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
SUB-ADVISER
Sosnoff Sheridan Corporation
440 South LaSalle Street
Suite 2301
Chicago, Illinois 60605
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
INDEPENDENCE ONE(R)
EQUITY PLUS FUND
(DISTRIBUTED BY FEDERATED SECURITIES CORP.)
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF MICHIGAN NATIONAL BANK]
Investment Adviser
G01200-06 (12/98) [recycled logo]
PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report of Independence One Equity Plus
Fund which covers the six-month period from May 1, 1998 through October 31,
1998. Inside, you'll find complete financial information for the fund--
beginning with the portfolio manager's discussion, followed by a listing of fund
holdings and the financial statements.
Your money is at work where it has the ability to grow over time--in a
diversified portfolio of high-quality stocks that include many household names
like American Express, Avon, AT&T, Brunswick, Ford, Chrysler, Coca-Cola, Disney,
DuPont, Hewlett Packard, IBM, Intel, Johnson & Johnson, McDonald's, Merck,
Microsoft, Ralston Purina, and Wal-Mart.
In a very volatile environment for stocks that saw stock prices experience a
broad decline, the fund produced a six-month total return of 0.55%*. While stock
prices fluctuated considerably, the fund's net asset value began and ended the
period at the same amount--$18.24. The fund also paid income distributions
totaling $0.10 per share. The fund ended the reporting period with $209.6
million in assets.
In addition, the fund achieved a 5-star (*****) overall rating by Morningstar
out of 2,678 domestic equity funds as of September 30, 1998.** This is
Morningstar's highest rating for risk-adjusted fund performance, and places the
fund in the top 10% of its category.
Thank you for selecting Independence One Equity Plus Fund to pursue the
long-term performance potential of stocks. We look forward to keeping you
informed about the progress of your investment.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
December 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.
**Morningstar proprietary ratings reflect risk-adjusted performance through
9/30/98. They are subject to change every month. Ratings are calculated from
the funds' 3-, 5-, and 10-year average annual returns in excess of 90-day
Treasury bill returns with appropriate fee adjustments, and a risk factor that
reflects fund performance below 90-day T-bill returns. The top 10% of funds in
a rating universe receive 5 stars; the next 22.5% receive 4 stars; the middle
35% receive 3 stars; the next 22.5% receive 2 stars and the bottom 10% receive
1 star. The fund's 3- year rating was: 5-stars (*****) out of 2,678 domestic
equity funds as of 9/30/98.
INVESTMENT REVIEW
- -------------------------------------------------------------------------------
Q What are your comments on what was a very volatile period for stocks?
A The international markets have gone through a tremendous period of
volatility. This volatility has been brought on by the collapse of the
Russian economy and stock market, coupled with the turmoil with other foreign
markets, especially Japan. During the reporting period, earnings forecasts for
U.S. corporations fell as well and, thus, all established equity markets fell at
least 10%. Relatively speaking, the Independence One Equity Plus Fund performed
very well. Its focus on large-cap stocks enabled it to outperform most stock
market indices during this very volatile period.
Q What was the total return of Independence One Equity Plus Fund for the
six-month period ended October 31, 1998, compared to its benchmark?
A The total return for the Independence One Equity Plus Fund for the six-month
period ended October 31, 1998 was up .55%.* During the same period
the Standard & Poor's 100 Composite Price Index ("S&P 100")** was up .82%.
Q What were the fund's top 10 holdings at the end of the period?
A
<TABLE>
<CAPTION>
COMPANY % OF PORTFOLIO
------- --------------
<S> <C>
General Electric Co. 6.855
Microsoft Corporation 6.273
Exxon Corporation 4.193
Coca Cola Company 4.016
Merck & Company, Inc. 3.888
Wal-Mart Stores, Inc. 3.727
Intel Corporation 3.634
International Business Machines 3.366
AT&T Corporation 2.713
Bristol-Myers Squibb Co. 2.646
</TABLE>
Q As we reach the end of a very turbulent period for stocks, what is your
outlook, and on what sectors are you focusing?
A It is expected that the volatility will continue as the global equity
markets react to various international events. Since the Independence One
Equity Plus Fund invests in stocks that make up the S&P 100 Index, we do not
focus on any sectors in particular.
* Performance quoted represents 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.
** Standard & Poor's 100 Composite Stock Index is a composite index of common
stocks in industry, transportation, and financial and public utility
companies and can be used to compare the total returns of funds whose
portfolios are invested primarily in common stocks. This index is unmanaged
and investments cannot be made in an index. Standard & Poor's(R), "S&P(R)",
and "S&P 100(R)" are trademarks of The McGraw-Hill Companies, Inc. and have
been licensed for use by Independence One Equity Plus Fund. The Fund is not
sponsored, endorsed, sold or promoted by or affiliated with Standard &
Poor's.
INDEPENDENCE ONE EQUITY PLUS FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS--96.6%
-----------------------------------------------
AEROSPACE & DEFENSE--2.3%
------------------------------------
50,905 Boeing Co. $ 1,908,937
------------------------------------
6,367 General Dynamics Corp. 376,847
------------------------------------
17,070 Raytheon Co., Class B 991,127
------------------------------------
9,901 Rockwell International Corp. 406,560
------------------------------------
11,564 United Technologies Corp. 1,101,471
------------------------------------ ------------
Total 4,784,942
------------------------------------ ------------
AUTOMOTIVE--3.3%
------------------------------------
32,522 Chrysler Corp. 1,565,121
------------------------------------
61,114 Ford Motor Co. 3,315,434
------------------------------------
33,675 General Motors Corp. 2,123,630
------------------------------------ ------------
Total 7,004,185
------------------------------------ ------------
BANKING--3.8%
------------------------------------
87,184 BankAmerica Corp. 5,007,631
------------------------------------
58,800 Bank One Corp. 2,873,850
------------------------------------ ------------
Total 7,881,481
------------------------------------ ------------
CAPITAL GOODS--0.8%
------------------------------------
10,639 Homestake Mining Co. 126,338
------------------------------------
20,382 Minnesota Mining & Manufacturing Co. 1,630,560
------------------------------------ ------------
Total 1,756,898
------------------------------------ ------------
CHEMICALS--2.7%
------------------------------------
11,342 Dow Chemical Co. 1,061,895
------------------------------------
56,857 Du Pont (E.I.) de Nemours & Co. 3,269,277
------------------------------------
3,686 Mallinckrodt, Inc. 105,051
------------------------------------
30,176 Monsanto Co. 1,225,900
------------------------------------ ------------
Total 5,662,123
------------------------------------ ------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
------------------------------------------------
COMMERCIAL--1.4%
-------------------------------------
55,446 Ameritech Corp. $ 2,990,619
------------------------------------- ------------
COMPUTERS--14.6%
-------------------------------------
3,660 (a)Ceridian Corp. 209,992
-------------------------------------
77,312 (a)Cisco Systems, Inc. 4,870,624
-------------------------------------
7,855 (a)Computer Sciences Corp. 414,351
-------------------------------------
52,188 Hewlett-Packard Co. 3,141,065
-------------------------------------
47,506 International Business Machines Corp. 7,051,672
-------------------------------------
124,147 (a)Microsoft Corp. 13,144,064
-------------------------------------
49,046 (a)Oracle Corp. 1,449,922
-------------------------------------
12,666 (a)Unisys Corp. 337,232
------------------------------------- ------------
Total 30,618,922
------------------------------------- ------------
CONSUMER--1.0%
-------------------------------------
23,234 American Express Co. 2,053,305
------------------------------------- ------------
ELECTRIC--0.6%
-------------------------------------
12,414 Entergy Corp. 356,902
-------------------------------------
35,136 Southern Co. 990,396
------------------------------------- ------------
Total 1,347,298
------------------------------------- ------------
ELECTRICAL EQUIPMENT--7.3%
-------------------------------------
4,786 Black & Decker Corp. 247,376
-------------------------------------
164,149 General Electric Co. 14,363,037
-------------------------------------
6,355 Honeywell, Inc. 507,606
------------------------------------- ------------
Total 15,118,019
------------------------------------- ------------
ELECTRONICS--4.6%
-------------------------------------
11,055 AMP, Inc. 453,946
-------------------------------------
85,450 Intel Corp. 7,621,072
-------------------------------------
8,275 (a)National Semiconductor Corp. 104,989
-------------------------------------
2,234 Polaroid Corp. 59,341
-------------------------------------
2,546 Tektronix, Inc. 45,510
-------------------------------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
--------------------------------------------------
ELECTRONICS--CONTINUED
---------------------------------------
19,675 Texas Instruments, Inc. $ 1,257,970
--------------------------------------- ------------
Total 9,542,828
--------------------------------------- ------------
ENTERTAINMENT--1.4%
---------------------------------------
103,043 Disney (Walt) Co. 2,775,721
---------------------------------------
5,094 (a)Harrah's Entertainment, Inc. 71,953
--------------------------------------- ------------
Total 2,847,674
--------------------------------------- ------------
FINANCIAL SERVICES--4.0%
---------------------------------------
115,173 Citigroup, Inc. 5,420,306
---------------------------------------
11,874 Hartford Financial Services Group, Inc. 630,806
---------------------------------------
17,432 Merrill Lynch & Co., Inc. 1,032,846
---------------------------------------
37,430 U.S. Bancorp, Inc. 1,366,195
--------------------------------------- ------------
Total 8,450,153
--------------------------------------- ------------
FOOD & BEVERAGE--7.7%
---------------------------------------
22,625 Campbell Soup Co. 1,206,195
---------------------------------------
124,413 Coca-Cola Co. 8,413,429
---------------------------------------
18,424 Heinz (H.J.) Co. 1,070,895
---------------------------------------
34,635 McDonald's Corp. 2,316,216
---------------------------------------
75,123 PepsiCo, Inc. 2,535,401
---------------------------------------
15,961 Ralston Purina Co. 532,698
--------------------------------------- ------------
Total 16,074,834
--------------------------------------- ------------
FOREST PRODUCTS & PAPER--0.7%
---------------------------------------
2,838 Boise Cascade Corp. 79,464
---------------------------------------
4,847 Champion International Corp. 154,801
---------------------------------------
15,492 International Paper Co. 719,410
---------------------------------------
10,025 Weyerhaeuser Co. 469,295
--------------------------------------- ------------
Total 1,422,970
--------------------------------------- ------------
HOMEBUILDERS--0.1%
---------------------------------------
4,135 Fluor Corp. 160,490
--------------------------------------- ------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ---------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------
HOUSEHOLD PRODUCTS--3.5%
----------------------------------
14,919 Colgate-Palmolive Co. $ 1,318,467
----------------------------------
67,563 Procter & Gamble Co. 6,004,662
---------------------------------- ------------
Total 7,323,129
---------------------------------- ------------
INSURANCE--2.9%
----------------------------------
12,781 American General Corp. 875,499
----------------------------------
52,875 American International Group, Inc. 4,507,594
----------------------------------
10,850 CIGNA Corp. 791,372
---------------------------------- ------------
Total 6,174,465
---------------------------------- ------------
MANUFACTURING--0.7%
----------------------------------
9,907 Allegheny Teledyne, Inc. 203,713
----------------------------------
16,258 Eastman Kodak Co. 1,259,995
---------------------------------- ------------
Total 1,463,708
---------------------------------- ------------
MEDICAL SUPPLIES--0.7%
----------------------------------
14,159 Baxter International, Inc. 848,655
----------------------------------
32,423 Columbia/HCA Healthcare Corp. 680,883
---------------------------------- ------------
Total 1,529,538
---------------------------------- ------------
METALS & MINING--0.4%
----------------------------------
9,409 Aluminum Co. of America 745,663
---------------------------------- ------------
OFFICE EQUIPMENT--0.8%
----------------------------------
4,031 Harris Corp. 141,337
----------------------------------
16,537 Xerox Corp. 1,602,022
---------------------------------- ------------
Total 1,743,359
---------------------------------- ------------
OIL--9.0%
----------------------------------
48,349 Amoco Corp. 2,713,588
----------------------------------
16,167 Atlantic Richfield Co. 1,113,502
----------------------------------
16,006 Baker Hughes, Inc. 353,132
----------------------------------
10,708 Coastal Corp. 377,457
----------------------------------
123,277 Exxon Corp. 8,783,486
----------------------------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ---------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------
OIL--CONTINUED
----------------------------------------
22,115 Halliburton Co. $ 794,758
----------------------------------------
39,369 Mobil Corp. 2,979,741
----------------------------------------
18,507 Occidental Petroleum Corp. 367,827
----------------------------------------
27,381 Schlumberger Ltd. 1,437,503
---------------------------------------- ------------
Total 18,920,994
---------------------------------------- ------------
PERSONAL CARE PRODUCTS--0.3%
----------------------------------------
13,274 Avon Products, Inc. 526,812
----------------------------------------
5,430 International Flavors & Fragrances, Inc. 203,286
---------------------------------------- ------------
Total 730,098
---------------------------------------- ------------
PHARMACEUTICALS--9.9%
----------------------------------------
50,146 Bristol-Myers Squibb Co. 5,544,267
----------------------------------------
67,748 Johnson & Johnson 5,521,462
----------------------------------------
60,221 Merck & Co., Inc. 8,144,890
----------------------------------------
25,594 Pharmacia & Upjohn, Inc. 1,354,882
---------------------------------------- ------------
Total 20,565,501
---------------------------------------- ------------
RECREATION--0.0%
----------------------------------------
5,010 Brunswick Corp. 97,382
---------------------------------------- ------------
RETAIL--5.0%
----------------------------------------
24,583 (a)K Mart Corp. 347,235
----------------------------------------
11,437 Limited, Inc. 293,073
----------------------------------------
11,631 May Department Stores Co. 709,491
----------------------------------------
19,702 Sears, Roebuck & Co. 885,359
----------------------------------------
5,103 Tandy Corp. 252,917
----------------------------------------
14,059 (a)Toys 'R' Us, Inc. 275,029
----------------------------------------
113,156 Wal-Mart Stores, Inc. 7,807,764
---------------------------------------- ------------
Total 10,570,868
---------------------------------------- ------------
STEEL--0.0%
----------------------------------------
6,464 (a)Bethlehem Steel Corp. 58,176
---------------------------------------- ------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
---------- --------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------------------
TELECOMMUNICATIONS--5.4%
---------------------------------------------------
91,304 AT&T Corp. $ 5,683,674
---------------------------------------------------
78,214 Bell Atlantic Corp. 4,155,119
---------------------------------------------------
32,933 Northern Telecom Ltd. 1,409,944
--------------------------------------------------- ------------
Total 11,248,737
--------------------------------------------------- ------------
TRANSPORTATION--1.0%
---------------------------------------------------
23,819 Burlington Northern Santa Fe 735,412
---------------------------------------------------
3,816 Delta AirLines, Inc. 402,827
---------------------------------------------------
7,413 (a)FDX Corp. 389,646
---------------------------------------------------
19,082 Norfolk Southern Corp. 628,513
--------------------------------------------------- ------------
Total 2,156,398
--------------------------------------------------- ------------
UTILITIES--0.3%
---------------------------------------------------
21,360 Williams Cos., Inc. (The) 586,065
--------------------------------------------------- ------------
UTILITIES-ELECTRIC--0.4%
---------------------------------------------------
9,594 American Electric Power Co., Inc. 469,506
---------------------------------------------------
10,928 Unicom Corp. 411,849
--------------------------------------------------- ------------
Total 881,355
--------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $110,147,344) 202,512,177
--------------------------------------------------- ------------
(B) REPURCHASE AGREEMENTS--3.3%
---------------------------------------------------------------
$6,974,000 First Chicago Capital Markets, Inc., 5.30%, dated
10/30/1998, due 11/2/1998 6,974,000
--------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $117,121,344)(C) $209,486,177
--------------------------------------------------- ------------
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(c) The cost of investments for federal tax purposes amounts to $117,121,344.
The net unrealized appreciation of investments on a federal tax basis
amounts to $92,364,833 which is comprised of $93,306,281 appreciation and
$941,448 depreciation at October 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($209,650,542) at October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------
Total investments in securities, at value
(identified and tax cost $117,121,344) $209,486,177
- --------------------------------------------------
Income receivable 230,865
- --------------------------------------------------
Deferred organizational costs 11,160
- --------------------------------------------------
Other assets 9,987
- -------------------------------------------------- -----------
Total assets 209,738,189
- --------------------------------------------------
LIABILITIES:
- --------------------------------------------------
Accrued expenses $78,600
- ------------------------------------------
Payable to Bank 9,047
- ------------------------------------------ -------
Total liabilities 87,647
- -------------------------------------------------- ------------
Net Assets for 11,496,169 shares outstanding $209,650,542
- -------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------
Paid in capital $108,866,011
- --------------------------------------------------
Net unrealized appreciation of investments 92,364,833
- --------------------------------------------------
Accumulated net realized gain on investments 8,332,306
- --------------------------------------------------
Undistributed net investment income 87,392
- -------------------------------------------------- ------------
Total Net Assets $209,650,542
- -------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- --------------------------------------------------
$209,650,542 / 11,496,169 shares outstanding $18.24
- -------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------
Dividends (net of foreign taxes withheld of $698) $ 1,443,938
- ----------------------------------------------------------
Interest 143,013
- ---------------------------------------------------------- -----------
Total income 1,586,951
- ----------------------------------------------------------
EXPENSES:
- -----------------------------------------------
Investment advisory fee $ 414,101
- -----------------------------------------------
Administrative personnel and services fee 107,460
- -----------------------------------------------
Custodian fees 19,766
- -----------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 16,328
- -----------------------------------------------
Directors'/Trustees' fees 4,360
- -----------------------------------------------
Auditing fees 6,801
- -----------------------------------------------
Legal fees 3,054
- -----------------------------------------------
Portfolio accounting fees 29,956
- -----------------------------------------------
Share registration costs 9,965
- -----------------------------------------------
Printing and postage 5,434
- -----------------------------------------------
Insurance premiums 1,683
- -----------------------------------------------
Miscellaneous 4,962
- ----------------------------------------------- ---------
Total expenses 623,870
- -----------------------------------------------
Waivers--
- -----------------------------------------------
Waiver of investment advisory fee $(126,847)
- ----------------------------------------------- ---------
Net expenses 497,023
- ---------------------------------------------------------- -----------
Net investment income 1,089,928
- ---------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------
Net realized gain on investments 5,522,830
- ----------------------------------------------------------
Net change in unrealized depreciation of investments (5,426,669)
- ---------------------------------------------------------- -----------
Net realized and unrealized gain on investments 96,161
- ---------------------------------------------------------- -----------
Change in net assets resulting from operations $ 1,186,089
- ---------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1998 APRIL 30, 1998
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------
OPERATIONS--
- ------------------------------------------------
Net investment income $ 1,089,928 $ 2,434,695
- ------------------------------------------------
Net realized gain (loss) on investments
($5,522,830 and $8,551,167 net gains,
respectively, as computed for federal tax
purposes) 5,522,830 8,506,760
- ------------------------------------------------
Net change in unrealized
appreciation/depreciation (5,426,669) 48,813,788
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from operations 1,186,089 59,755,243
- ------------------------------------------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------
Distributions from net investment income (1,087,431) (2,497,120)
- ------------------------------------------------
Distributions from net realized gains -- (7,427,247)
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from
distributions to shareholders (1,087,431) (9,924,367)
- ------------------------------------------------ ------------ ------------
SHARE TRANSACTIONS--
- ------------------------------------------------
Proceeds from sale of shares 24,705,682 29,050,872
- ------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 654,319 6,777,113
- ------------------------------------------------
Cost of shares redeemed (25,561,261) (45,233,940)
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from share
transactions (201,260) (9,405,955)
- ------------------------------------------------ ------------ ------------
Change in net assets (102,602) 40,424,921
- ------------------------------------------------
NET ASSETS:
- ------------------------------------------------
Beginning of period 209,753,144 169,328,223
- ------------------------------------------------ ------------ ------------
End of period (including undistributed net
investment income of $87,392 and $84,895,
respectively) $209,650,542 $209,753,144
- ------------------------------------------------ ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED APRIL 30,
(UNAUDITED) ----------------------------
OCTOBER 31,
1998 1998 1997 1996(A)
- ---------------------------------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 18.24 $ 14.04 $ 11.39 $ 10.00
- ----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------
Net investment income 0.10 0.22 0.21 0.11
- ----------------------------------
Net realized and unrealized gain
(loss) on investments -- 4.85 2.70 1.38
- ---------------------------------- -------- -------- -------- --------
Total from investment operations 0.10 5.07 2.91 1.49
- ---------------------------------- -------- -------- -------- --------
LESS DISTRIBUTIONS
- ----------------------------------
Distributions from net investment
income (0.10) (0.22) (0.21) (0.10)
- ----------------------------------
Distributions from net realized
gain on investments -- (0.65) (0.05) --
- ---------------------------------- -------- -------- -------- --------
Total distributions (0.10) (0.87) (0.26) (0.10)
- ---------------------------------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $18.24 $ 18.24 $ 14.04 $ 11.39
- ---------------------------------- -------- -------- -------- --------
TOTAL RETURN (B) 0.55% 37.20% 26.00% 14.96%
- ----------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------
Expenses 0.48%* 0.42% 0.40% 0.39%*
- ----------------------------------
Net investment income 1.05%* 1.28% 1.74% 1.92%*
- ----------------------------------
Expense waiver (c) 0.12%* 0.19% 0.24% 0.31%*
- ----------------------------------
SUPPLEMENTAL DATA
- ----------------------------------
Net assets, end of period (000
omitted) $209,651 $209,753 $169,328 $112,609
- ----------------------------------
Portfolio turnover 8% 11% 8% 6%
- ----------------------------------
</TABLE>
*Computed on an annualized basis.
(a) Reflects operations for the period from September 25, 1995 (date of initial
public investment) to April 30, 1996.
(b) Based on net asset value.
(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 EQUITY PLUS FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of nine portfolios. The financial
statements included herein are only those of Independence One Equity Plus Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The investment
objective is total return.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on a national securities exchange. Short-term securities are
valued at the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
INDEPENDENCE ONE EQUITY PLUS FUND
- -------------------------------------------------------------------------------
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
DEFERRED EXPENSES--The cost incurred by the Fund with respect to registration
of its shares in its first fiscal year, excluding the initial expense of
registering its shares, have been deferred and are being amortized over a
period not to exceed five years from the Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ
from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, APRIL 30,
1998 1998
- -------------------------------------------- ----------- ----------
<S> <C> <C>
Shares sold 1,414,414 1,818,823
- --------------------------------------------
Shares issued to shareholders in payment of
distributions declared 37,446 436,421
- --------------------------------------------
Shares redeemed (1,452,176) (2,818,913)
- -------------------------------------------- ---------- ----------
Net change resulting from share transactions (316) (563,669)
- -------------------------------------------- ---------- ----------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Michigan National Bank, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.40% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
INDEPENDENCE ONE EQUITY PLUS FUND
- -------------------------------------------------------------------------------
Under the terms of a sub-advisory agreement between the Adviser and Sosnoff
Sheridan Corporation, Sosnoff Sheridan Corporation receives an annual fee from
the Adviser equal to 0.035% of the average daily value of the Fund's equity
securities. Sosnoff Sheridan Corporation may voluntarily
choose to reduce it compensation.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Fund with certain administrative personnel and services. The fee paid to FAS
is based on the level of average aggregate net assets of the Trust for the
period. The administrative fee during any fiscal year shall be at least
$50,000 for each portfolio in the Trust. FAS may voluntarily choose to waive a
portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Michigan National Bank is the Fund's custodian. The fee is
based on the level of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1998, were as follows:
<TABLE>
<S> <C>
- ---------
PURCHASES $16,564,882
- --------- -----------
SALES $20,119,315
- --------- -----------
</TABLE>
(6) YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's 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 Fund's 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 Fund.
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
C. Grant Anderson
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 investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
INDEPENDENCE ONE
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
SUB-ADVISER
National Australia Asset Management Ltd.
333 Collins Street
Melbourne, Victoria 3000, Australia
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
G01889-05 (12/98)
INDEPENDENCE ONE(R)
INTERNATIONAL EQUITY FUND
(DISTRIBUTED BY FEDERATED SECURITIES CORP.)
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF MICHIGAN NATIONAL BANK]
PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the first report of Independence One International
Equity Fund. The report covers the period from September 25, 1998, when the fund
began operation, through October 31, 1998. Inside, you'll find complete
financial information for the fund--beginning with the portfolio manager's
discussion, followed by a listing of fund holdings and the financial statements.
U.S. companies no longer dominate the financial landscape. We're living in a
world economy with a growing appetite for the products and services of dynamic
companies located on every continent.
Independence One International Equity Fund can help you participate in those
opportunities. This new fund invests primarily in stocks issued by companies
listed on recognized stock exchanges in Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Luxembourg,
Malaysia, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, and the United Kingdom.
This fund also gives you the opportunity to reduce the risk of investing in
American stocks alone, because foreign stocks tend to perform differently than
U.S. stocks. In other words, when the U.S. market is down, a foreign stock
market may be up.*
I urge you to review the fund's strategy and portfolio holdings. As with U.S.
stocks, remember to maintain a long-term focus. Thank you for selecting
Independence One International Equity Fund to complement your U.S. stock
holdings and pursue your future goals. We look forward to updating you about the
progress of your fund.
Sincerely,
Edward C. Gonzales
President
December 15, 1998
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
1
INVESTMENT REVIEW
- -------------------------------------------------------------------------------
Q This new addition to the Independence One Funds gives investors with
long-term goals the opportunity to diversify their stock holdings beyond the
U.S. What is the advantage of a combined U.S./foreign approach to stocks?
A "Don't put all your eggs in one basket." By having the ability to invest
funds in markets outside the U.S., investors are able to diversify their
investment risk. This occurs as the investor is provided with an opportunity to
gain exposure to a diverse range of stocks, currencies and markets. These
markets provide a range of alternative opportunities, especially when they are
at different points in the economic cycle. Additionally, they may not have a
high correlation with movements in the U.S. market. By having access to a suite
of diverse investments, investors may be insulated (at least to some extent)
from a fall in the U.S. share market, especially if the major cause is due to
domestic problems.
Q In general, how are stocks selected for the fund's portfolio?
A National Australia Asset Management, the fund's investment sub-advisor, has
differing approaches to stock selection for the portfolio depending on
whether the stock is in a developed or a developing country. In developed
countries a value approach is used. This entails running a screening process
using six variables to determine whether a stock is cheap or expensive. These
variables are then collated and checked against a historical range to determine
if the stock is a candidate for purchase or sale. Stock fundamentals such as
management strategy and competitiveness are then considered and sentiment
indicators are used to assist implementation. In developing countries, the key
investment criterion is the growth potential of markets and companies and thus,
a top down approach is used. This approach seeks relative value at the market,
sector and stock level. At the stock level, earnings growth potential over a two
to three year period is considered crucial as is the ability to exploit market
positioning. The overall financial position of the company is carefully assessed
as is management quality, track record, and directors' dealing activity.
2
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------------------------------- --------
<C> <S> <C>
COMMON STOCKS--7.3%
--------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES--0.6%
-------------------------------------
200 Sony Corp. $ 12,695
------------------------------------- --------
BANKING--0.6%
-------------------------------------
400 HSBC Holdings PLC 9,167
-------------------------------------
1,000 Oversea-Chinese Banking Corp. Ltd. 4,362
------------------------------------- --------
Total 13,529
------------------------------------- --------
FOOD & HOUSEHOLD PRODUCTS--0.9%
-------------------------------------
1,000 Kao Corp. 20,244
------------------------------------- --------
INDUSTRIAL COMPONENTS--1.4%
-------------------------------------
1,000 Bridgestone Corp. 22,002
-------------------------------------
1,000 Minebea Co. 9,393
------------------------------------- --------
Total 31,395
------------------------------------- --------
MULTI-INDUSTRY--0.4%
-------------------------------------
1,000 Citic Pacific Ltd. 2,460
-------------------------------------
1,000 Hutchison Whampoa 7,166
------------------------------------- --------
Total 9,626
------------------------------------- --------
REAL ESTATE--0.4%
-------------------------------------
1,000 City Developments Ltd. 3,625
-------------------------------------
1,000 Sun Hung Kai Properties 6,972
------------------------------------- --------
Total 10,597
------------------------------------- --------
TELECOMMUNICATIONS--1.5%
-------------------------------------
2,000 (a)China Telecommunications 3,757
-------------------------------------
3 Nippon Telegraph & Telephone Corp. 23,469
-------------------------------------
4,000 Singapore Telecom 6,906
------------------------------------- --------
Total 34,132
------------------------------------- --------
</TABLE>
3
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
NO. OF
CONTRACTS VALUE
--------- ----------------------------------------------------- --------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------------------
TRANSPORTATION--ROAD & RAIL--0.8%
-----------------------------------------------------
3 East Japan Railway Co. $ 17,782
----------------------------------------------------- --------
UTILITIES--ELECTRICAL & GAS--0.7%
-----------------------------------------------------
1,000 Cheung Kong 6,843
-----------------------------------------------------
6,000 Hong Kong and China Gas Co. Ltd. 8,522
----------------------------------------------------- --------
Total 15,365
----------------------------------------------------- --------
TOTAL COMMON STOCKS (IDENTIFIED COST $129,291) 165,365
----------------------------------------------------- --------
PURCHASED CALL OPTION--0.0%
---------------------------------------------------------------
1 Nikkei 225 Index Futures, 12/11/1998 (IDENTIFIED COST
$1,338) 1,051
----------------------------------------------------- --------
MUTUAL FUND SHARES--5.0%
---------------------------------------------------------------
13,491 Independence One Prime Money Market Fund 13,491
-----------------------------------------------------
4,300 WEBS Italy Index Fund, Inc. 100,244
----------------------------------------------------- --------
TOTAL MUTUAL FUNDS (AT NET ASSET VALUE) 113,735
----------------------------------------------------- --------
TOTAL INVESTMENTS (IDENTIFIED COST $244,364)(B) $280,151
----------------------------------------------------- --------
</TABLE>
(a) Non-income producing security.
(b) The cost of investments for federal tax purposes amounts to $244,364. The
net unrealized appreciation of investments on a federal tax basis amounts to
$35,787 which is comprised of $36,075 appreciation and $288 depreciation at
October 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($2,279,341) at October 31, 1998.
The following acronym is used throughout this portfolio:
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
4
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------
Total investments in securities, at value
(identified and tax cost $244,364) $ 280,151
- ------------------------------------------------
Cash denominated in foreign currencies (at
identified cost $1,794,982) 1,833,330
- ------------------------------------------------
Income receivable 116
- ------------------------------------------------
Receivable for daily variation margin 170,002
- ------------------------------------------------ ----------
Total assets 2,283,599
- ------------------------------------------------
LIABILITIES:
- -------------------------------------
Payable for investments purchased $1,338
- -------------------------------------
Accrued expenses 2,920
- ------------------------------------- ----------
Total liabilities 4,258
- ------------------------------------------------ ----------
Net Assets for 201,110 shares outstanding $2,279,341
- ------------------------------------------------ ----------
NET ASSETS CONSIST OF:
- ------------------------------------------------
Paid in capital $2,011,730
- ------------------------------------------------
Net unrealized appreciation of investments,
translation of assets and
liabilities in foreign currency transactions and
futures contracts 197,746
- ------------------------------------------------
Accumulated net realized gain on investments,
foreign currency transactions
and futures contracts 69,926
- ------------------------------------------------
Net operating loss (61)
- ------------------------------------------------ ----------
Total Net Assets $2,279,341
- ------------------------------------------------ ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- ------------------------------------------------
$2,279,341 / 201,110 shares outstanding $11.33
- ------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
5
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED OCTOBER 31, 1998 (UNAUDITED)(A)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------
Dividends $ 129
- -----------------------------------------------------------------
Interest 2,898
- ----------------------------------------------------------------- --------
Total income 3,027
- -----------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------
Investment advisory fee $1,989
- ---------------------------------------------------------
Administrative personnel and services fee 204
- ---------------------------------------------------------
Custodian fees 827
- ---------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 567
- ---------------------------------------------------------
Directors'/Trustees' fees 62
- ---------------------------------------------------------
Auditing fees 209
- ---------------------------------------------------------
Legal fees 99
- ---------------------------------------------------------
Portfolio accounting fees 1,100
- ---------------------------------------------------------
Share registration costs 442
- ---------------------------------------------------------
Printing and postage 82
- ---------------------------------------------------------
Insurance premiums 58
- ---------------------------------------------------------
Miscellaneous 89
- --------------------------------------------------------- ------
Total expenses 5,728
- ---------------------------------------------------------
Waivers--
- -------------------------------------------------
Waiver of investment advisory fee $(1,989)
- -------------------------------------------------
Waiver of administrative personnel and services
fee (204)
- -------------------------------------------------
Waiver of transfer and dividend disbursing agent
fees and expenses (123)
- -------------------------------------------------
Reimbursement of other operating expenses (324)
- ------------------------------------------------- -------
Total waivers and reimbursements (2,640)
- --------------------------------------------------------- ------
Net expenses 3,088
- ----------------------------------------------------------------- --------
Net operating loss (61)
- ----------------------------------------------------------------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN
CURRENCY TRANSACTIONS AND FUTURES CONTRACTS:
- -----------------------------------------------------------------
Net realized gain on investments, foreign currency transactions
and futures contracts 69,926
- -----------------------------------------------------------------
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency
transactions and futures 197,746
- ----------------------------------------------------------------- --------
Net realized and unrealized gain on investments, foreign
currency transactions and futures contracts 267,672
- ----------------------------------------------------------------- --------
Change in net assets resulting from operations $267,611
- ----------------------------------------------------------------- --------
</TABLE>
(a) Reflects operations for the period from September 25, 1998 (date of initial
public investment) to October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
6
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1998(A)
(UNAUDITED)
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------
Net operating loss $ (61)
- --------------------------------------------------------
Net realized gain on investments, foreign currency
transactions and futures contracts ($69,926, as computed
for federal tax purposes) 69,926
- --------------------------------------------------------
Net change in unrealized appreciation, translation of
assets and liabilities in foreign currency and futures
contracts 197,746
- -------------------------------------------------------- ----------
Change in net assets resulting from operations 267,611
- -------------------------------------------------------- ----------
SHARE TRANSACTIONS--
- --------------------------------------------------------
Proceeds from sale of shares 2,011,730
- -------------------------------------------------------- ----------
Change in net assets resulting from share transactions 2,011,730
- -------------------------------------------------------- ----------
Change in net assets 2,279,341
- --------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------
Beginning of period 0
- -------------------------------------------------------- ----------
End of period $2,279,341
- -------------------------------------------------------- ----------
</TABLE>
(a) Reflects operations for the period from September 25, 1998 (date of initial
public investment) to October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
7
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1998(A)
(UNAUDITED)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------
Net operating loss (b) (0.00)
- ----------------------------------------------------
Net realized and unrealized gain on investments,
foreign currency transactions and futures contracts 1.33
- ---------------------------------------------------- ------
Total from investment operations 1.33
- ---------------------------------------------------- ------
NET ASSET VALUE, END OF PERIOD $11.33
- ---------------------------------------------------- ------
TOTAL RETURN (C) 13.30%
- ----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------
Expenses 1.55%*
- ----------------------------------------------------
Net operating loss (0.03%)*
- ----------------------------------------------------
Expense waiver/reimbursement (d) 1.33%*
- ----------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------
Net assets, end of period (000 omitted) $2,279
- ----------------------------------------------------
Portfolio turnover 0%
- ----------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 25, 1998 (date of initial
public investment) to October 31, 1998.
(b) Amount shown represents less than $0.01 per share.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(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)
8
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of nine portfolios. The financial
statements included herein are only those of Independence One International
Equity (the "Fund"), a 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. The investment objective of the Fund is to provide total
return.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on a national securities exchange. Short-term securities are
valued at the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value. Investments in other open-end regulated investment companies are
valued at net asset value. With respect to valuation of foreign securities,
trading in foreign cities may be completed at times which vary from the
closing of the New York Stock Exchange. Therefore, foreign securities are
valued at the latest closing price on the exchange on which they are traded
prior to the closing of the New York Stock Exchange. Foreign securities quoted
in foreign currencies are translated into U.S. dollars at the foreign exchange
rate in effect at noon, eastern time, on the day the value of the foreign
security is determined.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and
9
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------------------
maintains security positions such that sufficient liquid assets will be
available to make payment for the securities purchased. Securities purchased
on a when-issued or delayed delivery basis are marked to market daily and
begin earning interest on the settlement date.
FUTURES CONTRACTS--The Fund purchases stock index futures contracts to manage
cashflows, enhance yield, and to potentially reduce transaction costs. Upon
entering into a stock index futures contract with a broker, the Fund is
required to deposit in a segregated account a specified amount of cash or U.S.
government securities. Futures contracts are valued daily and unrealized gains
or losses are recorded in a "variation margin" account. Daily, the Fund
receives from or pays to the broker a specified amount of cash based upon
changes in the variation margin account. When a contract is closed, the Fund
recognizes a realized gain or loss.
For the period ended October 31, 1998, the Fund had realized gains on futures
contracts as follows:
<TABLE>
<CAPTION>
NET
EXPIRATION UNREALIZED
DATE CONTRACTS TO RECEIVE POSITION APPRECIATION
---------- ------------------------------ -------- ------------
<S> <C> <C> <C>
Nov 98 9 CAC 40 Index Futures Long $ 1,781
Dec 98 1 1 SPI Index Futures Long 2,100
Nov 98 8 OMX Index Futures Long 6,038
Dec 98 4 Swiss Market Index Futures Long 27,676
Dec 98 5 FTSE 100 Index (New) Futures Long 31,149
Nov 98 1 Amsterdam EOE Index Futures Long 11,824
Nov 98 1 IBEX 35 Plus Index Futures Long 8,290
Dec 98 1 German DAX Index Futures Long 29,283
Dec 98 Nikkei 225 Index Futures Long 5,470
--------
$123,611
--------
</TABLE>
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities.
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies ("FC") are translated into U.S. dollars based on the rate of
exchange of such currencies against U.S. dollars on the date of valuation.
Purchases and sales of securities, income and expenses are translated at the
rate of exchange quoted on the respective date that such transactions are
recorded. Differences between income and expense amounts recorded and
collected or paid are adjusted when reported by the custodian bank. The Fund
does not isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
10
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------------------
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates
on securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at fiscal year
end, resulting from changes in the exchange rate.
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). At
October 31, 1998, capital paid-in for International Equity Fund aggregated
$2,011,730.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1998
(UNAUDITED)
- -------------------------------------------- ----------------
<S> <C>
Shares sold 201,110
- -------------------------------------------- -------
Net change resulting from share transactions 201,110
- -------------------------------------------- -------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Michigan National Bank, the Fund's investment adviser
(the "Adviser"), earns for its services an annual investment advisory fee
equal to 1.00% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion. Under the
terms of sub-advisory agreement between the Adviser and National Australia
Asset Management Ltd. (the "Sub-Adviser"), the Sub-Adviser is entitled to
receive an annual fee, to be paid by the Adviser, of 0.30% of the average
daily value of the Fund's assets managed by the Sub-Advisor. The Sub-Advisor
may elect to waive some or all of its fees.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Fund with certain administrative personnel and services. The fee paid to FAS
is based on the level of average aggregate net assets of the Trust for the
period. The administrative fee during any fiscal year shall be at least
$50,000 for the Fund.
11
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------------------
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC"), serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Michigan National Bank is the Fund's custodian. The fee is
based on the level of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
GENERAL--Certain of the Officers of the Trust are Officers and/or Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities for the
period ended October 31, 1998, were as follows:
<TABLE>
<CAPTION>
- ---------
<S> <C>
Purchases $230,872
- --------- --------
Sales $ 0
- --------- --------
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
12
INDEPENDENCE ONE INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------------------
At October 31, 1998, the diversification of countries was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
COUNTRY NET ASSETS
-------------- -------------
<S> <C>
United Kingdom 21.48%
Japan 20.99%
Germany 18.37%
France 12.19%
Switzerland 7.74%
Netherlands 4.54%
Italy 4.37%
Spain 2.73%
Sweden 2.54%
Australia 2.33%
Hong Kong 1.97%
Singapore 0.66%
United States 0.09%
</TABLE>
(7) YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's 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 Fund's 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 Fund.
13
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
C. Grant Anderson
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 investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
14
INDEPENDENCE ONE
MUTUAL FUNDS
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
INVESTMENT ADVISER
Michigan National Bank
INVESTMENT SUB-ADVISER
(Government Securities Fund only)
Independence One Capital Management Corporation
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
G01889-02 (12/98)
INDEPENDENCE ONE(R)
MUTUAL FUNDS
(DISTRIBUTED BY FEDERATED SECURITIES CORP.)
COMBINED
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1998
Independence One U.S. Government
Securities Fund
Independence One Fixed Income Fund
Independence One Michigan
Municipal Bond Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF MICHIGAN NATIONAL BANK]
PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report of the Independence One Fixed
Income Funds, which covers the six-month period from May 1, 1998 through October
31, 1998. Inside, you'll find complete financial information for the
Independence One U.S. Government Securities Fund, the Independence One Fixed
Income Fund, and the Independence One Michigan Municipal Bond Fund. The report
begins with a discussion by the funds' portfolio managers, followed by a
complete listing of each fund's holdings and financial statements.
The bond market environment improved considerably during the reporting period,
as the increases in the funds' net asset value indicate. The following is a
fund-by-fund summary of performance over the six-month reporting period:
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
This fund's all-government bond portfolio produced an income stream totaling
$0.29 per share as the net asset value increased from $10.41 to $10.80. As a
result, the fund achieved a total return of 6.57%.* At the end of the reporting
period, 60% of the holdings consisted of U.S. Treasury bonds and notes, while
government agency securities accounted for 37.7% of the portfolio. Fund assets
totaled $69.7 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 consists of a mix of U.S. government agencies, U.S. Treasury obligations,
and corporate bonds. This portfolio produced an income stream totaling $0.29 per
share. Net asset value increased from $10.03 to $10.27. Through income and the
net asset value, the fund achieved a total return of 5.39%.* At the end of the
reporting period, fund assets reached $80.1 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 an income stream totaling $0.20 per share, while
the net asset value increased from $10.30 to $10.59. Through income and the net
asset value increase, the fund achieved a total return of 4.81%.* At the end of
the reporting period, fund assets totaled $20.3 million.
Thank you for selecting one or more Independence One Fixed Income Funds to
pursue the income potential of bonds. We look forward to keeping you informed
about the progress of your investment.
Sincerely,
Edward C. Gonzales
President
December 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 federal alternative minimum tax.
1
INVESTMENT REVIEW
- -------------------------------------------------------------------------------
Q What are your comments on the first half of the funds' fiscal year, which
saw a relatively positive environment for bonds and a massive "flight to
quality" that boosted the performance of Treasuries?
A A growing sensitivity to risk was the dominant investment theme for the
fixed income markets during the past six months. On August 17th, the
Russian government roiled the financial markets with the announcement of a 40%
devaluation of the rouble. Shortly thereafter they defaulted on most of their
sovereign debt. These actions sparked a "flight-to-quality" movement into U.S.
Treasuries. With fears of a credit crunch looming, the Federal Reserve Board
("Fed") lowered its interest rate target on federal funds by 1/4 of 1% on
September 29th. In early October, the financial difficulties of a prominent
hedge fund led the Fed to engineer a $3.6 billion bailout financial by a group
of fourteen major banks and securities firms. The yield spreads on U.S. agency
securities and corporate bonds widened dramatically relative to their Treasury
counterparts, and the Fed responded with its second rate cut in sixteen days on
October 15th. The thirty-year Treasury bellwether bond, which began the period
at 6%, fell to a record low yield of 4.70% on October 5th, and ended the period
at 5.15%.
Q How did the Independence One Bond Funds perform during the six-month
reporting period ended October 31, 1998?
A Independence One U.S. Government Securities Fund invests exclusively in U.S.
Treasury and U.S. agency securities and benefited from the flight-to-
quality phenomenon described above. It earned a total return of 6.57% for the
six-month period, and 10.08% for the twelve-months ending October 31, 1998.* The
Independence One Fixed Income Fund typically has approximately 30% of its assets
invested in corporate debt, but focuses on high quality, investment grade
issuers. It earned a total return of 5.39% for the six-month period, and 8.41%
for the twelve-months ended October 31, 1998.* The Independence One Michigan
Municipal Bond Fund invests in Michigan municipal bonds, the interest income of
which are generally exempt from federal and Michigan state income taxes. It
earned a total return of 4.81% for the six-month period, and 6.80% for the
twelve-months ended October 31, 1998.*
*Performance quoted reflects past performance and is not indicative of future
results. Investment return and principal will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. For
the five-year and since inception (January 11, 1993) periods ended October 31,
1998, Independence One U.S. Government Securities Fund produced average annual
total returns of 6.68% and 7.27%, respectively. From the since inception
(October 23, 1995) period to October 31, 1998, Independence One Fixed Income
Fund produced an average annual total return of 6.92%. From the since inception
(November 20, 1995) period to October 31, 1998, Independence One Michigan
Municipal Bond Fund produced an average annual return of 6.13%.
2
Q As we near the end of 1998 with two recent rate cuts by the Fed behind us,
what is your outlook for the bond market?
A The Fed has sent a strong message to the financial markets in the past two
months with its more accommodating monetary policy. It has expressed its
resolve to avert a full-blown credit crunch and to keep the current U.S.
expansion healthy. While we anticipate a slowing in the U.S. growth rate next
year, reflecting the impact of overall global economic weakness, we believe that
a recession is unlikely. Additional Fed short-term interest rate cuts are in our
forecast. However, long term interest rates will not likely fall as quickly as
investors begin to question whether the more aggressive easing posture of the
Fed will eventually lead to an increase in inflation expectations.
3
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------------------------------------------ -----------
<C> <S> <C>
GOVERNMENT AGENCIES--37.7%
------------------------------------------------------------
FEDERAL FARM CREDIT BANK--6.0%
------------------------------------------------
$ 4,000,000 5.97%, Bond, 3/11/2005 $ 4,195,200
------------------------------------------------ -----------
FEDERAL HOME LOAN MORTGAGE CORPORATION--21.3%
------------------------------------------------
7,000,000 5.65%, Bond, 5/19/1999 7,035,490
------------------------------------------------
3,000,000 6.55%, Bond, 10/2/2002 3,182,280
------------------------------------------------
4,000,000 7.20%, Bond, 6/14/2011 4,608,280
------------------------------------------------ -----------
Total 14,826,050
------------------------------------------------ -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--10.4%
------------------------------------------------
2,500,000 5.82%, Bond, 2/12/2003 2,546,525
------------------------------------------------
3,000,000 6.80%, Bond, 1/10/2003 3,216,960
------------------------------------------------
1,500,000 7.12%, Bond, 4/19/2002 1,517,895
------------------------------------------------ -----------
Total 7,281,380
------------------------------------------------ -----------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST
$24,980,792) 26,302,630
------------------------------------------------ -----------
U.S. TREASURY OBLIGATIONS--60.0%
------------------------------------------------------------
U. S. TREASURY BONDS--30.5%
------------------------------------------------
9,000,000 6.50%, 11/15/2026 10,467,810
------------------------------------------------
5,500,000 7.125%, 2/15/2023 6,782,820
------------------------------------------------
3,000,000 8.125%, 8/15/2019 4,010,160
------------------------------------------------ -----------
Total 21,260,790
------------------------------------------------ -----------
U. S. TREASURY NOTES--29.5%
------------------------------------------------
10,000,000 6.375%, 3/31/2001 10,465,200
------------------------------------------------
10,000,000 7.00%, 4/15/1999 10,114,900
------------------------------------------------ -----------
Total 20,580,100
------------------------------------------------ -----------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST
$37,731,820) 41,840,890
------------------------------------------------ -----------
</TABLE>
4
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------------------------------------------- -----------
<C> <S> <C>
(A) REPURCHASE AGREEMENT--1.4%
--------------------------------------------------------------
$ 989,000 First Chicago Capital Markets, Inc., 5.300%, dated
10/30/1998, due 11/2/1998 (AT AMORTIZED COST) $ 989,000
-------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $63,701,612)(B) $69,132,520
-------------------------------------------------- -----------
</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 $63,701,612. The
net unrealized appreciation of investments on a federal tax basis amounts to
$5,430,908 at October 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($69,727,333) at October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
5
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------
Total investments in securities, at
value (identified and tax cost
$63,701,612) $69,132,520
- -------------------------------------
Cash 2,057
- -------------------------------------
Income receivable 930,970
- ------------------------------------- -----------
Total assets 70,065,547
- -------------------------------------
LIABILITIES:
- ---------------------------
Income distribution payable $301,809
- ---------------------------
Accrued expenses 36,405
- --------------------------- --------
Total liabilities 338,214
- ------------------------------------- -----------
Net Assets for 6,458,140 shares
outstanding $69,727,333
- ------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------
Paid in capital $64,685,558
- -------------------------------------
Net unrealized appreciation of
investments 5,430,908
- -------------------------------------
Accumulated net realized loss on
investments (389,133)
- ------------------------------------- -----------
Total Net Assets $69,727,333
- ------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------
$69,727,333 / 6,458,140 shares
outstanding $10.80
- ------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
6
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------
Interest $2,137,131
- -------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------
Investment advisory fee $ 251,284
- --------------------------------------------------------
Administrative personnel and services fee 37,260
- --------------------------------------------------------
Custodian fees 9,962
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 16,028
- --------------------------------------------------------
Directors'/Trustees' fees 1,907
- --------------------------------------------------------
Auditing fees 6,765
- --------------------------------------------------------
Legal fees 2,534
- --------------------------------------------------------
Portfolio accounting fees 23,358
- --------------------------------------------------------
Share registration costs 6,166
- --------------------------------------------------------
Printing and postage 4,993
- --------------------------------------------------------
Insurance premiums 1,373
- --------------------------------------------------------
Miscellaneous 2,129
- -------------------------------------------------------- ---------
Total expenses 363,759
- --------------------------------------------------------
Waivers--
- --------------------------------------------------------
Waiver of investment advisory fee (150,135)
- -------------------------------------------------------- ---------
Net expenses 213,624
- ------------------------------------------------------------------- ----------
Net investment income 1,923,507
- ------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------
Net realized gain on investments 97,943
- -------------------------------------------------------------------
Net change in unrealized appreciation of investments 2,502,332
- ------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 2,600,275
- ------------------------------------------------------------------- ----------
Change in net assets resulting from operations $4,523,782
- ------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
7
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1998 APRIL 30, 1998
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------
OPERATIONS--
- ------------------------------------------------
Net investment income $ 1,923,507 $ 4,112,178
- ------------------------------------------------
Net realized gain (loss) on investments ($97,943
and $567,403 net gains, respectively, as
computed for federal tax purposes) 97,943 567,403
- ------------------------------------------------
Net change in unrealized appreciation 2,502,332 2,548,205
- ------------------------------------------------ ----------- ------------
Change in net assets resulting from operations 4,523,782 7,227,786
- ------------------------------------------------ ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------
Distributions from net investment income (1,923,507) (4,112,178)
- ------------------------------------------------ ----------- ------------
SHARE TRANSACTIONS--
- ------------------------------------------------
Proceeds from sale of shares 3,362,961 10,388,208
- ------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 184,277 404,801
- ------------------------------------------------
Cost of shares redeemed (7,286,963) (14,925,104)
- ------------------------------------------------ ----------- ------------
Change in net assets resulting from share
transactions (3,739,725) (4,132,095)
- ------------------------------------------------ ----------- ------------
Change in net assets (1,139,450) (1,016,487)
- ------------------------------------------------
NET ASSETS:
- ------------------------------------------------
Beginning of period 70,866,783 71,883,270
- ------------------------------------------------ ----------- ------------
End of period $69,727,333 $ 70,866,783
- ------------------------------------------------ ----------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
8
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED APRIL 30,
(UNAUDITED) -------------------------------------------
OCTOBER 31,
1998 1998 1997 1996 1995 1994
- ------------------------- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.41 $ 9.98 $ 9.98 $ 9.79 $ 9.84 $10.31
- -------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------
Net investment income 0.29 0.58 0.59 0.59 0.60 0.55
- -------------------------
Net realized and
unrealized gain (loss)
on investments 0.39 0.43 0.01 0.19 (0.05) (0.47)
- ------------------------- ------- ------- ------- ------- ------- -------
Total from investment
operations 0.68 1.01 0.60 0.78 0.55 0.08
- ------------------------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
- -------------------------
Distributions from net
investment income (0.29) (0.58) (0.59) (0.59) (0.60) (0.55)
- -------------------------
Distributions from net
realized gain on
investments -- -- (0.01) -- -- --
- ------------------------- ------- ------- ------- ------- ------- -------
Total distributions (0.29) (0.58) (0.60) (0.59) (0.60) (0.55)
- ------------------------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD $10.80 $10.41 $ 9.98 $ 9.98 $ 9.79 $ 9.84
- ------------------------- ------- ------- ------- ------- ------- -------
TOTAL RETURN (A) 6.57% 10.37% 6.15% 7.97% 5.90% 0.66%
- -------------------------
RATIOS TO AVERAGE NET
ASSETS
- -------------------------
Expenses 0.60%* 0.61% 0.57% 0.40% 0.35% 0.31%
- -------------------------
Net investment income 5.38%* 5.67% 5.82% 5.85% 6.23% 5.32%
- -------------------------
Expense
waiver/reimbursement (b) 0.42%* 0.45% 0.45% 0.66% 0.70% 0.70%
- -------------------------
SUPPLEMENTAL DATA
- -------------------------
Net assets, end of
period (000 omitted) $69,727 $70,867 $71,883 $72,291 $62,514 $72,866
- -------------------------
Portfolio turnover 18% 28% 73% 104% 75% 20%
- -------------------------
</TABLE>
* Computed on an annualized basis.
(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)
9
INDEPENDENCE ONE FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--28.0%
---------------------------------------------------------------
AUTOMOTIVE--1.3%
----------------------------------------------------
$1,000,000 Ford Motor Credit Corp., Note, 6.125%, 1/9/2006 $ 1,019,110
---------------------------------------------------- -----------
BANKING--6.6%
----------------------------------------------------
1,000,000 Bank One Corp., Sub. Note, 8.100%, 3/1/2002 1,080,150
----------------------------------------------------
1,000,000 Banc One Corp., Sub. Note, 8.740%, 9/15/2003 1,141,800
----------------------------------------------------
1,000,000 Citicorp, Sr. Note, 5.625%, 2/15/2001 1,001,750
----------------------------------------------------
2,000,000 NationsBank Corp., Sr. Note, 7.000%, 9/15/2001 2,073,760
---------------------------------------------------- -----------
Total 5,297,460
---------------------------------------------------- -----------
COMMERCIAL--2.5%
----------------------------------------------------
1,000,000 Associates Corp. of North America, Sr. Note, 6.260%,
2/15/2006 1,006,800
----------------------------------------------------
1,000,000 General Electric Financial Services, Inc., Deb.,
5.500%, 11/1/2001 1,000,750
---------------------------------------------------- -----------
Total 2,007,550
---------------------------------------------------- -----------
ENTERTAINMENT--1.4%
----------------------------------------------------
1,000,000 Disney (Walt) Co., Bond, Series B, 6.750%, 3/30/2006 1,091,620
---------------------------------------------------- -----------
FINANCIAL SERVICES--2.6%
----------------------------------------------------
1,000,000 Merrill Lynch & Co., Inc., Note, 7.000%, 3/15/2006 1,046,950
----------------------------------------------------
1,000,000 Morgan Stanley, Dean Witter & Co., Note, 7.750%,
6/1/2001 1,054,450
---------------------------------------------------- -----------
Total 2,101,400
---------------------------------------------------- -----------
FOOD & BEVERAGE--1.3%
----------------------------------------------------
1,000,000 Sara Lee Corp., Note, 6.300%, 11/7/2005 1,050,800
---------------------------------------------------- -----------
INDUSTRIAL SERVICES--1.5%
----------------------------------------------------
1,000,000 General Mills, Inc., Note, 8.900%, 6/15/2006 1,200,790
---------------------------------------------------- -----------
OFFICE EQUIPMENT--1.3%
----------------------------------------------------
1,000,000 Xerox Corp., Deb., 9.750%, 3/15/2000 1,062,900
---------------------------------------------------- -----------
</TABLE>
10
INDEPENDENCE ONE FIXED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- -----------
<C> <S> <C>
PHARMACEUTICALS--1.5%
----------------------------------------------------
$1,000,000 Lilly (Eli) & Co., Unsecured Note, 8.375%, 12/1/2006 $ 1,190,950
---------------------------------------------------- -----------
RETAIL--5.3%
----------------------------------------------------
1,000,000 Gap (The), Inc., Note, 6.900%, 9/15/2007 1,086,260
----------------------------------------------------
1,000,000 May Department Stores Co., Deb., 9.875%, 6/15/2000 1,075,320
----------------------------------------------------
1,000,000 Penney (J.C.) Co., Inc., Sr. Note, Series A, 6.375%,
9/15/2000 1,026,070
----------------------------------------------------
1,000,000 Wal-Mart Stores, Inc., Unsecured Note, 6.125%,
10/1/1999 1,009,730
---------------------------------------------------- -----------
Total 4,197,380
---------------------------------------------------- -----------
TELECOMMUNICATIONS--2.7%
----------------------------------------------------
1,000,000 AT&T Corp., Note, 7.500%, 6/1/2006 1,122,720
----------------------------------------------------
1,000,000 U.S. West Communications, Inc., Note, 6.625%,
9/15/2005 1,069,480
---------------------------------------------------- -----------
Total 2,192,200
---------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $21,604,904) 22,412,160
---------------------------------------------------- -----------
GOVERNMENT AGENCIES--18.7%
---------------------------------------------------------------
FEDERAL FARM CREDIT BANK--2.6%
----------------------------------------------------
2,000,000 5.970%, Note, 3/11/2005 2,097,600
---------------------------------------------------- -----------
FEDERAL HOME LOAN BANK--12.8%
----------------------------------------------------
2,000,000 5.530%, Bond, 1/15/2003 2,047,340
----------------------------------------------------
4,000,000 6.028%, Bond, 5/7/2003 4,121,520
----------------------------------------------------
2,000,000 5.125%, Note, 9/15/2003 2,023,560
----------------------------------------------------
1,000,000 5.575%, Note, 9/2/2003 1,028,700
----------------------------------------------------
880,000 7.460%, Note, 9/9/2004 984,852
---------------------------------------------------- -----------
Total 10,205,972
---------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--3.3%
----------------------------------------------------
1,500,000 5.820%, Note, 2/12/2003 1,527,915
----------------------------------------------------
1,000,000 7.490%, Note, 3/2/2005 1,128,930
---------------------------------------------------- -----------
Total 2,656,845
---------------------------------------------------- -----------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST
$14,466,309) 14,960,417
---------------------------------------------------- -----------
</TABLE>
11
INDEPENDENCE ONE FIXED INCOME FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -------------------------------------------------- -----------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--50.7%
-------------------------------------------------------------
U.S. TREASURY BONDS--4.5%
--------------------------------------------------
$1,000,000 6.000%, 2/15/2026 $ 1,090,890
--------------------------------------------------
2,000,000 10.750%, 5/15/2003 2,512,340
-------------------------------------------------- -----------
Total 3,603,230
-------------------------------------------------- -----------
U.S. TREASURY NOTES--46.2%
--------------------------------------------------
4,500,000 5.125%, 12/31/1998 4,506,795
--------------------------------------------------
6,500,000 6.125%, 7/31/2000 6,695,585
--------------------------------------------------
4,750,000 6.250%, 2/15/2007 5,264,330
--------------------------------------------------
8,000,000 6.375%, 8/15/2002 8,546,960
--------------------------------------------------
6,800,000 6.750%, 6/30/1999 6,901,932
--------------------------------------------------
5,000,000 7.500%, 10/31/1999 5,147,900
-------------------------------------------------- -----------
TOTAL 37,063,502
-------------------------------------------------- -----------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST
$39,769,829) 40,666,732
-------------------------------------------------- -----------
(A) REPURCHASE AGREEMENTS--1.4%
-------------------------------------------------------------
1,127,000 First Chicago Capital Markets, Inc., 5.300%, dated 10/30/1998, due
11/2/1998 (AT AMORTIZED COST) 1,127,000
-------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $76,968,042)(B) $79,166,309
-------------------------------------------------- -----------
</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 $76,968,042. The
net unrealized appreciation of investments on a federal tax basis amounts to
$2,198,267 which is comprised of $2,624,294 appreciation and $426,027
depreciation at October 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($80,120,334) at October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
12
INDEPENDENCE ONE FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------
Total investments in securities, at
value (identified and tax cost
$76,968,042) $79,166,309
- -------------------------------------
Cash 2,294
- -------------------------------------
Income receivable 1,356,367
- -------------------------------------
Deferred organizational costs 10,253
- -------------------------------------
Other assets 7,088
- ------------------------------------- -----------
Total assets 80,542,311
- -------------------------------------
LIABILITIES:
- ---------------------------
Income distribution payable $381,867
- ---------------------------
Accrued expenses 40,110
- --------------------------- --------
Total liabilities 421,977
- ------------------------------------- -----------
Net Assets for 7,798,833 shares
outstanding $80,120,334
- ------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------
Paid in capital $77,936,271
- -------------------------------------
Net unrealized appreciation of
investments 2,198,267
- -------------------------------------
Accumulated net realized loss on
investments (14,204)
- ------------------------------------- -----------
Total Net Assets $80,120,334
- ------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------
$80,120,334 / 7,798,833 shares
outstanding $10.27
- ------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
13
INDEPENDENCE ONE FIXED INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------
Interest $2,561,989
- -------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------
Investment advisory fee $ 303,611
- --------------------------------------------------------
Administrative personnel and services fee 42,016
- --------------------------------------------------------
Custodian fees 10,174
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 15,779
- --------------------------------------------------------
Directors'/Trustees' fees 2,086
- --------------------------------------------------------
Auditing fees 6,958
- --------------------------------------------------------
Legal fees 3,128
- --------------------------------------------------------
Portfolio accounting fees 22,603
- --------------------------------------------------------
Share registration costs 7,847
- --------------------------------------------------------
Printing and postage 5,347
- --------------------------------------------------------
Insurance premiums 1,448
- --------------------------------------------------------
Miscellaneous 3,873
- -------------------------------------------------------- ---------
Total expenses 424,870
- --------------------------------------------------------
Waivers--
- --------------------------------------------------------
Waiver of investment advisory fee (189,507)
- -------------------------------------------------------- ---------
Net expenses 235,363
- ------------------------------------------------------------------- ----------
Net investment income 2,326,626
- ------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------
Net realized gain on investments 204,893
- -------------------------------------------------------------------
Net change in unrealized appreciation of investments 1,722,342
- ------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 1,927,235
- ------------------------------------------------------------------- ----------
Change in net assets resulting from operations $4,253,861
- ------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
14
INDEPENDENCE ONE FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1998 APRIL 30, 1998
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------
OPERATIONS--
- ------------------------------------------------
Net investment income $ 2,326,626 $ 4,537,227
- ------------------------------------------------
Net realized gain (loss) on investments ($204,893 net gain and $102,986 net
loss, respectively, as computed for federal tax
purposes) 204,893 (16,975)
- ------------------------------------------------
Net change in unrealized appreciation 1,722,342 1,766,893
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from operations 4,253,861 6,287,145
- ------------------------------------------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------
Distributions from net investment income (2,326,626) (4,537,227)
- ------------------------------------------------ ------------ ------------
SHARE TRANSACTIONS--
- ------------------------------------------------
Proceeds from sale of shares 6,520,703 19,644,568
- ------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 1,713,623 3,881,214
- ------------------------------------------------
Cost of shares redeemed (10,383,451) (15,817,021)
- ------------------------------------------------ ------------ ------------
Change in net assets resulting from share
transactions (2,149,125) 7,708,761
- ------------------------------------------------ ------------ ------------
Change in net assets (221,890) 9,458,679
- ------------------------------------------------
NET ASSETS:
- ------------------------------------------------
Beginning of period 80,342,224 70,883,545
- ------------------------------------------------ ------------ ------------
End of period $ 80,120,334 $ 80,342,224
- ------------------------------------------------ ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
15
INDEPENDENCE ONE FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED APRIL 30,
(UNAUDITED) ---------------------------
OCTOBER 31,
1998 1998 1997 1996(A)
- --------------------------------- ----------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.03 $ 9.80 $ 9.82 $10.00
- ---------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net investment income 0.29 0.59 0.57 0.30
- ---------------------------------
Net realized and unrealized gain
(loss) on investments 0.24 0.23 (0.02) (0.18)
- --------------------------------- ------- ------- ------- ------- ---
Total from investment operations 0.53 0.82 0.55 0.12
- --------------------------------- ------- ------- ------- ------- ---
LESS DISTRIBUTIONS
- ---------------------------------
Distributions from net
investment income (0.29) (0.59) (0.57) (0.30)
- ---------------------------------
Distributions from net realized
gain on investments -- -- 0.00(b) --
- --------------------------------- ------- ------- ------- ------- ---
Total distributions (0.29) (0.59) (0.57) (0.30)
- --------------------------------- ------- ------- ------- ------- ---
NET ASSET VALUE, END OF PERIOD $10.27 $10.03 $ 9.80 $ 9.82
- --------------------------------- ------- ------- ------- ------- ---
TOTAL RETURN (C) 5.39% 8.56% 5.79% 1.15%
- ---------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------
Expenses 0.58%* 0.56% 0.55% 0.54%*
- ---------------------------------
Net investment income 5.75%* 5.92% 5.83% 5.73%*
- ---------------------------------
Expense waiver/reimbursement (d) 0.47%* 0.50% 0.50% 0.61%*
- ---------------------------------
SUPPLEMENTAL DATA
- ---------------------------------
Net assets, end of period (000
omitted) $80,120 $80,342 $70,884 $62,256
- ---------------------------------
Portfolio turnover 9% 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)
16
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
(A) LONG-TERM MUNICIPALS--98.2%
--------------------------------------------------------
MICHIGAN--98.2%
---------------------------------------------
$ 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 $ 911,708
---------------------------------------------
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/A3 101,865
---------------------------------------------
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 412,108
---------------------------------------------
485,000 Central Michigan University, Revenue Bonds,
5.30% (FGIC INS)/(Original Issue Yield:
5.40%), 10/1/2011 AAA/Aaa 530,420
---------------------------------------------
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 155,139
---------------------------------------------
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 564,331
---------------------------------------------
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 577,705
---------------------------------------------
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 188,760
---------------------------------------------
680,000 Grand Rapids, MI Community College, GO UT Bonds, 5.30% (MBIA
INS)/(Original Issue
Yield: 5.35%), 5/1/2009 AAA/Aaa 727,926
---------------------------------------------
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 400,584
---------------------------------------------
</TABLE>
17
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 $ 515,650
---------------------------------------------
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 575,069
---------------------------------------------
1,000,000 Kenowa Hills Michigan Public Schools, GO UT
Bonds, 5.60% (MBIA INS), 5/1/2009 AAA/Aaa 1,085,350
---------------------------------------------
500,000 Kent County, MI, GO, 4.50% (Original Issue
Yield: 5.00%), 11/1/2011 AAA/Aa2 506,145
---------------------------------------------
600,000 Lakewood, MI Public Schools, GO UT Bonds, 5.30% (MBIA INS)/(Original
Issue Yield:
5.45%), 5/1/2009 AAA/Aaa 637,932
---------------------------------------------
100,000 Lapeer, MI, GO LT Refunding Bonds, 6.10%
(AMBAC INS)/(Original Issue Yield: 6.25%),
10/1/1999 AAA/Aaa 102,778
---------------------------------------------
1,055,000 Lincoln Park, MI School District, GO UT
Bonds, 5.70% (FGIC INS), 5/1/2008 AAA/Aaa 1,176,283
---------------------------------------------
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 621,426
---------------------------------------------
1,000,000 Michigan Municipal Bond Authority, Revenue
Bonds (Series B), 5.35% (Original Issue
Yield: 5.45%), 10/1/2007 AA+/Aa1 1,085,170
---------------------------------------------
500,000 Michigan Municipal Bond Authority, Revenue
Bonds, 5.25% (Local Government Loan
Program)/(AMBAC INS), 5/1/2006 AAA/Aaa 538,655
---------------------------------------------
100,000 Michigan State Building Authority, Revenue
Bonds (Series I), 5.50% (Original Issue
Yield: 5.60%), 10/1/2004 AA/Aa2 107,460
---------------------------------------------
150,000 Michigan State Building Authority, Revenue
Bonds, 6.20% (Grand Rapids Center)/(BIG INS),
3/1/2001 AAA/Aaa 158,558
---------------------------------------------
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 466,141
---------------------------------------------
100,000 Michigan State Housing Development Authority,
Refunding Revenue Bonds (Series A), 6.40%
(FHA/VA mtgs GTD), 6/1/2000 AA+/NR 102,960
---------------------------------------------
</TABLE>
18
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 Michigan State Housing Development Authority,
Refunding Revenue, 4.85% (AMBAC INS),
10/1/2002 AAA/Aaa $ 511,020
---------------------------------------------
150,000 Michigan Strategic Fund, Small Business
Refunding Revenue Bonds (Series A1-A2), 5.90%
(SBA GTD), 10/1/2000 NR/Aaa 156,972
---------------------------------------------
500,000 Novi, MI, Refunding G.O. Bonds, 5.25%,
10/1/2009 A+/A1 542,620
---------------------------------------------
600,000 Ottawa County, MI Building Authority, Revenue
Bonds, 4.90%, 11/1/2009 AA/Aa3 629,766
---------------------------------------------
100,000 Portage, MI, GO LT City Share Bonds, 5.90%,
12/1/2003 AA-/NR 109,428
---------------------------------------------
700,000 Redford, MI School District, GO UT Bonds, 6.25%, Michigan State GTD
(Q-SBLF), (FGIC
INS)/(Original Issue Yield: 5.35%), 5/1/2007 AAA/Aaa 808,486
---------------------------------------------
390,000 Rochester, MI, GO UT Refunding Bonds, 4.90%
(FSA INS), 10/1/2006 AAA/Aaa 415,931
---------------------------------------------
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 418,096
---------------------------------------------
500,000 Three Rivers Michigan Community Schools, GO
UT Bonds, 5.40% (Michigan State GTD)/(MBIA
INS), 5/1/2008 AAA/Aaa 547,850
---------------------------------------------
765,000 University of Michigan, Revenue Bonds (Series
A), 5.40%, 11/15/2008 AA/Aa1 833,383
---------------------------------------------
350,000 University of Michigan, Revenue Bonds (Series
A), 5.60% (Original Issue Yield: 5.70%),
11/15/2012 AA/Aa1 380,475
---------------------------------------------
500,000 Washtenaw Community College, MI, GO UT, 5.00%
(Original Issue Yield: 5.10%), 4/1/2008 AA/Aa3 525,745
---------------------------------------------
500,000 Washtenaw Community College, MI, GO UT, 5.00%
(Original Issue Yield: 5.35%), 4/1/2011 AA/Aa3 516,080
---------------------------------------------
100,000 Wayne County, MI Community College, GO UT
Refunding Bonds, 6.15% (FGIC INS), 4/1/1999 AAA/Aaa 101,351
---------------------------------------------
750,000 Western Michigan University, Revenue
Refunding Bonds, 5.00% (FGIC INS)/(Original
Issue Yield: 5.15%), 11/15/2012 AAA/Aaa 766,680
---------------------------------------------
</TABLE>
19
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 Wixon, MI, UT GO Bonds, 4.70% (AMBAC
INS)/(Original Issue Yield: 4.85%), 5/1/2009 AAA/Aaa $ 512,550
-------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPALS (IDENTIFIED COST
$18,710,100) 20,026,556
-------------------------------------------- -----------
MUTUAL FUNDS--0.2%
-------------------------------------------------------
44,405 Goldman Sachs Tax Exempt Fund (at net asset
value) 44,405
-------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST
$18,754,505)(B) $20,070,961
-------------------------------------------- -----------
</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 October 31, 1998, 2.6% of the total investments at market value were
subject to alternative minimum tax.
(b) The cost of investments for federal tax purposes amounts to $18,754,505. The
net unrealized appreciation of investments on a federal tax basis amounts to
$1,316,456 at October 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($20,386,524) at October 31, 1998.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
GTD--Guaranty
BIG--Bond Investors Guaranty INS--Insured
FGIC--Financial Guaranty Insurance CompanyLOC--Letter of Credit
LT--Limited Tax
FHA/VA--Federal Housing Administration/ Veterans Administration
FSA--Financial Security Assurance MBIA--Municipal Bond Investors
GO--General Obligation Assurance
SBA--Small Business Association
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
20
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------
Total investments in securities, at
value (identified and tax cost
$18,754,505) $20,070,961
- -------------------------------------
Cash 1,343
- -------------------------------------
Income receivable 382,079
- -------------------------------------
Deferred organizational costs 11,539
- -------------------------------------
Other assets 3,422
- ------------------------------------- -----------
Total assets 20,469,344
- -------------------------------------
LIABILITIES:
- ----------------------------
Income distribution payable $ 65,912
- ----------------------------
Accrued expenses 16,908
- ---------------------------- --------
Total liabilities 82,820
- ------------------------------------- -----------
Net Assets for 1,924,470 shares
outstanding $20,386,524
- ------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------
Paid in capital $19,037,942
- -------------------------------------
Net unrealized appreciation of
investments 1,316,456
- -------------------------------------
Accumulated net realized gain on
investments 32,126
- ------------------------------------- -----------
Total Net Assets $20,386,524
- ------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------
$20,386,524 / 1,924,470 shares
outstanding $10.59
- ------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
21
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------
Interest $506,830
- -------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------
Investment advisory fee $ 79,259
- ---------------------------------------------------------
Administrative personnel and services fee 10,970
- ---------------------------------------------------------
Custodian fees 7,540
- ---------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 15,209
- ---------------------------------------------------------
Directors'/Trustees' fees 622
- ---------------------------------------------------------
Auditing fees 6,999
- ---------------------------------------------------------
Legal fees 2,619
- ---------------------------------------------------------
Portfolio accounting fees 24,787
- ---------------------------------------------------------
Share registration costs 6,705
- ---------------------------------------------------------
Printing and postage 3,781
- ---------------------------------------------------------
Insurance premiums 1,162
- ---------------------------------------------------------
Miscellaneous 4,726
- --------------------------------------------------------- --------
Total expenses 164,379
- ---------------------------------------------------------
Waivers--
- ------------------------------------------------
Waiver of investment advisory fee $(51,673)
- ------------------------------------------------
Waiver of administrative personnel and services
fee (9,511)
- ------------------------------------------------ --------
Total waivers (61,184)
- --------------------------------------------------------- --------
Net expenses 103,195
- ------------------------------------------------------------------- --------
Net investment income 403,635
- ------------------------------------------------------------------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------
Net realized gain on investments 9,596
- -------------------------------------------------------------------
Net change in unrealized appreciation of investments 574,162
- ------------------------------------------------------------------- --------
Net realized and unrealized gain on investments 583,758
- ------------------------------------------------------------------- --------
Change in net assets resulting from operations $987,393
- ------------------------------------------------------------------- --------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
22
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1998 APRIL 30, 1998
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------
OPERATIONS--
- ------------------------------------------------
Net investment income $ 403,635 $ 1,003,030
- ------------------------------------------------
Net realized gain (loss) on investments ($9,596
and $92,311 net gains, respectively, as computed
for federal tax purposes) 9,596 91,171
- ------------------------------------------------
Net change in unrealized appreciation 574,162 709,048
- ------------------------------------------------ ----------- -----------
Change in net assets resulting from operations 987,393 1,803,249
- ------------------------------------------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------
Distributions from net investment income (403,635) (1,003,030)
- ------------------------------------------------ ----------- -----------
SHARE TRANSACTIONS--
- ------------------------------------------------
Proceeds from sale of shares 401,417 3,693,948
- ------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 6,662 13,837
- ------------------------------------------------
Cost of shares redeemed (1,631,831) (6,964,431)
- ------------------------------------------------ ----------- -----------
Change in net assets resulting from share
transactions (1,223,752) (3,256,646)
- ------------------------------------------------ ----------- -----------
Change in net assets (639,994) (2,456,427)
- ------------------------------------------------
NET ASSETS:
- ------------------------------------------------
Beginning of period 21,026,518 23,482,945
- ------------------------------------------------ ----------- -----------
End of period $20,386,524 $21,026,518
- ------------------------------------------------ ----------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
23
INDEPENDENCE ONE MICHIGAN MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED APRIL 30,
(UNAUDITED) ---------------------------
OCTOBER 31,
1998 1998 1997 1996(A)
- --------------------------------- ----------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $10.30 $ 9.99 $ 9.95 $10.00
- ---------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net investment income 0.20 0.42 0.41 0.17
- ---------------------------------
Net realized and unrealized gain
(loss) on investments 0.29 0.31 0.04 (0.05)
- --------------------------------- ------- ------- ------- -------
Total from investment operations 0.49 0.73 0.45 0.12
- --------------------------------- ------- ------- ------- -------
LESS DISTRIBUTIONS
- ---------------------------------
Distributions from net
investment income (0.20) (0.42) (0.41) (0.17)
- ---------------------------------
Distributions from net realized
gain on investments -- -- 0.00(b) --
- --------------------------------- ------- ------- ------- -------
Total distributions (0.20) (0.42) (0.41) (0.17)
- --------------------------------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.59 $10.30 $ 9.99 $ 9.95
- --------------------------------- ------- ------- ------- -------
TOTAL RETURN (C) 4.81% 7.38% 4.62% 1.21%
- ---------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------
Expenses 0.98%* 0.81% 0.70% 0.57%*
- ---------------------------------
Net investment income 3.82%* 4.07% 4.12% 3.83%*
- ---------------------------------
Expense waiver (d) 0.58%* 0.72% 0.94% 0.76%*
- ---------------------------------
SUPPLEMENTAL DATA
- ---------------------------------
Net assets, end of period (000
omitted) $20,387 $21,027 $23,483 $25,123
- ---------------------------------
Portfolio turnover 3% 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)
24
INDEPENDENCE ONE MUTUAL FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end management investment
company. The Trust consists of 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.
25
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 TOTAL TAX
YEAR YEAR 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.
26
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.
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
-----------------------
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, APRIL 30,
1998 1998
- -------------------------------------------- ----------- ----------
<S> <C> <C>
Shares sold 318,029 1,008,867
- --------------------------------------------
Shares issued to shareholders in payment of
distributions declared 17,351 39,277
- --------------------------------------------
Shares redeemed (684,279) (1,447,352)
- -------------------------------------------- ---------- ----------
Net change resulting from share transactions (348,899) (399,208)
- -------------------------------------------- ---------- ----------
<CAPTION>
FIXED INCOME FUND
-----------------------
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, APRIL 30,
1998 1998
- -------------------------------------------- ----------- ----------
<S> <C> <C>
Shares sold 642,849 1,968,892
- --------------------------------------------
Shares issued to shareholders in payment of
distributions declared 169,179 388,432
- --------------------------------------------
Shares redeemed (1,021,590) (1,583,847)
- -------------------------------------------- ---------- ----------
Net change resulting from share transactions (209,562) 773,477
- -------------------------------------------- ---------- ----------
</TABLE>
27
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MICHIGAN MUNICIPAL
BOND FUND
----------------------
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, APRIL 30,
1998 1998
- -------------------------------------------- ----------- ----------
<S> <C> <C>
Shares sold 38,376 358,787
- --------------------------------------------
Shares issued to shareholders in payment of
distributions declared 636 1,340
- --------------------------------------------
Shares redeemed (155,622) (669,163)
- -------------------------------------------- -------- --------
Net change resulting from share transactions (116,610) (309,036)
- -------------------------------------------- -------- --------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Michigan National Bank, the Funds' investment adviser
(the "Adviser") receives 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--Federated Administrative Services ("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.
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.
28
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
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 TRANSACTION
Purchases and sales of investments, excluding short-term securities, for the six
months ended October 31, 1998, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO NAME PURCHASES SALES
- ----------------------------------------------------------
<S> <C> <C>
U.S. Government Securities Fund $12,138,624 $13,402,738
- ----------------------------------------------------------
Fixed Income Fund 7,140,761 8,355,871
- ----------------------------------------------------------
Michigan Municipal Bond Fund 504,030 1,013,625
</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 October 31, 1998, 72.4% 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 27% of total investments.
(7) YEAR 2000
Similar to other financial organizations, the Funds could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's 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 Fund's 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.
29
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
C. Grant Anderson
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 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.
30
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
INDEPENDENCE ONE(R)
MUTUAL FUNDS
(DISTRIBUTED BY FEDERATED SECURITIES CORP.)
COMBINED
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 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
G01889-03 (12/98) [recycled logo]
PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report of the Independence One Money
Market Funds for the first half of the funds' fiscal year, which is the
six-month period from May 1, 1998 through October 31, 1998. This report begins
with a discussion with each fund's portfolio manager, which is followed by a
complete listing of fund holdings and financial information.
Each fund is a convenient, stable way to put your ready cash to work every day
pursuing competitive money market income.* Fund-by-fund highlights for the
six-month period are below.
INDEPENDENCE ONE PRIME MONEY MARKET FUND, a high-quality portfolio of money
market securities, paid dividends of $0.03 per share for Class A Shares and
Class B Shares over the reporting period, respectively. Assets in the fund
reached $617.4 million at the end of the reporting period.
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND, a portfolio of U.S. Treasury
money market securities, paid a total of $0.02 per share in dividends over the
reporting period. Assets in the fund totaled $257.9 million at reporting
period end.
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND, a high-quality portfolio of more
than 50 Michigan municipal money market securities, paid a total of $0.02 per
share in double tax-free dividends over the reporting period.+ Assets in the
fund totaled $129.8 million on the last day of the reporting period.
Than you for keeping your cash working every day through one or more of the
Independence One Money Market Funds.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
December 15, 1998
* An investment in the funds is neither insured nor guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
funds seek to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the funds.
+Income may be subject to the federal alternative minimum tax.
INVESTMENT REVIEW
- -------------------------------------------------------------------------------
Q What are your comments on the short-term markets over the first half of the
funds' fiscal year, which was punctuated by two rate cuts by the Federal
Reserve Board ("Fed")?
A The Fed has sent a strong message to the financial markets in the past two
months with its more accommodating monetary policy. It has expressed its
resolve to avert a full-blown credit crunch and to keep the current U.S.
expansion healthy. With fears of a credit crunch looming, the Fed lowered its
interest rate target on federal funds by 1/4 of 1% on September 29th, followed
by a second rate cut on October 15, 1998.
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
six-month reporting period ended October 31, 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 2.54% for Class A Shares and 2.67%
for Class B Shares during the six-month reporting period ended October 31,
1998.* The 7-day net yield for Class A Shares began the reporting period on May
1, 1998 at 5.03% and ended the reporting period on October 31, 1998 at 4.60%.*
The 7-day net yield for Class B Shares began the reporting period on May 1, 1998
at 5.28% and ended the reporting period on October 31, 1998 at 4.85%.* The
average maturity of the fund as of October 31, 1998 was 53 days.
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
Independence One U.S. Treasury Money Market Fund earned a total return of 2.46%
during the six-month reporting period ended October 31, 1998.* The 7-day net
yield began the reporting period on May 1, 1998 at 4.91% and ended the reporting
period on October 31, 1998 at 4.37%.* The average maturity for the fund as of
October 31, 1998 was 64 days.
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
Independence One Michigan Municipal Cash Fund earned a total return of 1.53%
during the six-month reporting period ended October 31, 1998.* The 7-day net
yield began the reporting period on May 1, 1998 at 3.37% and ended the reporting
period on October 31, 1998 at 2.82%.* The average maturity of the fund as of
October 31, 1998 was 50 days.
Q As the end of 1998 approaches, there is still some expectation of further
rate cuts by the Fed. What is your overall outlook for short-term interest
rates?
A While we anticipate a slowing in the U.S. growth rate next year, reflecting
the impact of overall global economic weakness, we believe a
recession is unlikely. Additional Fed short-term interest rate cuts are in our
forecast; investors, however, may begin to question whether the more aggressive
easing posture of the Fed will eventually lead to an increase in inflation
expectations.
* Performance quoted represents past performance and is not indicative of future
results. Yields will vary. Yields quoted for money market funds most closely
reflect the funds' current earnings.
INDEPENDENCE ONE PRIME MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------------------------------------------- ------------
<C> <S> <C>
CERTIFICATE OF DEPOSIT--31.6%
--------------------------------------------------------------
FINANCE--31.6%
--------------------------------------------------
$10,000,000 ABN-AMRO Bank NV, Chicago, 5.740%, 3/12/1999 $ 9,995,745
--------------------------------------------------
15,000,000 Bank of America NT and SA, San Francisco, 5.540%,
11/23/1998 15,000,000
--------------------------------------------------
10,000,000 Bank of Montreal, 5.130%, 1/29/1999 10,000,244
--------------------------------------------------
25,000,000 Bank of Nova Scotia, Toronto, 5.400% - 5.440%,
12/10/1998 - 12/17/1998 25,001,374
--------------------------------------------------
15,000,000 Banque Nationale de Paris, 5.570%, 11/9/1998 15,000,097
--------------------------------------------------
20,000,000 Canadian Imperial Bank of Commerce, NY, 5.260%-
5.440%,
11/18/1998 -12/4/1998 19,999,982
--------------------------------------------------
5,000,000 Canadian Imperial Bank of Commerce, Toronto,
5.610%, 1/11/1999 4,999,813
--------------------------------------------------
20,000,000 Commerzbank AG, Frankfurt, 5.534% - 5.540%,
11/9/1998 - 12/29/1998 20,000,908
--------------------------------------------------
15,000,000 Dresdner Securities (USA), Inc., 5.110%, 2/16/1999 15,009,528
--------------------------------------------------
15,000,000 Rabobank Nederland, Utrecht, 5.180%, 1/6/1999 15,008,381
--------------------------------------------------
10,000,000 Societe Generale, 5.690%, 3/22/1999 9,999,630
--------------------------------------------------
20,000,000 Svenska Handelsbanken, Stockholm, 5.660% - 5.670%,
12/22/1998 19,996,536
--------------------------------------------------
15,000,000 Toronto Dominion Holdings (USA), Inc., 5.580%,
12/22/1998 15,000,415
-------------------------------------------------- ------------
TOTAL CERTIFICATE OF DEPOSIT 195,012,653
-------------------------------------------------- ------------
(A) COMMERCIAL PAPER--48.2%
--------------------------------------------------------------
BANKS--4.0%
--------------------------------------------------
25,000,000 Banca CRT Financial Corp., 4.983% - 5.219%,
1/6/1999 - 4/1/1999 24,679,232
-------------------------------------------------- ------------
CONSUMER LOAN RECEIVABLES--8.2%
--------------------------------------------------
25,000,000 Fleet Funding Corp., 5.378% - 5.553%, 11/2/1998 -
11/19/1998 24,958,347
--------------------------------------------------
25,706,000 Receivables Capital Corp., 5.191% - 5.420%,
11/10/1998 - 1/11/1999 25,625,136
-------------------------------------------------- ------------
Total 50,583,483
-------------------------------------------------- ------------
FINANCE--19.6%
--------------------------------------------------
10,000,000 BCI Funding Corp., 5.557%, 11/24/1998 9,964,989
--------------------------------------------------
</TABLE>
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------------------------------------------- ------------
<C> <S> <C>
(A) COMMERCIAL PAPER--CONTINUED
---------------------------------------------------------------
FINANCE--CONTINUED
---------------------------------------------------
$ 5,000,000 Commerzbank U.S. Finance, Inc., (Guaranteed by
Commerzbank AG, Frankfurt), 5.131%, 1/13/1999 $ 4,948,596
---------------------------------------------------
25,000,000 Delaware Funding Corp., 5.219% - 5.500%, 11/20/1998
- 1/20/1999 24,848,650
---------------------------------------------------
25,000,000 Morgan Stanley, Dean Witter & Co., 5.191% - 5.287%,
1/29/1999 - 2/3/1999 24,671,694
---------------------------------------------------
25,000,000 Quincy Capital Corp., 5.165% - 5.566%, 11/6/1998 -
1/13/1999 24,885,125
---------------------------------------------------
17,000,000 Transamerica Finance Corp., 5.476%, 12/11/1998 16,898,000
---------------------------------------------------
15,000,000 UBS Finance (Delaware), Inc., (UBS AG LOC), 5.274%,
1/15/1999 14,837,406
--------------------------------------------------- ------------
Total 121,054,460
--------------------------------------------------- ------------
MISCELLANEOUS RECEIVABLES--4.0%
---------------------------------------------------
25,000,000 Asset Securitization Cooperative Corp., 5.286% -
5.491%,
11/24/1998 - 11/25/1998 24,912,867
--------------------------------------------------- ------------
PROCESS INDUSTRIES--3.5%
---------------------------------------------------
22,000,000 Monsanto Co., 5.190% 5.418%, 12/17/1998 - 1/8/1999 21,835,431
--------------------------------------------------- ------------
SECURITIES SERVICES--8.9%
---------------------------------------------------
25,000,000 Goldman Sachs Group, LP, 5.070% - 5.169%, 1/21/1999
- 2/24/1999 24,646,625
---------------------------------------------------
15,000,000 J.P. Morgan & Co., Inc., 5.556%, 11/17/1998 14,963,467
---------------------------------------------------
15,000,000 Merrill Lynch & Co., Inc., 5.578%, 11/10/1998 14,979,375
--------------------------------------------------- ------------
Total 54,589,467
--------------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 297,654,940
--------------------------------------------------- ------------
GOVERNMENT AGENCY--2.7%
---------------------------------------------------------------
FEDERAL HOME LOAN BANK--2.7%
---------------------------------------------------
17,000,000 5.000%, 10/27/1999 17,000,000
--------------------------------------------------- ------------
(B) REPURCHASE AGREEMENTS--17.3%
---------------------------------------------------------------
56,608,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.400%, dated 10/30/1998, due 11/2/1998 56,608,000
---------------------------------------------------
</TABLE>
INDEPENDENCE ONE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------------------------------------------- ------------
<C> <S> <C>
(B) REPURCHASE AGREEMENTS--CONTINUED
--------------------------------------------------------------
$50,000,000 First Chicago Capital Markets, Inc., 5.300%, dated
10/30/1998, due 11/2/1998 $ 50,000,000
-------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 106,608,000
-------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $616,275,593
-------------------------------------------------- ------------
</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
($617,444,105) at October 31, 1998.
The following acronyms are used throughout this portfolio:
LOC--Letter of Credit
LP--Limited Partnership
SA--Support Agreement
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------
Investment in repurchase agreements $106,608,000
- -----------------------------------
Total investments in securities 509,667,593
- ----------------------------------- ------------
Total investments in securities, at amortized
cost and value $616,275,593
- -------------------------------------------------
Cash 4,534
- -------------------------------------------------
Income receivable 3,814,625
- ------------------------------------------------- ------------
Total assets 620,094,752
- -------------------------------------------------
LIABILITIES:
- -----------------------------------
Income distribution payable $ 2,383,758
- -----------------------------------
Accrued expenses 266,889
- ----------------------------------- ------------
Total liabilities 2,650,647
- ------------------------------------------------- ------------
Net Assets for 617,444,105 shares outstanding $617,444,105
- ------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- -------------------------------------------------
CLASS A SHARES:
- -------------------------------------------------
$516,138,683 / 516,138,683 shares outstanding $1.00
- ------------------------------------------------- ------------
CLASS B SHARES:
- -------------------------------------------------
$101,305,422 / 101,305,422 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
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------
Interest $14,841,166
- -----------------------------------------------------------
EXPENSES:
- -----------------------------------------------
Investment advisory fee $1,061,568
- -----------------------------------------------
Administrative personnel and services fee 275,017
- -----------------------------------------------
Custodian fees 35,179
- -----------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 51,144
- -----------------------------------------------
Directors'/Trustees' fees 12,274
- -----------------------------------------------
Auditing fees 8,370
- -----------------------------------------------
Legal fees 2,956
- -----------------------------------------------
Portfolio accounting fees 49,365
- -----------------------------------------------
Shareholder services fee--Class A Shares 547,185
- -----------------------------------------------
Share registration costs 16,520
- -----------------------------------------------
Printing and postage 4,529
- -----------------------------------------------
Insurance premiums 2,682
- -----------------------------------------------
Miscellaneous 2,558
- ----------------------------------------------- ----------
Total expenses 2,069,347
- -----------------------------------------------
Waivers--
- -----------------------------------------------
Waiver of investment advisory fee (663,480)
- ----------------------------------------------- ----------
Net expenses 1,405,867
- ----------------------------------------------------------- -----------
Net investment income $13,435,299
- ----------------------------------------------------------- -----------
</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>
SIX MONTHS ENDED
OCTOBER 31, 1998 YEAR ENDED
(UNAUDITED) APRIL 30, 1998
---------------- ---------------
- -------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------
OPERATIONS--
- -------------------------------------------
Net investment income $ 13,435,299 $ 23,845,778
- ------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------
Distributions from net investment income
- -------------------------------------------
Class A Shares (10,984,965) (18,466,487)
- -------------------------------------------
Class B Shares (2,450,334) (5,379,291)
- ------------------------------------------- --------------- ---------------
Change in net assets resulting from
distributions to shareholders (13,435,299) (23,845,778)
- ------------------------------------------- --------------- ---------------
SHARE TRANSACTIONS--
- -------------------------------------------
Proceeds from sale of shares 2,109,276,338 3,127,600,723
- -------------------------------------------
Net asset value of shares issued to
shareholders in payment of distributions
declared 6,773,627 13,841,267
- -------------------------------------------
Cost of shares redeemed (1,969,850,929) (3,079,200,897)
- ------------------------------------------- --------------- ---------------
Change in net assets resulting from share
transactions 146,199,036 62,241,093
- ------------------------------------------- --------------- ---------------
Change in net assets 146,199,036 62,241,093
- -------------------------------------------
NET ASSETS:
- -------------------------------------------
Beginning of period 471,245,069 409,003,976
- ------------------------------------------- --------------- ---------------
End of period $ 617,444,105 $ 471,245,069
- ------------------------------------------- --------------- ---------------
</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>
SIX MONTHS
ENDED YEAR ENDED APRIL 30,
OCTOBER 31, ------------------------------------------------
1998
(UNAUDITED) 1998 1997 1996 1995 1994
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------
NET ASSET VALUE,
BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.03 0.05 0.05 0.05 0.05 0.03
- -----------------------
LESS DISTRIBUTIONS
- -----------------------
Distributions from net
investment income (0.03) (0.05) (0.05) (0.05) (0.05) (0.03)
- ----------------------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- -------- -------- -------- -------- -------- --------
TOTAL RETURN (A) 2.54% 5.20% 4.94% 5.33% 4.66% 2.73%
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 0.57%* 0.59% 0.60% 0.61% 0.61% 0.59%
- -----------------------
Net investment income 5.02%* 5.07% 4.83% 5.19% 4.51% 2.70%
- -----------------------
Expense waiver (b) 0.25%* 0.25% 0.25% 0.25% -- 0.02%
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
Net assets, end of
period (000 omitted) $516,139 $389,522 $337,836 $310,991 $233,607 $310,588
- -----------------------
</TABLE>
* Computed on an annualized basis.
(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>
SIX MONTHS
ENDED YEAR ENDED APRIL 30,
OCTOBER 31, -------------------------
1998
(UNAUDITED) 1998 1997 1996(A)
- ---------------------------------------- ----------- ------- ------- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------
Net investment income 0.03 0.05 0.05 0.05
- ----------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------
Distributions from net investment
income (0.03) (0.05) (0.05) (0.05)
- ---------------------------------------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------- -------- ------- ------- -------
TOTAL RETURN (B) 2.67% 5.46% 5.20% 5.07%
- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------
Expenses 0.32% 0.34% 0.35% 0.36%*
- ----------------------------------------
Net investment income 5.27% 5.31% 5.06% 5.34%*
- ----------------------------------------
Expense waiver (c) 0.25% 0.25% 0.25% 0.25%*
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000 omitted) $101,305 $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
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--39.0%
--------------------------------------------------------------
U.S. TREASURY BILL--5.8%
--------------------------------------------------
$15,000,000 1/21/1999 $14,854,537
-------------------------------------------------- ------------
U.S. TREASURY NOTES--33.2%
--------------------------------------------------
10,000,000 5.875%, 1/31/1999 10,033,254
--------------------------------------------------
15,000,000 5.875%, 3/31/1999 15,020,802
--------------------------------------------------
15,000,000 6.375%, 1/15/1999 15,026,066
--------------------------------------------------
10,000,000 6.375%, 4/30/1999 10,038,978
--------------------------------------------------
20,000,000 6.750%, 5/31/1999 20,264,679
--------------------------------------------------
15,000,000 6.875%, 7/31/1999 15,271,054
-------------------------------------------------- ------------
Total 85,654,833
-------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 100,509,370
-------------------------------------------------- ------------
(A) REPURCHASE AGREEMENTS--60.8%
--------------------------------------------------------------
64,000,000 BA Securities, Inc., 5.330%, dated 10/30/1998, due 64,000,000
11/2/1998
--------------------------------------------------
10,000,000 Dean Witter Reynolds, Inc., 5.380%, dated 10,000,000
10/30/1998, due 11/2/1998
--------------------------------------------------
64,000,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.400%, dated 10/30/1998, due 11/2/1998 64,000,000
--------------------------------------------------
10,000,000 First Chicago Capital Markets, Inc., 5.300%, dated
10/30/1998, due 11/2/1998 10,000,000
--------------------------------------------------
8,839,000 Merrill Lynch, Pierce, Fenner and Smith, 5.250%,
dated 10/30/1998, due 11/2/1998 8,839,000
-------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 156,839,000
-------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $257,348,370
-------------------------------------------------- ------------
</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.
Note: The categories of investments are shown as a percentage of net assets
($257,894,274) at October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE U.S. TREASURY MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------
Investment in repurchase agreements $156,839,000
- -----------------------------------
Total investments in securities 100,509,370
- ----------------------------------- ------------
Total investments in securities, at amortized
cost and value $257,348,370
- -------------------------------------------------
Cash 5,076
- -------------------------------------------------
Income receivable 1,705,002
- ------------------------------------------------- ------------
Total assets 259,058,448
- -------------------------------------------------
LIABILITIES:
- -----------------------------------
Income distribution payable $ 1,021,306
- -----------------------------------
Accrued expenses 142,868
- ----------------------------------- ------------
Total liabilities 1,164,174
- ------------------------------------------------- ------------
Net Assets for 257,894,274 shares outstanding $257,894,274
- ------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- -------------------------------------------------
$257,894,274 / 257,894,274 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
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------
Interest $7,545,263
- ------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------
Investment advisory fee $558,219
- --------------------------------------------------------
Administrative personnel and services fee 144,845
- --------------------------------------------------------
Custodian fees 30,711
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 18,542
- --------------------------------------------------------
Directors'/Trustees' fees 7,908
- --------------------------------------------------------
Auditing fees 6,971
- --------------------------------------------------------
Legal fees 3,019
- --------------------------------------------------------
Portfolio accounting fees 35,161
- --------------------------------------------------------
Share registration costs 8,029
- --------------------------------------------------------
Printing and postage 4,697
- --------------------------------------------------------
Insurance premiums 2,017
- --------------------------------------------------------
Miscellaneous 1,917
- -------------------------------------------------------- --------
Total expenses 822,036
- --------------------------------------------------------
Net investment income $6,723,227
- ------------------------------------------------------------------ ----------
</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>
SIX MONTHS ENDED
OCTOBER 31, 1998 YEAR ENDED
(UNAUDITED) APRIL 30, 1998
- ------------------------------------------- ---------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------
OPERATIONS--
- -------------------------------------------
Net investment income $ 6,723,227 $ 13,078,210
- ------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------
Distributions from net investment income (6,723,227) (13,078,210)
- ------------------------------------------- --------------- ---------------
SHARE TRANSACTIONS--
- -------------------------------------------
Proceeds from sale of shares 1,342,476,020 2,653,184,433
- -------------------------------------------
Net asset value of shares issued to
shareholders
in payment of distributions declared 3,406,212 7,978,732
- -------------------------------------------
Cost of shares redeemed (1,408,556,301) (2,585,884,188)
- ------------------------------------------- --------------- ---------------
Change in net assets resulting from share
transactions (62,674,069) 75,278,977
- ------------------------------------------- --------------- ---------------
Change in net assets (62,674,069) 75,278,977
- -------------------------------------------
NET ASSETS:
- -------------------------------------------
Beginning of period 320,568,343 245,289,366
- ------------------------------------------- --------------- ---------------
End of period $ 257,894,274 $ 320,568,343
- ------------------------------------------- --------------- ---------------
</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>
SIX MONTHS
ENDED YEAR ENDED APRIL 30,
OCTOBER 31, ------------------------------------------------
1998
(UNAUDITED) 1998 1997 1996 1995 1994
- ----------------------- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.02 0.05 0.05 0.05 0.04 0.03
- -----------------------
LESS DISTRIBUTIONS
- -----------------------
Distributions from net
investment income (0.02) (0.05) (0.05) (0.05) (0.04) (0.03)
- ----------------------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- -------- -------- -------- -------- -------- --------
TOTAL RETURN (A) 2.46% 5.03% 4.86% 5.28% 4.49% 2.63%
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 0.59%* 0.59% 0.59% 0.60% 0.63% 0.61%
- -----------------------
Net investment income 4.82%* 4.92% 4.75% 5.14% 4.41% 2.60%
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
Net assets, end of
period (000 omitted) $257,894 $320,568 $245,289 $297,233 $244,887 $215,832
- -----------------------
</TABLE>
* Computed on an annualized basis.
(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
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- ----------------------------------------- ---------- ------------
<C> <S> <C> <C>
(A) SHORT-TERM MUNICIPALS--96.8%
----------------------------------------------------
FLORIDA--3.9%
-----------------------------------------
$5,000,000 Alachua County, Fl Health Facilities
Authority, Health Facilities Revenue
Bonds (Series 1996B) Weekly VRDNs (Shands
Teaching Hospital and Clinics,
Inc.)/(MBIA INS)/(SunTrust Bank, Central
Florida LIQ) A-1+/VMIG1 $ 5,000,000
----------------------------------------- ------------
ILLINOIS--4.6%
-----------------------------------------
3,500,000 Illinois Health Facilities Authority,
Health, Hospital, Nursing Home
Improvements Weekly VRDNs (MBIA INS) A-1+/VMIG1 3,500,000
-----------------------------------------
2,500,000 Illinois Health Facilities Authority,
Refunding Revenue Bonds (Series A) Weekly
VRDNs (Swedish Covenant Hospital)/(MBIA
INS) A-1+/VMIG1 2,500,000
----------------------------------------- ------------
Total 6,000,000
----------------------------------------- ------------
MICHIGAN--88.3%
-----------------------------------------
1,000,000 Cornell, MI Economic Development Corp.,
Industrial Development Revenue Refunding
Bonds (Series 1990), 3.45% CP (Mead-
Escanaba Paper Co. Project)/(Credit
Suisse First Boston LOC), Mandatory
Tender 11/10/1998 A-1+/NR 1,000,000
-----------------------------------------
2,700,000 Delta County, MI Economic Development
Corp., Environmental Improvement Revenue
Refunding Bonds (Series 1985 A), 2.90% CP
(Mead-Escanaba Paper Co. Project),
Mandatory Tender 12/2/1998 (Morgan GTD
LOC) P-1/NR 2,700,000
-----------------------------------------
2,200,000 Delta County, MI Economic Development
Corp., Environmental Improvement Revenue
Refunding Bonds (Series 1985 A), 2.90% CP
(Mead-Escanaba Paper Co. Project),
Mandatory Tender 12/3/1998 (Morgan GTD
LOC) P-1/NR 2,200,000
-----------------------------------------
1,100,000 Delta County, MI Economic Development
Corp., Environmental Improvement Revenue
Refunding Bonds (Series 1985 A), 3.10% CP
(Mead-Escanaba Paper Co. Project),
Mandatory Tender 1/11/1999 (Morgan GTD
LOC) 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
-------------------------------------------
$2,000,000 Delta County, MI Economic Development
Corp., Environmental Improvement Revenue
Refunding Bonds (Series 1985 A), 3.30% CP
(Mead-Escanaba Paper Co. Project),
Mandatory Tender 11/2/1998 (Morgan GTD LOC) P-1/NR $ 2,000,000
-------------------------------------------
1,000,000 Delta County, MI Economic Development
Corp., Environmental Improvement Revenue
Refunding Bonds (Series 1985 B), 2.85% CP
(Mead-Escanaba Paper Co. Project)/(Union
Bank of Switzerland, Zurich LOC), Mandatory
Tender 1/6/1999 NR/P-1 1,000,000
-------------------------------------------
1,200,000 Delta County, MI Economic Development
Corp., Environmental Improvement Revenue
Refunding Bonds (Series 1985 B), 2.90% CP
(Mead-Escanaba Paper Co. Project)/(Union
Bank of Switzerland, Zurich LOC), Mandatory
Tender 11/15/1998 NR/P-1 1,200,000
-------------------------------------------
2,000,000 Delta County, MI Economic Development
Corp., Environmental Improvement Revenue
Refunding Bonds (Series 1985 B), 3.10% CP
(Mead-Escanaba Paper Co. Project)/(Union
Bank of Switzerland, Zurich LOC), Mandatory
Tender 1/12/1999 NR/P-1 2,000,000
-------------------------------------------
1,000,000 Delta County, MI Economic Development
Corp., Environmental Improvement Revenue
Refunding Bonds (Series 1985 B), 3.45% CP
(Mead-Escanaba Paper Co. Project)/(Union
Bank of Switzerland, Zurich LOC), Mandatory
Tender 11/17/1998 NR/P-1 1,000,000
-------------------------------------------
2,500,000 Detroit, MI City School District, GO LT,
4.50% Bonds, 7/1/1999 SP-1+/NR 2,513,419
-------------------------------------------
355,000 Farmington Hills, MI Economic Development
Corp., LT Obligation Weekly VRDNs
(Brookfield Building Association)/(Comerica
Bank, Detroit, MI LOC) A-1/A 355,000
-------------------------------------------
800,000 Farmington Hills, MI Economic Development
Corp., Limited Obligations Revenue Bonds,
3.80% TOBs (Marketing Displays)/(Comerica
Bank, Detroit, MI LOC) 3/1/1999 NR/NR 800,000
-------------------------------------------
</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
------------------------------------------
$1,000,000 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
------------------------------------------
3,088,000 Lakeville Community School, 4.10% Bonds,
6/30/1999 NR/NR 3,096,852
------------------------------------------
3,125,000 Lincoln, MI Consolidated School District,
Cash Flow Management, 4.00% Bonds,
8/20/1999 NR/NR 3,130,991
------------------------------------------
2,000,000 Michigan Higher Education Student Loan
Authority, Refunding Revenue Bonds (Series
X11-B) Weekly VRDNs (AMBAC INS) A-1/VMIG1 2,000,000
------------------------------------------
2,000,000 Michigan Higher Education Student Loan
Authority, Series XXII - F Weekly VRDNs
(AMBAC INS) AAA/VMIG1 2,000,000
------------------------------------------
3,000,000 Michigan Municipal Bond Authority, Revenue
Bonds (Series B-1), 4.50% Bonds, 7/2/1999 SP-1+/NR 3,017,336
------------------------------------------
1,315,000 Michigan State Hospital Finance Authority
Weekly VRDNs (Hospital Equipment Loan
Program)/(First of America Bank--
Kalamazoo, MI LOC) NR/VMIG1 1,315,000
------------------------------------------
3,435,000 Michigan State Hospital Finance Authority,
(Series 1994) Weekly VRDNs (Mt. Clemens
General Hospital)/(Comerica Bank, Detroit,
MI LOC) NR/VMIG1 3,435,000
------------------------------------------
1,600,000 Michigan State Hospital Finance Authority,
(Series A) Health, Hospital Nursing Home
Improvement Revenue Bonds Weekly VRDNs
(First of America Bank, N.A. LOC) NR/VMIG1 1,600,000
------------------------------------------
500,000 Michigan State Hospital Finance Authority,
(Series A) Health, Hospital Nursing Home
Improvement Weekly VRDNs (First of America
Bank, N.A. LOC) NR/VMIG1 500,000
------------------------------------------
2,810,000 Michigan State Hospital Finance Authority,
(Series A) Weekly VRDNs (Hospital
Equipment Loan Program)/(First of America
Bank, N.A. LOC) NR/VMIG1 2,810,000
------------------------------------------
</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
-----------------------------------------
$6,100,000 Michigan State Hospital Finance
Authority, (Series F) Weekly VRDNs
(Daughters of Charity) A-1+/VMIG1 $ 6,100,000
-----------------------------------------
2,800,000 Michigan State Hospital Finance
Authority, Health, Hospital, Nursing Home
Improvements (Series A) Weekly VRDNs
(First of America Bank, N.A. LOC) NR/VMIG1 2,800,000
-----------------------------------------
800,000 Michigan State Hospital Finance
Authority, Hospital Equipment Loan
Program Bonds (Series A) Weekly VRDNs
(First of American Bank LOC) NR/VMIG1 800,000
-----------------------------------------
1,000,000 Michigan State, GO UT, 5.30% TRANs,
11/1/1998 AA+/Aa1 1,000,000
-----------------------------------------
1,560,000 Michigan Strategic Fund Monthly VRDNs
(Applied Textiles, Inc.) (Old Bank &
Trust LOC) NR/NR 1,560,000
-----------------------------------------
300,000 Michigan Strategic Fund Weekly VRDNs (NBD
Bank, Michigan LOC) NR/NR 300,000
-----------------------------------------
2,590,000 Michigan Strategic Fund Weekly VRDNs
(Advanced Tooling Systems, Inc.)/(NBD
Bank, Michigan LOC) (Commercial Bank,
Michigan LOC) NR/NR 2,590,000
-----------------------------------------
1,500,000 Michigan Strategic Fund Weekly VRDNs
(Morrell, Inc.) (Comerica Bank, Detroit,
MI LOC) NR/NR 1,500,000
-----------------------------------------
2,000,000 Michigan Strategic Fund, 3.00% CP (Dow
Chemical Co.), Mandatory Tender 11/5/1998 P-1/NR 2,000,000
-----------------------------------------
1,100,000 Michigan Strategic Fund, 3.10% CP (Dow
Chemical Co.), Mandatory Tender 1/12/1999 P-1 /NR 1,100,000
-----------------------------------------
2,000,000 Michigan Strategic Fund, 3.15% CP (Dow
Chemical Co.), Mandatory Tender 12/1/1998 P-1 /NR 2,000,000
-----------------------------------------
3,800,000 Michigan Strategic Fund, 3.25% CP (Dow
Chemical Co.), Mandatory Tender
11/17/1998 NR/P-1 3,800,000
-----------------------------------------
1,100,000 Michigan Strategic Fund, 3.40% CP (Dow
Chemical Co.), Mandatory Tender 12/3/1998 NR/P-1 1,100,000
-----------------------------------------
900,000 Michigan Strategic Fund, 3.45% CP (Dow
Chemical Co.), Mandatory Tender
11/16/1998 NR/P-1 900,000
-----------------------------------------
</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
------------------------------------------
$2,200,000 Michigan Strategic Fund, 3.45% CP (Dow
Chemical Co.), Mandatory Tender 11/18/1998 NR/P-1 $ 2,200,000
------------------------------------------
1,000,000 Michigan Strategic Fund, Industrial
Improvement Revenue Bonds Weekly VRDNs
(Eclipse Mold, Inc. Project)/(NBD Bank,
Michigan LOC) NR/NR 1,000,000
------------------------------------------
1,000,000 Michigan Strategic Fund, Industrial
Improvement Revenue Bonds Weekly VRDNs
(Pinnacle Molded Plastics)/(NBD Bank,
Michigan LOC) NR/NR 1,000,000
------------------------------------------
885,000 Michigan Strategic Fund, Industrial
Improvement Revenue Bonds Weekly VRDNs
(Royal Oak Industries, Inc.) (Old Kent
Bank & Trust LOC) NR/P-1 884,801
------------------------------------------
1,000,000 Michigan Strategic Fund, Industrial
Revenue Refunding Bonds Daily VRDNs (UBS--
Union Bank of Switzerland LOC) NR/P-1 1,000,000
------------------------------------------
2,000,000 Michigan Strategic Fund, Limited
Obligation Revenue Bonds (Series 1995)
Weekly VRDNs (United Waste Systems,
Inc.)/(Bank of America, IL LOC) A-1/VMIG1 2,000,000
------------------------------------------
2,525,000 Michigan Strategic Fund, PCR Bonds Weekly
VRDNs (General Motors Corp.) NR/VMIG1 2,525,000
------------------------------------------
885,000 Michigan Strategic Fund, Refunding Revenue
Bonds (Series B) Weekly VRDNs (Riverfront
Development Co.) (Old Kent Bank & Trust
LOC) NR 885,000
------------------------------------------
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) A-1+/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
------------------------------------------
</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
-------------------------------------------
$7,900,000 Michigan Strategic Fund, Solid Waste
Disposal Revenue Bonds Weekly VRDNs
(Grayling Generating) (Barclays Bank PLC
LOC) NR/VMIG1 $ 7,900,000
-------------------------------------------
2,000,000 Oakland County, MI EDC Weekly VRDNs (Comerica Bank, Detroit, MI
LOC)/(Oakland
University) NR/NR 2,000,000
-------------------------------------------
1,500,000 Oakland County, MI EDC Weekly VRDNs
(Michigan Christian College)/(NBD Bank,
Michigan LOC) NR/NR 1,500,000
-------------------------------------------
3,200,000 Oscoda, MI Area Shool District, Student Aid
Notes, 3.70% Bonds, 8/20/1999 NR/NR 3,201,232
-------------------------------------------
4,000,000 Regents of University of Michigan, (Series A), 3.05% CP (Regents of
University of
Michigan GTD), Mandatory Tender 1/7/1999 A-1+/P-1 4,000,000
-------------------------------------------
2,600,000 Regents of University of Michigan, (Series A), 3.20% CP (Regents of
University of
Michigan GTD), Mandatory Tender 12/8/1998 A-1+/P-1 2,600,000
-------------------------------------------
2,000,000 Regents of University of Michigan, (Series A), 3.20% CP (Regents of
University of
Michigan GTD), Mandatory Tender 12/9/1998 A-1+/P-1 2,000,000
-------------------------------------------
2,000,000 Regents of University of Michigan, (Series A), 3.40% CP (Regents of
University of
Michigan GTD), Mandatory Tender 12/2/1998 A-1+/P-1 2,000,000
-------------------------------------------
1,000,000 Regents of University of Michigan, (Series A), 3.45% CP (Regents of
University of
Michigan GTD), Mandatory Tender 11/16/1998 A-1+/P-1 1,000,000
-------------------------------------------
1,800,000 Vicksburg, MI Community Schools, Student
Aid Notes, 3.70% Bonds, 8/21/99 NR/NR 1,801,406
------------------------------------------- ------------
Total 114,721,037
------------------------------------------- ------------
TOTAL SHORT-TERM MUNICIPALS $125,721,037
------------------------------------------- ------------
</TABLE>
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
SHARES RATING* VALUE
--------- ------------------------------------------- ------- ------------
<C> <S> <C> <C>
MUTUAL FUND SHARES--3.0%
-----------------------------------------------------
3,866,000 Nuveen Tax Exempt Money Market Fund (at net
asset value) 3,866,000
------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $129,587,037
------------------------------------------- ------------
</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 October 31, 1998, 13.6% 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
($129,826,654) at October 31, 1998.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond
Assurance Corporation
LLC--Limited Liability Corporation
CP--Commercial Paper LOC--Letter of Credit
EDC--Economic Development Commission LT--Limited Tax
EDR--Economic Development Revenue MBIA--Municipal Bond Investors
EDRB--Economic Development Revenue Bonds Assurance
GO--General Obligation PCR--Pollution Control Revenue
GTD--Guaranty SA--Support Agreement
INS--Insured TOBs--Tender Option Bonds
LIQ--Liquidity Agreement TRANs--Tax and Revenue Anticipation
Notes
UT--Unlimited Tax
VRDNs--Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------
Total investments in securities, at
amortized cost and value $129,587,037
- -------------------------------------
Income receivable 613,662
- ------------------------------------- ------------
Total assets 130,200,699
- -------------------------------------
LIABILITIES:
- ---------------------------
Income distribution payable $318,083
- ---------------------------
Payable to Bank 2,973
- ---------------------------
Accrued expenses 52,989
- --------------------------- --------
Total liabilities 374,045
- ------------------------------------- ------------
Net Assets for 129,826,654 shares
outstanding $129,826,654
- ------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------
$129,826,654 / 129,826,654 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
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------
Interest $2,072,718
- ------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------
Investment advisory fee $237,342
- --------------------------------------------------------
Administrative personnel and services fee 61,542
- --------------------------------------------------------
Custodian fees 9,562
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 16,942
- --------------------------------------------------------
Directors'/Trustees' fees 2,533
- --------------------------------------------------------
Auditing fees 7,567
- --------------------------------------------------------
Legal fees 2,584
- --------------------------------------------------------
Portfolio accounting fees 20,095
- --------------------------------------------------------
Share registration costs 7,154
- --------------------------------------------------------
Printing and postage 4,780
- --------------------------------------------------------
Insurance premiums 1,432
- --------------------------------------------------------
Miscellaneous 2,016
- -------------------------------------------------------- --------
Total expenses 373,549
- --------------------------------------------------------
Waivers--
- --------------------------------------------------------
Waiver of investment advisory fee (89,003)
- -------------------------------------------------------- --------
Net expenses 284,546
- ------------------------------------------------------------------ ----------
Net investment income $1,788,172
- ------------------------------------------------------------------ ----------
</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>
SIX MONTHS ENDED
OCTOBER 31, 1998 YEAR ENDED
(UNAUDITED) APRIL 30, 1998
- ------------------------------------------- ---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------
OPERATIONS--
- -------------------------------------------
Net investment income $ 1,788,172 $ 2,990,068
- ------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------
Distributions from net investment income (1,788,172) (2,990,068)
- ------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- -------------------------------------------
Proceeds from sale of shares 429,460,731 746,963,146
- -------------------------------------------
Net asset value of shares issued to
shareholders in payment of distributions
declared 1,096,582 2,382,308
- -------------------------------------------
Cost of shares redeemed (403,500,384) (730,595,042)
- ------------------------------------------- ------------- -------------
Change in net assets resulting from share
transactions 27,056,929 18,750,412
- ------------------------------------------- ------------- -------------
Change in net assets 27,056,929 18,750,412
- -------------------------------------------
NET ASSETS:
- -------------------------------------------
Beginning of period 102,769,725 84,019,313
- ------------------------------------------- ------------- -------------
End of period $ 129,826,654 $ 102,769,725
- ------------------------------------------- ------------- -------------
</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>
SIX MONTHS
ENDED YEAR ENDED APRIL 30,
OCTOBER 31, -------------------------------------------
1998
(UNAUDITED) 1998 1997 1996 1995 1994
- ----------------------- ----------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.02 0.03 0.03 0.03 0.03 0.02
- -----------------------
LESS DISTRIBUTIONS
- -----------------------
Distributions from net
investment income (0.02) (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 $ 1.00
- ----------------------- ------ ------ ------ ------ ------ ------
TOTAL RETURN (A) 1.53% 3.24% 3.04% 3.24% 2.81% 1.98%
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 0.48%* 0.49% 0.48% 0.53% 0.59% 0.50%
- -----------------------
Net investment income 3.01%* 3.19% 3.01% 3.18% 2.80% 1.96%
- -----------------------
Expense waiver (b) 0.15%* 0.16% 0.20% 0.20% 0.21% 0.22%
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
Net assets, end of
period (000 omitted) $129,827 $102,770 $84,019 $74,712 $66,856 $55,013
- -----------------------
</TABLE>
* Computed on an annualized basis.
(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
OCTOBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end management investment
company. The Trust consists of 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 Prime Money Market To provide current income
Fund ("Prime Money Market Fund") consistent with stability of
principal.
- ----------------------------------------------------------------------------
Independence One U.S. Treasury Money Market To provide current income
Fund ("U.S. Treasury Money Market Fund") consistent with 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 of 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.
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
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.
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.
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
(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 October 31, 1998, capital paid-in for Prime Money Market
Fund, U.S. Treasury Money Market Fund, and Michigan Municipal Cash Fund
aggregated $617,444,105, $257,894,274, and $129,826,654, respectively.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND
------------------------------
SIX MONTHS
ENDED
OCTOBER 31, YEAR ENDED
1998 APRIL 30,
(UNAUDITED) 1998
-------------- --------------
<S> <C> <C>
CLASS A SHARES
- ----------------------------------------
Shares sold 1,795,639,819 2,741,778,522
- ----------------------------------------
Shares issued to shareholders in payment
of distributions declared 5,467,437 10,455,588
- ----------------------------------------
Shares redeemed (1,674,490,448) (2,700,548,575)
- ---------------------------------------- -------------- --------------
Net change resulting from Class A Share
transactions 126,616,808 51,685,535
- ---------------------------------------- -------------- --------------
<CAPTION>
PRIME MONEY MARKET FUND
------------------------------
SIX MONTHS
ENDED
OCTOBER 31, YEAR ENDED
1998 APRIL 30,
(UNAUDITED) 1998
-------------- --------------
<S> <C> <C>
CLASS B SHARES
- ----------------------------------------
Shares sold 313,636,519 385,822,201
- ----------------------------------------
Shares issued to shareholders in payment
of distributions declared 1,306,190 3,385,679
- ----------------------------------------
Shares redeemed (295,360,481) (378,652,322)
- ---------------------------------------- -------------- --------------
Net change resulting from Class B Share
transactions 19,582,228 10,555,558
- ---------------------------------------- -------------- --------------
Net change resulting from share
transactions 146,199,036 62,241,093
- ---------------------------------------- -------------- --------------
</TABLE>
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. TREASURY
MONEY MARKET FUND
------------------------------
SIX MONTHS
ENDED
OCTOBER 31, YEAR ENDED
1998 APRIL 30,
(UNAUDITED) 1998
- -------------------------------------------- -------------- --------------
<S> <C> <C>
Shares sold 1,342,476,020 2,653,184,433
- --------------------------------------------
Shares issued to shareholders in payment of
distributions declared 3,406,212 7,978,732
- --------------------------------------------
Shares redeemed (1,408,556,301) (2,585,884,188)
- -------------------------------------------- -------------- --------------
Net change resulting from share transactions (62,674,069) 75,278,977
- -------------------------------------------- -------------- --------------
<CAPTION>
MICHIGAN MUNICIPAL
CASH FUND
------------------------------
SIX MONTHS
ENDED
OCTOBER 31, YEAR ENDED
1998 APRIL 30,
(UNAUDITED) 1998
- -------------------------------------------- -------------- --------------
<S> <C> <C>
Shares sold 429,460,731 746,963,146
- --------------------------------------------
Shares issued to shareholders in payment of
distributions declared 1,096,582 2,382,308
- --------------------------------------------
Shares redeemed (403,500,384) (730,595,042)
- -------------------------------------------- -------------- --------------
Net change resulting from share transactions 27,056,929 18,750,412
- -------------------------------------------- -------------- --------------
</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 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
INDEPENDENCE ONE MUTUAL FUNDS
- -------------------------------------------------------------------------------
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 October 31, 1998, 54% 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 7.58% 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 Fund's 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.
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
C. Grant Anderson
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 investment 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 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
SUB-ADVISER
Sosnoff Sheridan Corporation
440 South LaSalle Street
Suite 2301
Chicago, Illinois 60605
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
INDEPENDENCE ONE(R)
SMALL CAP FUND
(DISTRIBUTED BY FEDERATED SECURITIES CORP.)
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF MICHIGAN NATIONAL BANK]
Investment Adviser
G01889-04 (12/98) [recycled logo]
PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the first report of Independence One Small Cap Fund. The
report covers the period from June 16, 1998, when the fund began operation,
through October 31, 1998. Inside, you'll find complete financial information for
the fund--beginning with the portfolio manager's discussion, followed by a
listing of fund holdings and the financial statements.
Stocks issued by smaller companies have historically offered the potential for
higher returns over time than stocks issued by large companies, in exchange for
a higher level of risk.* Over the past months, stock prices, in general,
experienced a broad decline over concerns that Asian economic difficulties will
impact the U.S. Small-company stocks bore the brunt of the decline, as the
fund's negative total return indicates. Of course, volatility is part of
investing in any type of stock. Prices will fluctuate, and there will inevitably
be periods of declines, but the historical performance trend of stocks--
particularly small-company stocks--has been extremely positive.**
Thank you for selecting Independence One Small Cap Fund to pursue the long-term
performance potential of small-company stocks. I urge you to keep focused on the
long term, which is the true measure of stock performance. We look forward to
updating you about the progress of your fund.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
December 15, 1998
* In return for a higher level of growth potential, small-company stocks have
historically experienced greater volatility than average.
** Source: Standard & Poor's and the Russell 2000 Index.
INVESTMENT REVIEW
- -------------------------------------------------------------------------------
Q The new Independence One Small Cap Fund gives investors a more aggressive
opportunity to pursue their long-term goals through stocks issued by smaller
companies. What are the advantages of small-cap stocks, and how have they
performed historically vs. large-cap stocks?
A Small-cap stocks provide investors with the opportunity to diversify their
equity portfolio. The stocks of these companies tend to be more volatile
than their large-cap counterparts given the greater uncertainty surrounding the
earnings of smaller companies. Over the long run, however, small-cap stocks
should outperform larger domestic stocks given their relatively high growth
rates.
Q Can you summarize how stocks are selected for the fund's portfolio?
A The fund will limit its stock selections to approximately 200 of the stocks
included in the Standard & Poor's SmallCap 600 Index ("S&P SmallCap
600"),* a capitalization-weighted index of 600 common stocks. We will seek to
achieve a representative sampling of the various industry groups contained in
that index. The stocks selected must have a history of price volatility
("beta")+ similar to the average beta of all stocks in the index. In addition,
stocks may be selected using any of the following criteria: the stock's price is
equal to or greater than the average index stock price; the number of
outstanding shares of the stock is equal to or greater than that of the average
index stock; or the stock has a total capitalization equal to or greater than
the average index stock capitalization. It is believed that the application of
these criteria will help focus the fund's holdings on stocks that are relatively
more liquid and that can be bought and sold with relatively lower transaction
costs.
Q What are your comments regarding what these stocks offer investors right
now, as values among small-caps are so compelling?
A The strength in the large-cap market experienced in the last few years has
not spilled over into the small-cap market, although these companies'
earnings may be 3-4 times the rate at which large-cap companies are growing.
Given the historical returns of this asset class, we would not expect this
divergence in returns to continue very much longer.
* The S&P SmallCap 600 is an unmanaged, capitalization-weighted index of 600
common stocks. It is designed to provide a measure of overall small
capitalization company performance, and includes common stocks of companies
from a variety of economic sectors. Investment cannot be made in an index.
Standard & Poor's,(R)" "S&P,(R)" and "S&P SmallCap 600(R)" are trademarks of
The McGraw-Hill Companies, Inc. and have been authorized for use by
Independence One Small Cap Fund. The Fund is not sponsored, endorsed, sold or
promoted by or affiliated with Standard & Poor's.
+ Beta analyzes the market risk of a fund by showing how responsive the Fund is
to the market. The beta of the market is 1.00. Accordingly, a fund with a 1.10
beta is expected to perform 10% better than the market in up markets and 10%
worse in down markets. Usually the higher betas represent riskier investments.
INDEPENDENCE ONE SMALL CAP FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------------ -----------
<C> <S> <C>
COMMON STOCKS--91.1%
-----------------------------------------------------
BASIC INDUSTRY--6.0%
------------------------------------------
2,079 AMCOL International Corp. $ 21,050
------------------------------------------
2,685 Aptargroup, Inc. 71,824
------------------------------------------
1,894 Caraustar Industries, Inc. 44,983
------------------------------------------
1,631 Coeur d'Alene Mines Corp. 9,174
------------------------------------------
2,654 Corn Products International, Inc. 75,639
------------------------------------------
2,601 Dekalb Genetics Corp., Class B 238,317
------------------------------------------
2,855 Delta & Pine Land Co. 95,286
------------------------------------------
4,105 (a)Hecla Mining Co. 18,472
------------------------------------------
1,267 Imco Recycling, Inc. 17,500
------------------------------------------
796 Lone Star Industries, Inc. 56,068
------------------------------------------
1,951 MacDermid, Inc. 71,455
------------------------------------------
873 Republic Group, Inc. 12,931
------------------------------------------
1,399 (a)WHX Corp. 16,613
------------------------------------------ -----------
Total 749,312
------------------------------------------ -----------
CONSUMER DURABLES--4.8%
------------------------------------------
974 Bassett Furniture Industries, Inc. 22,158
------------------------------------------
3,578 (a)Champion Enterprises, Inc. 71,113
------------------------------------------
4,143 D. R. Horton, Inc. 65,770
------------------------------------------
845 Dixie Group, Inc. 4,859
------------------------------------------
2,143 Ethan Allen Interiors, Inc. 73,666
------------------------------------------
3,902 (a)Mohawk Industries, Inc. 117,792
------------------------------------------
3,476 Oakwood Homes Corp. 54,747
------------------------------------------
1,931 Polaris Industries Partners, L.P., Class A 66,378
------------------------------------------
1,093 Ryland Group, Inc. 27,188
------------------------------------------
1,758 Smith (A.O.) Corp. 35,929
------------------------------------------
</TABLE>
INDEPENDENCE ONE SMALL CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------
CONSUMER DURABLES--CONTINUED
--------------------------------------
2,756 (a)Toll Brothers, Inc. $ 63,905
-------------------------------------- -----------
Total 603,505
-------------------------------------- -----------
CONSUMER NON-DURABLES--2.8%
--------------------------------------
1,098 (a)Ashworth Inc. 7,000
--------------------------------------
2,743 (a)Buckeye Technologies, Inc. 54,860
--------------------------------------
1,415 ChemFirst, Inc. 27,416
--------------------------------------
3,198 Earthgrains Co. 95,940
--------------------------------------
1,223 (a)Gibson Greetings, Inc. 12,765
--------------------------------------
2,774 (a)Nautica Enterprise, Inc. 57,387
--------------------------------------
2,796 (a)Smithfield Foods, Inc. 54,872
--------------------------------------
3,261 Wolverine World Wide, Inc. 42,597
-------------------------------------- -----------
Total 352,837
-------------------------------------- -----------
ENERGY MINERALS--3.0%
--------------------------------------
2,363 (a)Barrett Resources 55,678
--------------------------------------
3,348 Cross Timbers Oil Co. 48,127
--------------------------------------
2,408 Devon Energy Corp. 81,571
--------------------------------------
2,696 (a)Newfield Exploration Co. 65,547
--------------------------------------
1,628 (a)Offshore Logistics, Inc. 24,471
--------------------------------------
2,987 Pogo Producing Co. 44,805
--------------------------------------
819 St. Mary Land & Exploration Co. 17,199
--------------------------------------
3,383 (a)Tuboscope Vetco International Corp. 41,865
-------------------------------------- -----------
Total 379,263
-------------------------------------- -----------
FINANCE--20.3%
--------------------------------------
3,210 American Bankers Insurance Group, Inc. 143,447
--------------------------------------
4,553 (a)Americredit Corp. 60,896
--------------------------------------
3,298 (a)Amresco, Inc. 22,880
--------------------------------------
4,053 Astoria Financial Corp. 174,279
--------------------------------------
1,691 CMAC Investment Corp. 70,811
--------------------------------------
</TABLE>
INDEPENDENCE ONE SMALL CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------
FINANCE--CONTINUED
--------------------------------------
1,977 Centura Banks, Inc. $ 136,413
--------------------------------------
4,365 Commercial Federal Corp. 99,031
--------------------------------------
2,094 Downey Financial Corp. 49,078
--------------------------------------
4,089 (a)E*Trade Group, Inc. 73,602
--------------------------------------
2,676 Eaton Vance Corp. 59,875
--------------------------------------
2,784 Enhance Financial Services Group, Inc. 68,382
--------------------------------------
4,268 First American Financial Corp. 133,642
--------------------------------------
2,217 First Midwest Bancorp, Inc. 90,897
--------------------------------------
2,220 Firstbank Corp. 53,419
--------------------------------------
4,857 Firstmerit Corp. 128,710
--------------------------------------
2,593 Fremont General Corp. 128,029
--------------------------------------
2,794 Frontier Insurance Group, Inc. 45,572
--------------------------------------
3,224 Hubco, Inc. 87,046
--------------------------------------
3,827 Keystone Financial, Inc. 111,940
--------------------------------------
4,128 Legg Mason, Inc. 109,650
--------------------------------------
2,909 Mutual Risk Management Ltd. 98,361
--------------------------------------
1,354 NAC Re Corp. 65,584
--------------------------------------
2,053 Orion Capital Corp. 70,187
--------------------------------------
1,895 Pioneer Group, Inc. 27,122
--------------------------------------
3,607 Raymond James Financial, Inc. 82,736
--------------------------------------
1 Regions Financial Corp. 33
--------------------------------------
2,283 Riggs National Corp. 55,077
--------------------------------------
2,169 Selective Insurance Group, Inc. 39,720
--------------------------------------
1,533 (a)Silicon Valley Bancshares 31,427
--------------------------------------
3,022 St. Paul Bancorp, Inc. 62,140
--------------------------------------
3,160 UST Corp. 73,075
--------------------------------------
0 Union Planters Corp.* 5
--------------------------------------
</TABLE>
INDEPENDENCE ONE SMALL CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
------------------------------------------------------
FINANCE--CONTINUED
-------------------------------------------
3,184 United Bankshares, Inc. $ 85,172
------------------------------------------- -----------
Total 2,538,238
------------------------------------------- -----------
HEALTH CARE--10.6%
-------------------------------------------
1,756 (a)Access Health, Inc. 62,996
-------------------------------------------
2,133 (a)Cephalon, Inc. 15,997
-------------------------------------------
2,440 (a)Cerner Corp. 54,595
-------------------------------------------
998 (a)Circon Corp. 9,231
-------------------------------------------
2,624 (a)Genesis Health Ventures, Inc. 35,424
-------------------------------------------
2,876 (a)IDEXX Laboratories, Inc. 65,609
-------------------------------------------
1,986 (a)Incyte Pharmaceuticals, Inc. 60,573
-------------------------------------------
4,027 Integrated Health Services, Inc. 65,187
-------------------------------------------
2,233 Invacare Corp. 50,242
-------------------------------------------
2,139 Jones Pharma, Inc. 69,116
-------------------------------------------
2,355 (a)Magellan Health Services, Inc. 21,342
-------------------------------------------
1,979 (a)Medimmune, Inc. 133,088
-------------------------------------------
1,847 Mentor Corp. 31,399
-------------------------------------------
2,399 (a)North American Vaccine, Inc. 36,285
-------------------------------------------
1,600 (a)Noven Pharmaceuticals, Inc. 6,500
-------------------------------------------
3,548 (a)Orthodontic Centers of America, Inc. 67,190
-------------------------------------------
1,831 (a)Parexel International Corp. 40,396
-------------------------------------------
2,479 (a)Patterson Dental Co. 102,259
-------------------------------------------
2,968 (a)Renal Care Group, Inc. 86,443
-------------------------------------------
4,054 (a)Safeskin Corp. 89,695
-------------------------------------------
2,061 (a)Sierra Health Services, Inc. 48,047
-------------------------------------------
2,436 (a)Universal Health Services, Inc., Class B 124,997
-------------------------------------------
1,886 (a)Vertex Pharmaceuticals, Inc. 49,743
------------------------------------------- -----------
Total 1,326,354
------------------------------------------- -----------
</TABLE>
INDEPENDENCE ONE SMALL CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------
PRODUCER MANUFACTURING--6.0%
--------------------------------------
3,324 (a)Anixter International, Inc. $ 51,314
--------------------------------------
2,869 Applied Power, Inc., Class A 79,077
--------------------------------------
2,772 Baldor Electric Co. 58,212
--------------------------------------
1,924 Belden, Inc. 28,018
--------------------------------------
2,797 Blount International, Inc., Class A 61,359
--------------------------------------
2,244 (a)Cable Design Technologies, Class A 37,026
--------------------------------------
1,661 Graco, Inc. 43,809
--------------------------------------
3,905 Interface, Inc. 48,080
--------------------------------------
1,906 Intermet Corp. 30,972
--------------------------------------
1,253 Kuhlman Corp. 33,205
--------------------------------------
2,653 (a)Mueller Industries, Inc. 59,693
--------------------------------------
502 (a)Nashua Corp. 7,687
--------------------------------------
1,351 (a)Oak Industries, Inc. 36,561
--------------------------------------
825 Robbins & Myers, Inc. 19,491
--------------------------------------
2,330 Roper Industries, Inc. 41,503
--------------------------------------
948 (a)SPS Technologies, Inc. 46,926
--------------------------------------
1,379 (a)Scott Technologies, Inc. 19,306
--------------------------------------
936 Spartan Motors, Inc. 6,026
--------------------------------------
2,279 (a)Triarc Companies, Inc., Class A 35,609
-------------------------------------- -----------
Total 743,874
-------------------------------------- -----------
RETAIL TRADE--7.1%
--------------------------------------
1,910 (a)Ann Taylor Stores Corp. 55,390
--------------------------------------
1,039 Baker (J.), Inc. 5,714
--------------------------------------
544 (a)Damark International, Inc., Class A 3,196
--------------------------------------
1,237 (a)Discount Auto Parts, Inc. 29,843
--------------------------------------
2,166 (a)Eagle Hardware & Garden, Inc. 50,359
--------------------------------------
1,564 (a)Filenes Basement Corp. 2,981
--------------------------------------
</TABLE>
INDEPENDENCE ONE SMALL CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------ -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-----------------------------------------------
RETAIL TRADE--CONTINUED
------------------------------------
1,828 (a)Footstar, Inc. $ 47,756
------------------------------------
1,560 Hancock Fabrics, Inc. 13,552
------------------------------------
2,247 (a) Just For Feet, Inc. 38,059
------------------------------------
2,903 (a)Linens 'N Things, Inc. 89,812
------------------------------------
2,477 (a)Mens Wearhouse, Inc. 60,067
------------------------------------
2,204 (a)Michaels Stores, Inc. 44,080
------------------------------------
7,342 Pier 1 Imports, Inc. 67,909
------------------------------------
1,773 Regis Corp. Minnesota 54,409
------------------------------------
1,941 Shopko Stores, Inc. 60,778
------------------------------------
1,964 (a)Whole Foods Market, Inc. 78,683
------------------------------------
4,139 (a)Williams-Sonoma, Inc. 112,788
------------------------------------
2,712 (a)Zale Corp. 64,241
------------------------------------ -----------
Total 879,617
------------------------------------ -----------
SERVICES--8.7%
------------------------------------
2,257 Applebee's International, Inc. 45,986
------------------------------------
892 (a)Au Bon Pain Co., Inc., Class A 5,798
------------------------------------
1,362 (a)CEC Entertainment, Inc. 38,476
------------------------------------
3,478 CKE Restaurants, Inc. 91,515
------------------------------------
2,196 Central Parking Corp. 92,095
------------------------------------
5,162 (a)DeVRY, Inc. 113,564
------------------------------------
2,915 (a)Foodmaker, Inc. 46,093
------------------------------------
2,066 (a)HA-LO Industries, Inc. 58,364
------------------------------------
1,958 (a)Hollywood Park, Inc. 18,723
------------------------------------
3,499 (a)Interim Services, Inc. 74,354
------------------------------------
2,260 (a)Landrys Seafood Restaurants, Inc. 18,928
------------------------------------
1,684 (a)Primark Corp. 45,468
------------------------------------
3,550 Richfood Holdings, Inc. 63,013
------------------------------------
</TABLE>
INDEPENDENCE ONE SMALL CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ----------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
----------------------------------------------
SERVICES--CONTINUED
-----------------------------------
1,417 (a)Sonic Corp. $ 26,923
-----------------------------------
1,722 TCBY Enterprises, Inc. 12,162
-----------------------------------
1,062 (a)Taco Cabana, Inc., Class A 6,704
-----------------------------------
3,330 True North Communications, Inc. 78,671
-----------------------------------
2,879 (a)Valassis Communication, Inc. 114,800
-----------------------------------
2,351 (a)Westwood One, Inc. 42,318
-----------------------------------
2,867 (a)World Color Press 87,085
----------------------------------- -----------
Total 1,081,040
----------------------------------- -----------
TECHNOLOGY--15.6%
-----------------------------------
2,064 AAR Corp. 47,730
-----------------------------------
5,468 (a)Acxiom Corp. 137,383
-----------------------------------
3,163 (a)American Management System, Inc. 97,065
-----------------------------------
3,754 (a)Aspect Telecommunications Corp. 56,779
-----------------------------------
1,902 (a)Auspex Systems, Inc. 5,349
-----------------------------------
696 (a)Bell Industries, Inc. 6,917
-----------------------------------
1,985 (a)Bisys Group, Inc. 86,844
-----------------------------------
2,102 (a)Boole & Babbage, Inc. 55,966
-----------------------------------
2,734 (a)Burr Brown Corp. 50,750
-----------------------------------
1,207 (a)California Microwave 9,279
-----------------------------------
3,995 (a)Ciber, Inc. 78,402
-----------------------------------
2,085 Dallas Semiconductor Corp. 77,145
-----------------------------------
1,038 (a)Digi International, Inc. 15,570
-----------------------------------
2,348 (a)Filenet Corp. 21,719
-----------------------------------
1,692 Gerber Scientific, Inc. 38,281
-----------------------------------
1,912 (a)HNC Software 64,291
-----------------------------------
3,140 (a)Harbinger Corp. 20,802
-----------------------------------
1,473 (a)Hutchinson Technology, Inc. 28,631
-----------------------------------
</TABLE>
INDEPENDENCE ONE SMALL CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ----------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
----------------------------------------------------
TECHNOLOGY--CONTINUED
-----------------------------------------
1,100 Innovex, Inc. $ 15,400
-----------------------------------------
1,032 (a)Intervoice, Inc. 29,412
-----------------------------------------
1,238 (a)Marshall Industries 35,593
-----------------------------------------
2,320 National Computer Systems, Inc. 64,960
-----------------------------------------
2,520 National Data Corp. 85,365
-----------------------------------------
2,540 (a)Novellus Systems, Inc. 98,584
-----------------------------------------
2,733 (a)Orbital Sciences Corp. 90,189
-----------------------------------------
3,629 (a)Read-Rite Corp. 39,012
-----------------------------------------
3,810 (a)S3, Inc. 12,025
-----------------------------------------
3,137 (a)Sanmina Corp. 128,617
-----------------------------------------
2,953 (a)Technology Solutions Corp. 35,436
-----------------------------------------
1,199 Telxon Corp. 24,580
-----------------------------------------
591 (a)Three-Five Systems, Inc. 5,171
-----------------------------------------
1,698 (a)Trimble Navigation Ltd. 13,584
-----------------------------------------
2,348 (a)Unitrode Corp. 29,497
-----------------------------------------
3,462 (a)VLSI Technology, Inc. 33,322
-----------------------------------------
5,455 (a)Vitesse Semiconductor Corp. 175,924
-----------------------------------------
3,812 (a)Whitmann-Hart, Inc. 75,764
-----------------------------------------
3,235 (a)Xylan Corp. 51,760
----------------------------------------- -----------
Total 1,943,098
----------------------------------------- -----------
TRANSPORTATION--3.4%
-----------------------------------------
2,579 Air Express International Corp. 54,159
-----------------------------------------
4,947 Comair Holdings, Inc. 162,633
-----------------------------------------
1,834 Expeditors International Washington, Inc. 62,127
-----------------------------------------
2,670 (a)Fritz Companies, Inc. 23,696
-----------------------------------------
2,235 (a)Heartland Express, Inc. 40,230
-----------------------------------------
913 (a)M.S. Carriers, Inc. 19,630
-----------------------------------------
2,113 (a)Mesa Air Group, Inc. 10,697
-----------------------------------------
</TABLE>
INDEPENDENCE ONE SMALL CAP FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
---------- -------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------------------
TRANSPORTATION--CONTINUED
--------------------------------------------------
1,954 USFreightways Corp. $ 48,972
-------------------------------------------------- -----------
Total 422,144
-------------------------------------------------- -----------
UTILITIES--2.8%
--------------------------------------------------
2,254 Atmos Energy Corp. 66,916
--------------------------------------------------
2,273 Piedmont Natural Gas, Inc. 78,987
--------------------------------------------------
2,305 Sierra Pacific Resources 83,988
--------------------------------------------------
2,247 Southwest Gas Corp. 53,226
--------------------------------------------------
2,781 WICOR, Inc. 67,787
-------------------------------------------------- -----------
Total 350,904
-------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $12,423,767) 11,370,186
-------------------------------------------------- -----------
MUTUAL FUND--0.6%
-------------------------------------------------------------
74,979 Independence One Prime Money Market Fund (at net
asset value) 74,979
-------------------------------------------------- -----------
(B) REPURCHASE AGREEMENT--18.8%
-------------------------------------------------------------
$2,349,000 First Chicago Capital Markets, Inc., 5.30%, dated
10/30/1998, due 11/2/1998 2,349,000
-------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $14,847,746)(C) $13,794,165
-------------------------------------------------- -----------
</TABLE>
* Represents holdings of less than one share.
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(c) The cost of investments for federal tax purposes amounts to $14,847,746. The
net unrealized depreciation of investments on a federal tax basis amounts to
$1,053,581 which is comprised of $294,770 appreciation and $1,348,351
depreciation at October 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($12,487,614) at October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------
Investments in repurchase agreements $ 2,349,000
- ------------------------------------
Investments in securities 11,445,165
- ------------------------------------ -----------
Total investments in securities, at value
(identified and tax cost $14,847,746) $13,794,165
- -------------------------------------------------
Cash 30,159
- -------------------------------------------------
Income receivable 4,303
- ------------------------------------------------- -----------
Total assets 13,828,627
- -------------------------------------------------
LIABILITIES:
- ------------------------------------
Payable for investments purchased 1,301,364
- ------------------------------------
Payable for shares redeemed 27,457
- ------------------------------------
Accrued expenses 12,192
- ------------------------------------ -----------
Total liabilities 1,341,013
- ------------------------------------------------- -----------
Net Assets for 1,439,815 shares outstanding $12,487,614
- ------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------------------
Paid in capital $13,534,967
- -------------------------------------------------
Net unrealized depreciation of investments (1,053,581)
- -------------------------------------------------
Accumulated net realized gain on investments 3,069
- -------------------------------------------------
Undistributed net investment income 3,159
- ------------------------------------------------- -----------
Total Net Assets $12,487,614
- ------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- -------------------------------------------------
$12,487,614/1,439,815 shares outstanding $8.67
- ------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE SMALL CAP FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------
Dividends (net of foreign taxes withheld of $13) $ 15,849
- -------------------------------------------------------------
Interest 22,495
- ------------------------------------------------------------- -----------
Total income 38,344
- -------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------
Investment advisory fee $13,863
- ----------------------------------------------------
Administrative personnel and services fee 7,050
- ----------------------------------------------------
Custodian fees 4,935
- ----------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 8,207
- ----------------------------------------------------
Directors'/Trustees' fees 887
- ----------------------------------------------------
Auditing fees 2,967
- ----------------------------------------------------
Legal fees 1,497
- ----------------------------------------------------
Portfolio accounting fees 13,170
- ----------------------------------------------------
Share registration costs 6,433
- ----------------------------------------------------
Printing and postage 1,802
- ----------------------------------------------------
Insurance premiums 832
- ----------------------------------------------------
Miscellaneous 1,192
- ---------------------------------------------------- -------
Total expenses 62,835
- ----------------------------------------------------
Waivers--
- -------------------------------------------
Waiver of investment advisory fee $(13,863)
- -------------------------------------------
Waiver of administrative personnel and
services fee (7,050)
- -------------------------------------------
Waiver of custodian fees (4,935)
- -------------------------------------------
Waiver of transfer and dividend disbursing
agent fees and expenses (1,802)
- ------------------------------------------- --------
Total waivers (27,650)
- ---------------------------------------------------- -------
Net expenses 35,185
- ------------------------------------------------------------- -----------
Net investment income 3,159
- ------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------
Net realized gain on investments 3,069
- -------------------------------------------------------------
Net change in unrealized depreciation of investments (1,053,581)
- ------------------------------------------------------------- -----------
Net realized and unrealized loss on investments (1,050,512)
- ------------------------------------------------------------- -----------
Change in net assets resulting from operations $(1,047,353)
- ------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE SMALL CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED)
OCTOBER 31, 1998(A)
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------
Net investment income $ 3,159
- ---------------------------------------------------------
Net realized gain on investments ($3,069, as computed for
federal tax purposes) 3,069
- ---------------------------------------------------------
Net change in unrealized depreciation (1,053,581)
- --------------------------------------------------------- -----------
Change in net assets resulting from operations (1,047,353)
- --------------------------------------------------------- -----------
SHARE TRANSACTIONS--
- ---------------------------------------------------------
Proceeds from sale of shares 13,632,913
- ---------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared --
- ---------------------------------------------------------
Cost of shares redeemed (97,946)
- --------------------------------------------------------- -----------
Change in net assets resulting from share transactions 13,534,967
- --------------------------------------------------------- -----------
Change in net assets 12,487,614
- ---------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------
Beginning of period --
- --------------------------------------------------------- -----------
End of period (including undistributed net investment
income of $3,159) $12,487,614
- --------------------------------------------------------- -----------
</TABLE>
(a) For the period from June 16, 1998 (date of initial public investment) to
October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE SMALL CAP FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1998(A)
-------------------
(UNAUDITED)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- -------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.00**
- -------------------------------------------------------
Net investment income --
- -------------------------------------------------------
Net realized and unrealized gain (loss) on investments (1.33)
- ------------------------------------------------------- -------
Total from investment operations (1.33)
- ------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 8.67
- ------------------------------------------------------- -------
TOTAL RETURN (B) (13.30%)
- -------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------
Expenses 1.27%*
- -------------------------------------------------------
Net investment income 0.11%*
- -------------------------------------------------------
Expense waiver (c) 1.00%*
- -------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------
Net assets, end of period (000 omitted) $12,488
- -------------------------------------------------------
Portfolio turnover 4%
- -------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Amount represents per share less than $.01.
(a) Reflects operations for the period from June 16, 1998 (date of initial
public investment) to October 31, 1998.
(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 SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of nine portfolios. The financial
statements included herein are only those of Independence One Small Cap Fund
(the "Fund"), a 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.
The investment objective of the Fund is total return. The Fund will pursue this
objective by attempting to provide investment results that correspond to or
exceed the aggregate price and dividend performance of the Standard & Poor's
SmallCap 600 Index (the "S&P SmallCap 600") by investing primarily in a
representative sample of the common stocks comprising the S&P SmallCap 600. The
Fund is neither affiliated with nor sponsored by Standard & Poor's ("S&P").
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on a national securities exchange. Short-term securities are
valued at the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
INDEPENDENCE ONE SMALL CAP FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ
from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
OCTOBER 31, 1998
- --------------------------------------------------------- ----------------
<S> <C>
Shares sold 1,451,075
- ---------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared --
- ---------------------------------------------------------
Shares redeemed (11,260)
- --------------------------------------------------------- ---------
Net change resulting from share transactions 1,439,815
- --------------------------------------------------------- ---------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Michigan National Bank, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.50% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
INDEPENDENCE ONE SMALL CAP FUND
- -------------------------------------------------------------------------------
Under the terms of a sub-advisory agreement between the Adviser and Sosnoff
Sheridan Corporation, Sosnoff Sheridan Corporation receives an annual fee from
the Adviser equal to 0.05% of the Fund's average daily net assets. Sosnoff
Sheridan Group may voluntarily choose to reduce its
compensation.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Fund with certain administrative personnel and services. The fee paid to FAS
is based on the level of average aggregate net assets of the Trust for the
period. FAS may voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Michigan National Bank is the Fund's custodian. The fee is
based on the level of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1998, were as follows:
<TABLE>
<CAPTION>
- ---------
<S> <C>
Purchases $13,621,500
- --------- -----------
Sales $ 1,200,802
- --------- -----------
</TABLE>
(6) YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's 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 Fund's 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 Fund.
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
C. Grant Anderson
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 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
its objective and policies, management fees, expenses and other information.
