fees 90,317
- -----------------------------------------------
Shareholder services fee--Class A Shares 910,356
- -----------------------------------------------
Share registration costs 48,156
- -----------------------------------------------
Printing and postage 9,091
- -----------------------------------------------
Insurance premiums 6,400
- -----------------------------------------------
Miscellaneous 5,000
- ----------------------------------------------- -----------
Total expenses 3,643,838
- -----------------------------------------------
Waiver--
- -----------------------------------------------
Waiver of investment advisory fee (1,163,708)
- ----------------------------------------------- -----------
Net expenses 2,480,130
- ------------------------------------------------------------ -----------
Net investment income $23,845,778
- ------------------------------------------------------------ -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
- ------------------------------------------- --------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------
OPERATIONS--
- -------------------------------------------
Net investment income $ 23,845,778 $ 20,976,396
- ------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------
Distributions from net investment income
- -------------------------------------------
Class A Shares (18,466,487) (16,743,570)
- -------------------------------------------
Class B Shares (5,379,291) (4,232,826)
- ------------------------------------------- --------------- ---------------
Change in net assets resulting from
distributions to shareholders (23,845,778) (20,976,396)
- ------------------------------------------- --------------- ---------------
SHARE TRANSACTIONS--
- -------------------------------------------
Proceeds from sale of shares 3,127,600,723 2,703,226,336
- -------------------------------------------
Net asset value of shares issued to
shareholders in payment of distributions
declared 13,841,267 10,473,533
- -------------------------------------------
Cost of shares redeemed (3,079,200,897) (2,701,466,548)
- ------------------------------------------- --------------- ---------------
Change in net assets resulting from share
transactions 62,241,093 12,233,321
- ------------------------------------------- --------------- ---------------
Change in net assets 62,241,093 12,233,321
- -------------------------------------------
NET ASSETS:
- -------------------------------------------
Beginning of period 409,003,976 396,770,655
- ------------------------------------------- --------------- ---------------
End of period $ 471,245,069 $ 409,003,976
- ------------------------------------------- --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------
INCOME FROM INVESTMENT OPER-
ATIONS
- ----------------------------
Net investment income 0.05 0.05 0.05 0.05 0.03
- ----------------------------
LESS DISTRIBUTIONS
- ----------------------------
Distributions from net in- (0.05) (0.05) (0.05) (0.05) (0.03)
vestment income -------- -------- -------- -------- --------
- ----------------------------
NET ASSET VALUE, END OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
PERIOD -------- -------- -------- -------- --------
- ----------------------------
TOTAL RETURN (A) 5.20% 4.94% 5.33% 4.66% 2.73%
- ----------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses 0.59% 0.60% 0.61% 0.61% 0.59%
- ----------------------------
Net investment income 5.07% 4.83% 5.19% 4.51% 2.70%
- ----------------------------
Expense waiver (b) 0.25% 0.25% 0.25% -- 0.02%
- ----------------------------
SUPPLEMENTAL DATA
- ----------------------------
Net assets, end of period
(000 omitted) $389,522 $337,836 $310,991 $233,607 $310,588
- ----------------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------
1998 1997 1996(A)
- ----------------------------------------- ------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------
Net investment income 0.05 0.05 0.05
- -----------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------
Distributions from net investment income (0.05) (0.05) (0.05)
- ----------------------------------------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------- ------- ------- -------
TOTAL RETURN (B) 5.46% 5.20% 5.07%
- -----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------
Expenses 0.34% 0.35% 0.36%*
- -----------------------------------------
Net investment income 5.31% 5.06% 5.34%*
- -----------------------------------------
Expense waiver (c) 0.25% 0.25% 0.25%*
- -----------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------
Net assets, end of period (000 omitted) $81,723 $71,168 $85,780
- -----------------------------------------
</TABLE>
*Computed on an annualized basis.
(a) Reflects operations for the period from June 13, 1995 (date of initial
public investment) to April 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--29.4%
--------------------------------------------------------------
U.S. TREASURY BILLS--16.8%
--------------------------------------------------
$15,000,000 8/20/1998 $ 14,759,962
--------------------------------------------------
25,000,000 9/17/1998 24,501,434
--------------------------------------------------
15,000,000 10/15/1998 14,638,167
-------------------------------------------------- ------------
Total 53,899,563
-------------------------------------------------- ------------
U.S. TREASURY NOTES--12.6%
--------------------------------------------------
15,000,000 5.875%, 3/31/1999 15,046,320
--------------------------------------------------
15,000,000 6.375%, 1/15/1999 15,090,016
--------------------------------------------------
10,000,000 6.375%, 4/30/1999 10,078,822
-------------------------------------------------- ------------
Total 40,215,158
-------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 94,114,721
-------------------------------------------------- ------------
(A) REPURCHASE AGREEMENTS--70.7%
--------------------------------------------------------------
BA Securities, Inc., 5.500%, dated 4/30/1998, due
18,318,000 5/1/1998 18,318,000
--------------------------------------------------
80,100,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.500%, dated 4/30/1998, due 5/1/1998 80,100,000
--------------------------------------------------
80,100,000 First Chicago Capital Markets, Inc., 5.520%, dated
4/30/1998, due 5/1/1998 80,100,000
--------------------------------------------------
Goldman Sachs Group, LP, 5.480%, dated 4/30/1998,
16,000,000 due 5/1/1998 16,000,000
--------------------------------------------------
16,000,000 Merrill Lynch, Pierce, Fenner and Smith, 5.400%,
dated 4/30/1998, due 5/1/1998 16,000,000
--------------------------------------------------
UBS Securities, Inc., 5.520%, dated 4/30/1998, due
16,000,000 5/1/1998 16,000,000
-------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 226,518,000
-------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $320,632,721
-------------------------------------------------- ------------
</TABLE>
(a) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(b) Also represents cost for federal tax purposes.
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------
Note: The categories of investments are shown as a percentage of net assets
($320,568,343) at April 30, 1998.
The following acronym is used throughout this portfolio:
LP--Limited Partnership
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------
Investments in repurchase agreements $226,518,000
- ------------------------------------
Investments in securities 94,114,721
- ------------------------------------ ------------
Total investments in securities, at amortized
cost and value $320,632,721
- --------------------------------------------------
Cash 612
- --------------------------------------------------
Income receivable 709,738
- --------------------------------------------------
Receivable for shares sold 800
- -------------------------------------------------- ------------
Total assets 321,343,871
- --------------------------------------------------
LIABILITIES:
- ------------------------------------
Payable for shares redeemed 207,000
- ------------------------------------
Income distribution payable 538,874
- ------------------------------------
Accrued expenses 29,654
- ------------------------------------ ------------
Total liabilities 775,528
- -------------------------------------------------- ------------
NET ASSETS for 320,568,343 shares outstanding $320,568,343
- -------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- --------------------------------------------------
$320,568,343 / 320,568,343 shares outstanding $1.00
- -------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------
Interest $14,643,043
- -----------------------------------------------------------
EXPENSES:
- -----------------------------------------------
Investment advisory fee $1,062,526
- -----------------------------------------------
Administrative personnel and services fee 283,031
- -----------------------------------------------
Custodian fees 58,473
- -----------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 30,489
- -----------------------------------------------
Directors'/Trustees' fees 13,000
- -----------------------------------------------
Auditing fees 13,500
- -----------------------------------------------
Legal fees 6,000
- -----------------------------------------------
Portfolio accounting fees 60,993
- -----------------------------------------------
Share registration costs 14,406
- -----------------------------------------------
Printing and postage 14,548
- -----------------------------------------------
Insurance premiums 4,500
- -----------------------------------------------
Miscellaneous 3,367
- ----------------------------------------------- ----------
Total expenses 1,564,833
- ----------------------------------------------------------- -----------
Net investment income $13,078,210
- ----------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
- ------------------------------------------- --------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------
OPERATIONS--
- -------------------------------------------
Net investment income $ 13,078,210 $ 13,060,744
- ------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------
Distributions from net investment income (13,078,210) (13,060,744)
- ------------------------------------------- --------------- ---------------
SHARE TRANSACTIONS--
- -------------------------------------------
Proceeds from sale of shares 2,653,184,433 2,388,962,959
- -------------------------------------------
Net asset value of shares issued to
shareholders
in payment of distributions declared 7,978,732 8,194,683
- -------------------------------------------
Cost of shares redeemed (2,585,884,188) (2,449,101,104)
- ------------------------------------------- --------------- ---------------
Change in net assets resulting from share
transactions 75,278,977 (51,943,462)
- ------------------------------------------- --------------- ---------------
Change in net assets 75,278,977 (51,943,462)
- -------------------------------------------
NET ASSETS:
- -------------------------------------------
Beginning of period 245,289,366 297,232,828
- ------------------------------------------- --------------- ---------------
End of period $ 320,568,343 $ 245,289,366
- ------------------------------------------- --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ----------------------------
Net investment income 0.05 0.05 0.05 0.04 0.03
- ----------------------------
LESS DISTRIBUTIONS
- ----------------------------
Distributions from net (0.05) (0.05) (0.05) (0.04) (0.03)
investment income -------- -------- -------- -------- --------
- ----------------------------
NET ASSET VALUE, END OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
PERIOD -------- -------- -------- -------- --------
- ----------------------------
TOTAL RETURN (A) 5.03% 4.86% 5.28% 4.49% 2.63%
- ----------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses 0.59% 0.59% 0.60% 0.63% 0.61%
- ----------------------------
Net investment income 4.92% 4.75% 5.14% 4.41% 2.60%
- ----------------------------
SUPPLEMENTAL DATA
- ----------------------------
Net assets, end of period
(000 omitted) $320,568 $245,289 $297,233 $244,887 $215,832
- ----------------------------
</TABLE>
(a) Based on net asset value.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
(A) SHORT-TERM MUNICIPALS--92.8%
--------------------------------------------------------
ALABAMA--2.9%
---------------------------------------------
$3,000,000 Phoenix City, AL IDB, (Series 1988), 3.75% CP (Mead Coated
Board)/(ABN AMRO Bank N.V.,
Amsterdam LOC), Mandatory Tender 5/4/1998 P-1/NR $ 3,000,000
--------------------------------------------- -----------
KANSAS--2.0%
---------------------------------------------
2,000,000 Burlington, KS, PCR Bonds (Series A), 3.20%
CP (Kansas City Power And Light Co.),
Mandatory Tender 5/4/1998 A-1+/NR 2,000,000
--------------------------------------------- -----------
MICHIGAN--87.9%
---------------------------------------------
2,000,000 Beecher, MI School District, State Aid Notes,
4.125% Bonds, 6/30/1998 NR/NR 2,000,550
---------------------------------------------
725,000 Coopersville, MI School District Authority,
4.60% Bonds, 7/30/1998 NR/NR 726,506
---------------------------------------------
2,200,000 Delta County, MI Economic Development Corp.,
Environmental Improvement Revenue Refunding
Bonds (Series 1985 A), 3.25% CP (Mead-
Escanaba Paper Co. Project), Mandatory Tender
5/4/1998 P-1/NR 2,200,000
---------------------------------------------
2,000,000 Delta County, MI Economic Development Corp.,
Environmental Improvement Revenue Refunding
Bonds (Series 1985 A), 3.40% CP (Mead-
Escanaba Paper Co. Project), Mandatory Tender
5/4/1998 P-1/NR 2,000,000
---------------------------------------------
1,100,000 Delta County, MI Economic Development Corp.,
Environmental Improvement Revenue Refunding
Bonds (Series 1985 A), 3.50% CP (Mead-
Escanaba Paper Co. Project), Mandatory Tender
7/9/1998 P-1/NR 1,100,000
---------------------------------------------
1,000,000 Delta County, MI Economic Development Corp.,
Environmental Improvement Revenue Refunding
Bonds (Series 1985 B), 3.20% CP (Mead-
Escanaba Paper Co. Project)/(Union Bank of
Switzerland, Zurich LOC), Mandatory Tender
6/4/1998 P-1/NR 1,000,000
---------------------------------------------
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- ------------------------------------------- --------- -----------
<C> <S> <C> <C>
(A) SHORT-TERM MUNICIPALS--CONTINUED
------------------------------------------------------
MICHIGAN--CONTINUED
-------------------------------------------
$2,000,000 Delta County, MI Economic Development
Corp., Environmental Improvement Revenue
Refunding Bonds (Series 1985 B), 3.25% CP
(Mead-Escanaba Paper Co. Project)/(Union
Bank of Switzerland, Zurich LOC), Mandatory
Tender 5/6/1998 P-1/NR $ 2,000,000
-------------------------------------------
1,000,000 Delta County, MI Economic Development
Corp., Environmental Improvement Revenue
Refunding Bonds (Series 1985 B), 3.40% CP
(Mead-Escanaba Paper Co. Project)/(Union
Bank of Switzerland, Zurich LOC), Mandatory
Tender 5/4/1998 P-1/NR 1,000,000
-------------------------------------------
860,000 Farmington Hills, MI Economic Development
Corp., Limited Obligations Revenue Bonds,
3.70% TOBs (Marketing Displays)/(Comerica
Bank, Detroit, MI LOC) 9/1/1998 NR/NR 860,000
-------------------------------------------
1,000,000 Grand Rapids, MI EDR Weekly VRDNs (Amway
Hotel Corp.)/(Old Kent Bank & Trust Co.,
Grand Rapids LOC) A-1/NR 1,000,000
-------------------------------------------
1,000,000 Grand Rapids, MI EDR, EDRB Weekly VRDNs
(Amway Hotel Corp.)/(Old Kent Bank & Trust
Co., Grand Rapids LOC) A-1/NR 1,000,000
-------------------------------------------
2,300,000 Huron Valley, MI School District, 4.25%
TRANs, 5/1/1998 NR/NR 2,300,000
-------------------------------------------
4,000,000 Kalamazoo, MI City School District, GO LT,
3.60% Bonds, 7/30/1998 NR/NR 4,000,976
-------------------------------------------
2,000,000 Michigan Higher Education Student Loan
Authority, Series XXII--F Weekly VRDNs
(Kredietbank N.V., Brussels SA) VMIG1/AAA 2,000,000
-------------------------------------------
1,800,000 Michigan Municipal Bond Authority, (Series
1998-A), 4.25% Bonds, 7/31/1998 SP-1+/NR 1,803,532
-------------------------------------------
5,000,000 Michigan Municipal Bond Authority, (Series
B), 4.50% Bonds, 7/2/1998 SP-1+/NR 5,006,199
-------------------------------------------
1,525,000 Michigan State Hospital Finance Authority
Weekly VRDNs (Chelsea Community Hospital) VMIG1/NR 1,525,000
-------------------------------------------
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- ------------------------------------------ ---------- -----------
<C> <S> <C> <C>
(A) SHORT-TERM MUNICIPALS--CONTINUED
-----------------------------------------------------
MICHIGAN--CONTINUED
------------------------------------------
$1,390,000 Michigan State Hospital Finance Authority
Weekly VRDNs (Hospital Equipment Loan
Program)/(First of America Bank--
Kalamazoo, MI LOC) VMIG1/NR $ 1,390,000
------------------------------------------
1,100,000 Michigan State Hospital Finance Authority,
(Series 1994) Weekly VRDNs (Mt. Clemens
General Hospital)/(Comerica Bank, Detroit,
MI LOC) VMIG1/NR 1,100,000
------------------------------------------
80,000 Michigan State Hospital Finance Authority,
(Series A) Weekly VRDNs (Hospital
Equipment Loan Program) VMIG1/NR 80,000
------------------------------------------
2,900,000 Michigan State Hospital Finance Authority,
(Series A) Weekly VRDNs (Hospital
Equipment Loan Program) VMIG1/NR 2,900,000
------------------------------------------
5,200,000 Michigan State Hospital Finance Authority,
(Series F) Weekly VRDNs (Daughters of
Charity) VMIG1/A-1 5,200,000
------------------------------------------
200,000 Michigan State Hospital Finance Authority,
Hospital Equipment Loan Program Bonds
(Series A) Weekly VRDNs (First of American
Bank LOC) VMIG1/NR 200,000
------------------------------------------
4,000,000 Michigan State, GO UT, 4.50% TRANs,
9/30/1998 SP-1+/MIG1 4,013,551
------------------------------------------
1,000,000 Michigan State, GO UT, 5.30% TRANs,
11/1/1998 AA+/Aa2 1,008,831
------------------------------------------
1,700,000 Michigan Strategic Fund Monthly VRDNs
(Applied Textiles, Inc.) NR/NR 1,700,000
------------------------------------------
900,000 Michigan Strategic Fund Weekly VRDNs
(Matvest, Inc.) NR/NR 900,000
------------------------------------------
1,500,000 Michigan Strategic Fund Weekly VRDNs
(Morrell, Inc.) NR/NR 1,500,000
------------------------------------------
2,000,000 Michigan Strategic Fund, 3.25% CP (Dow
Chemical Co.), Mandatory Tender 5/11/1998 P-1/NR 2,000,000
------------------------------------------
2,200,000 Michigan Strategic Fund, 3.25% CP (Dow
Chemical Co.), Mandatory Tender 6/2/1998 P-1/NR 2,200,000
------------------------------------------
2,000,000 Michigan Strategic Fund, 3.25% CP (Dow
Chemical Co.), Mandatory Tender 6/9/1998 P-1/NR 2,000,000
------------------------------------------
1,800,000 Michigan Strategic Fund, 3.25% CP (Dow
Chemical Co.), Mandatory Tender 6/9/1998 P-1/NR 1,800,000
------------------------------------------
1,100,000 Michigan Strategic Fund, 3.40% CP (Dow
Chemical Co.), Mandatory Tender 6/1/1998 P-1/NR 1,100,000
------------------------------------------
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- ------------------------------------------- --------- -----------
<C> <S> <C> <C>
(A) SHORT-TERM MUNICIPALS--CONTINUED
------------------------------------------------------
MICHIGAN--CONTINUED
-------------------------------------------
$1,100,000 Michigan Strategic Fund, 3.50% CP (Dow
Chemical Co.), Mandatory Tender 7/9/1998 P-1/NR $ 1,100,000
-------------------------------------------
1,000,000 Michigan Strategic Fund, Industrial
Improvement Revenue Bonds Weekly VRDNs
(Eclipse Mold, Inc. Project) NR/NR 1,000,000
-------------------------------------------
1,000,000 Michigan Strategic Fund, Industrial
Improvement Revenue Bonds Weekly VRDNs
(Pinnacle Molded Plastics) NR/NR 1,000,000
-------------------------------------------
2,000,000 Michigan Strategic Fund, Limited Obligation
Revenue Bonds (Series 1995) Weekly VRDNs
(United Waste Systems, Inc.)/(Bank of
America Illinois LOC) VMIG1/A-1 2,000,000
-------------------------------------------
2,525,000 Michigan Strategic Fund, PCR Bonds Weekly
VRDNs (General Motors Corp.) VMIG1/NR 2,525,000
-------------------------------------------
970,000 Michigan Strategic Fund, Refunding Revenue
Bonds (Series B) Weekly VRDNs (Riverfront
Development Co.) NR/NR 970,000
-------------------------------------------
3,000,000 Michigan Strategic Fund, Refunding Revenue
Bonds Weekly VRDNs (Louisiana-Pacific
Corp.)/(Wachovia Bank & Trust Co. LOC) NR/Aa2 3,000,000
-------------------------------------------
900,000 Michigan Strategic Fund, Resource Recovery
Improvement Bonds Weekly VRDNs (Great Lakes
Recovery Systems)/(NBD Bank, Michigan LOC) AA/NR 900,000
-------------------------------------------
1,000,000 Michigan Strategic Fund, Revenue Bonds
Weekly VRDNs (YWY Investments LLC)/(NBD
Bank, Michigan LOC) NR/NR 1,000,000
-------------------------------------------
4,900,000 Michigan Strategic Fund, Solid Waste
Disposal Revenue Bonds Weekly VRDNs
(Grayling Generating) VMIG1/NR 4,900,000
-------------------------------------------
1,500,000 Oakland County, MI EDC Weekly VRDNs
(Michigan Christian College)/(NBD Bank,
Michigan LOC) NR/NR 1,500,000
-------------------------------------------
2,000,000 Pinckney, MI Community Schools, 3.95%
TRANs, 5/1/1998 NR/NR 2,000,000
-------------------------------------------
600,000 Regents of University of Michigan, (Series A), 3.25% CP (Regents of
University of
Michigan GTD), Mandatory Tender 5/7/1998 P-1/NR 600,000
-------------------------------------------
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR CREDIT
SHARES RATING* VALUE
---------- ------------------------------------------- ------- -----------
<C> <S> <C> <C>
(A) SHORT-TERM MUNICIPALS--CONTINUED
- -----------------------------------------------------------------------------
MICHIGAN--CONTINUED
-------------------------------------------
$3,000,000 Regents of University of Michigan, (Series
A), 3.40% CP (Regents of University of
Michigan GTD), Mandatory Tender 5/14/1998 P-1/NR $ 3,000,000
-------------------------------------------
2,000,000 Regents of University of Michigan, (Series A), 3.40% CP (Regents of
University of
Michigan GTD), Mandatory Tender 6/10/1998 P-1/NR 2,000,000
-------------------------------------------
2,000,000 Regents of University of Michigan, (Series A), 3.40% CP (Regents of
University of
Michigan GTD), Mandatory Tender 6/9/1998 P-1/NR 2,000,000
-------------------------------------------
265,000 Troy, MI City School District, GO UT Bonds,
3.80% Bonds
(Q-SBLF INS), 5/1/1998 AA/Aa2 265,000
------------------------------------------- -----------
Total Michigan 90,375,145
------------------------------------------- -----------
TOTAL SHORT-TERM MUNICIPALS 95,375,145
------------------------------------------- -----------
MUTUAL FUND SHARES--2.5%
- -----------------------------------------------------------------------------
2,564,000 Nuveen Tax Exempt Money Market Fund (AT NET
ASSET VALUE) 2,564,000
------------------------------------------- -----------
TOTAL INVESTMENTS (AT AMORTIZED COST) (B) $97,939,145
------------------------------------------- -----------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) At April 30, 1998, 16.1% of the total investments at market value were
subject to alternative minimum tax.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($102,769,725) at April 30, 1998.
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
CP--Commercial Paper LOC--Letter of Credit
EDC--Economic Development Commission LT--Limited Tax
EDR--Economic Development Revenue PCR--Pollution Control Revenue
EDRB--Economic Development Revenue Bonds Q-SBLF--Qualified State Bond Loan
GO--General Obligation Fund
GTD--Guaranty SA--Support Agreement
IDB--Industrial Development Bond TOBs--Tender Option Bonds
INS--Insured TRANs--Tax and Revenue Anticipation
LLC--Limited Liability Corporation Notes
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
VRDNs--Variable Rate Demand Notes
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------
Total investments in securities, at
amortized cost and value $ 97,939,145
- -------------------------------------
Cash 203
- -------------------------------------
Income receivable 886,007
- -------------------------------------
Receivable for investments sold 4,014,400
- -------------------------------------
Receivable for shares sold 54,558
- ------------------------------------- ------------
Total assets 102,894,313
- -------------------------------------
LIABILITIES:
- ----------------------------
Payable for shares redeemed $ 54,672
- ----------------------------
Income distribution payable 50,232
- ----------------------------
Accrued expenses 19,684
- ---------------------------- --------
Total liabilities 124,588
- ------------------------------------- ------------
NET ASSETS for 102,769,725 shares
outstanding $102,769,725
- ------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------
$102,769,725 / 102,769,725 shares
outstanding $1.00
- ------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------
Interest $3,448,607
- -------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------
Investment advisory fee $ 375,284
- --------------------------------------------------------
Administrative personnel and services fee 99,977
- --------------------------------------------------------
Custodian fees 13,501
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 25,463
- --------------------------------------------------------
Directors'/Trustees' fees 4,500
- --------------------------------------------------------
Auditing fees 14,500
- --------------------------------------------------------
Legal fees 5,000
- --------------------------------------------------------
Portfolio accounting fees 35,523
- --------------------------------------------------------
Share registration costs 15,658
- --------------------------------------------------------
Printing and postage 9,369
- --------------------------------------------------------
Insurance premiums 3,250
- --------------------------------------------------------
Miscellaneous 3,186
- -------------------------------------------------------- ---------
Total expenses 605,211
- --------------------------------------------------------
Waivers--
- --------------------------------------------------------
Waiver of investment advisory fee (146,672)
- -------------------------------------------------------- ---------
Net expenses 458,539
- ------------------------------------------------------------------- ----------
Net investment income $2,990,068
- ------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
- ------------------------------------------- -------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------
OPERATIONS--
- -------------------------------------------
Net investment income $ 2,990,068 $ 2,524,176
- ------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------
Distributions from net investment income (2,990,068) (2,524,176)
- ------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- -------------------------------------------
Proceeds from sale of shares 746,963,146 594,439,241
- -------------------------------------------
Net asset value of shares issued to
shareholders
in payment of distributions declared 2,382,308 2,021,101
- -------------------------------------------
Cost of shares redeemed (730,595,042) (587,153,264)
- ------------------------------------------- ------------- -------------
Change in net assets resulting from share
transactions 18,750,412 9,307,078
- ------------------------------------------- ------------- -------------
Change in net assets 18,750,412 9,307,078
- -------------------------------------------
NET ASSETS:
- -------------------------------------------
Beginning of period 84,019,313 74,712,235
- ------------------------------------------- ------------- -------------
End of period $ 102,769,725 $ 84,019,313
- ------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------
Net investment income 0.03 0.03 0.03 0.03 0.02
- ----------------------------------
LESS DISTRIBUTIONS
- ----------------------------------
Distributions from net investment
income (0.03) (0.03) (0.03) (0.03) (0.02)
- ---------------------------------- -------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------- -------- ------- ------- ------- -------
TOTAL RETURN (A) 3.24% 3.04% 3.24% 2.81% 1.98%
- ----------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------
Expenses 0.49% 0.48% 0.53% 0.59% 0.50%
- ----------------------------------
Net investment income 3.19% 3.01% 3.18% 2.80% 1.96%
- ----------------------------------
Expense waiver (b) 0.16% 0.20% 0.20% 0.21% 0.22%
- ----------------------------------
SUPPLEMENTAL DATA
- ----------------------------------
Net assets, end of period (000
omitted) $102,770 $84,019 $74,712 $66,856 $55,013
- ----------------------------------
</TABLE>
(a) Based on net asset value.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MUTUAL FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
- -------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end management investment
company. The Trust consists of nine portfolios. The financial statements of the
following portfolios (individually referred to as the "Fund", or collectively as
the "Funds") are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
<C> <S>
To provide current income
Independence One Prime Money Market Fund consistent with ("Prime Money Market
Fund") stability of principal.
- -------------------------------------------------------------------------------
To provide current income
Independence One U.S. Treasury Money Market consistent with
Fund ("U.S. Treasury Money Market Fund") stability of principal.
- -------------------------------------------------------------------------------
Independence One Michigan Municipal Cash To provide stability of income
Fund ("Michigan Municipal Cash Fund") and current
income exempt from federal regular
income tax and Michigan state
income tax consistent with
stability of principal.
</TABLE>
The financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Funds use the amortized cost method to value their
portfolio securities is in accordance with Rule 2a-7 under the Act.
Investments in other open-end regulated investment companies are valued at net
asset value.
REPURCHASE AGREEMENTS--It is the policy of the Funds to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Funds to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Funds' adviser to be creditworthy
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
pursuant to the guidelines and/or standards reviewed or established by the
Board of Trustees (the "Trustees"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Funds could receive less than the repurchase price on the
sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Distributions
to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in
when-issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ
from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3)SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At April 30, 1998, capital paid-in for Prime Money Market Fund,
U.S. Treasury Money Market Fund, and Michigan Municipal Cash Fund aggregated
$471,245,069, $320,568,343, and $102,769,725, respectively.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND
------------------------------
YEAR ENDED APRIL 30,
------------------------------
CLASS A SHARES 1998 1997
- ------------------------------------------------ -------------- --------------
<S> <C> <C>
Shares sold 2,741,778,522 2,380,466,586
- ------------------------------------------------
Shares issued to shareholders in payment of dis-
tributions declared 10,455,588 8,476,115
- ------------------------------------------------
Shares redeemed (2,700,548,575) (2,362,097,479)
- ------------------------------------------------ -------------- --------------
Net change resulting from Class A Share trans-
actions 51,685,535 26,845,222
- ------------------------------------------------ -------------- --------------
</TABLE>
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND
------------------------------
YEAR ENDED APRIL 30,
------------------------------
CLASS B SHARES 1998 1997
- ---------------------------------------------- -------------- --------------
<S> <C> <C>
Shares sold 385,822,201 322,759,750
- ----------------------------------------------
Shares issued to shareholders in payment of
distributions declared 3,385,679 1,997,418
- ----------------------------------------------
Shares redeemed (378,652,322) (339,369,069)
- ---------------------------------------------- -------------- --------------
Net change resulting from Class B Share 10,555,558 (14,611,901)
transactions -------------- --------------
- ----------------------------------------------
Net change resulting from share 62,241,093 12,233,321
transactions -------------- --------------
- ----------------------------------------------
<CAPTION>
U.S. TREASURY MONEY
MARKET FUND
------------------------------
YEAR ENDED APRIL 30,
------------------------------
1998 1997
- ---------------------------------------------- -------------- --------------
<S> <C> <C>
Shares sold 2,653,184,433 2,388,962,959
- ----------------------------------------------
Shares issued to shareholders in payment of
distributions declared 7,978,732 8,194,683
- ----------------------------------------------
Shares redeemed (2,585,884,188) (2,449,101,104)
- ---------------------------------------------- -------------- --------------
Net change resulting from share transactions 75,278,977 (51,943,462)
- ---------------------------------------------- -------------- --------------
<CAPTION>
MICHIGAN MUNICIPAL
CASH FUND
------------------------------
YEAR ENDED APRIL 30,
------------------------------
<S> <C> <C>
1998 1997
- ---------------------------------------------- -------------- --------------
Shares sold 746,963,146 594,439,241
- ----------------------------------------------
Shares issued to shareholders in payment of
distributions declared 2,382,308 2,021,101
- ----------------------------------------------
Shares redeemed (730,595,042) (587,153,264)
- ---------------------------------------------- -------------- --------------
Net change resulting from share transactions 18,750,412 9,307,078
- ---------------------------------------------- -------------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Michigan National Bank, the Funds' investment adviser
(the "Adviser") earns for its services an annual investment advisory fee equal
to 0.40% of each Fund's average daily net assets. The Adviser may voluntarily
choose to waive any portion of its fee. The Adviser can modify or terminate
this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Funds with certain administrative personnel and services. The fee paid to FAS
is based on the level of
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
average aggregate net assets of the Trust for the period. The administrative
fee during any fiscal year shall be at least $50,000 for each portfolio in the
Trust.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Michigan National Bank, Prime Money Market Fund will pay Michigan
National Bank up to 0.25% of average daily net assets of the Class A Shares
for the period. The fee paid to Michigan National Bank is used to finance
certain services for shareholders and to maintain
shareholder accounts.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the Funds. The
fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Funds' accounting records for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Michigan National Bank is the Funds' custodian. The fee is
based on the level of each Fund's average daily net assets for the period,
plus out-of-pocket expenses.
GENERAL--Certain of the Officers of the Trust are Officers and/or Directors or
Trustees of the above companies.
(5) CONCENTRATION OF CREDIT RISK
Since Michigan Municipal Cash Fund invests a substantial portion of its assets
in issuers located in one state, it will be more susceptible to factors
adversely affecting issuers of that state than would be a comparable tax-exempt
mutual fund that invests nationally. In order to reduce the credit risk
associated with such factors, at April 30, 1998, 29.4% of the securities in the
portfolio of investments are backed by letters of credit or bond insurance of
various financial institutions and financial guaranty assurance agencies. The
value of investments insured by or supported (backed) by a letter of credit from
any one institution or agency did not exceed 7.8% of total investments.
(6) YEAR 2000
Similar to other financial organizations, the Funds could be adversely affected
if the computer systems used by the Funds' service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Funds' Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Funds' other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Funds.
INDEPENDENCE ONE MUTUAL FUNDS
- --------------------------------------------------------------------------------
(7) SUBSEQUENT EVENT
Subsequent to the year ended April 30, 1998, the Trust added Independence One
Small Cap Fund and Independence One International Equity Fund, which will become
effective June 16, 1998.
REPORT OF KPMG PEAT MARWICK LLP,
INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
To the Board of Trustees and Shareholders INDEPENDENCE ONE MUTUAL FUNDS:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, for the Independence One Mutual Funds listed
below, as of April 30, 1998, and the related statements of operations and
changes in net assets, and the financial highlights for each of the periods
listed below:
INDEPENDENCE ONE PRIME MONEY MARKET FUND--statement of operations for the year
ended April 30, 1998, the statement of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended.
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND--statement of operations for
the year ended April 30, 1998, the statement of changes in net assets for each
of the years in the two-year period then ended, and the financial highlights
for each of the years in the five-year period then ended.
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND--statement of operations for the
year ended April 30, 1998, the statement of changes in net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at April
30, 1998 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Independence One Prime Money Market Fund, Independence One U.S. Treasury Money
Market Fund and Independence One Michigan Municipal Cash Fund as of April 30,
1998, and the results of their operations, changes in their net assets, and
their financial highlights for each of the periods listed above, in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
June 12, 1998
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
Robert E. Baker Edward C. Gonzales
President and Treasurer
Harold Berry Jeffrey W. Sterling
Vice President and Assistant Treasurer
Nathan Forbes
Jay S. Neuman
Harry J. Nederlander Secretary
Timothy S. Johnson
Thomas S. Wilson Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U. S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves risk, including possible
loss of principal. Although money market funds seek to maintain a stable net
asset value of $1.00 per share, there is no assurance that they will be able to
do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
INDEPENDENCE ONE
MUTUAL FUNDS
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
INVESTMENT ADVISER
Michigan National Bank
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
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 8600
Boston, Massachusetts 02266-8600
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
One Mellon Bank Center
Pittsburgh, Pennsylvania 15219
Cusip 453777708
Cusip 453777203 [RECYCLED
Cusip 453777302 PAPER
Cusip 453777401 LOGO]
G01200-01 (6/98)
INDEPENDENCE ONE(R)
MUTUAL FUNDS
(DISTRIBUTED BY FEDERATED SECURITIES CORP.)
COMBINED
ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1998
Independence One Prime
Money Market Fund
Independence One U.S. Treasury
Money Market Fund
Independence One Michigan
Municipal Cash Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF MICHIGAN NATIONAL BANK]
Investment Adviser
APPENDIX
A. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The shares of
Independence One U.S. Government Securities Fund (the "Fund") are represented by
a solid line and the Lehman Brothers Government Bond Index (the "LBGBI") is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the shares
of the Fund and the LBGBI. The "x" axis reflects computation periods from
1/11/93 to 4/30/98. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund's
shares as compared to the LBGBI. The ending values were $14,105 and $14,529,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Fund shares' Average Annual Total Return for the one- and
five-year periods ended 4/30/98 and from the start of performance of the Fund's
shares (1/11/93) to 4/30/98. The total returns were 10.37%, 6.16% and 6.70%,
respectively.
B. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The shares of
Independence One Fixed Income Fund (the "Fund") are represented by a solid line
and the Lehman Brothers Intermediate Government/Corporate Bond Index (the
"LBGCBI") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the shares of the Fund and the LBGCBI. The "x" axis reflects
computation periods from 10/23/95 to 4/30/98. The "y" axis reflects the cost of
the investment. The right margin reflects the ending value of the hypothetical
investment in the Fund's shares as compared to the LBGCBI. The ending values
were $11,617 and $11,726, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the Fund shares' Average Annual Total Returns for
the one-year period ended 4/30/98 and from the start of performance of the
Fund's shares (10/23/95) to 4/30/98. The total returns were 8.56% and 6.12%,
respectively.
C. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The shares of
Independence One Michigan Municipal Bond Fund (the "Fund") are represented by a
solid line and the Lehman Brothers 7-Year General Obligations Bond Index (the
"LB7YGOBI") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the shares of the Fund and the LB7YGOBI. The "x" axis reflects
computation periods from 11/20/95 to 4/30/98. The "y" axis reflects the cost of
the investment. The right margin reflects the ending value of the hypothetical
investment in the Fund's shares as compared to the LB7YGOBI. The ending values
were $11,370 and $11,375, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the Fund shares' Average Annual Total Returns for
the one-year period ended 4/30/98 and from the start of performance of the
Fund's shares (11/20/95) to 4/30/98. The total returns were 7.38% and 5.39%,
respectively.
