INDEPENDENCE ONE EQUITY PLUS FUND
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ANNUAL REPORT FOR THE FISCAL YEAR ENDED
APRIL 30, 1998
MANAGEMENT DISCUSSION & ANALYSIS
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The shares of Independence One Equity Plus Fund represent interests in the
fund, which is a diversified portfolio and one of a series of investment
portfolios in Independence One Mutual Funds, an open-end management investment
company. The investment objective of the fund is total return. The fund
pursues this objective by attempting to provide investment results that
correspond to the aggregate price and dividend performance of the Standard &
Poor's 100 Composite Stock Price Index (the "S&P 100")* by investing primarily
in the common stocks comprising the S&P 100.+
The inception date for the fund was September 25, 1995. The net asset value
of the fund has risen from $13.96 on May 1, 1997 to $18.24 on April 30, 1998.
The fund earned a total return of 37.20% from May 1, 1997 through April 30,
1998.** The S&P 100 total return was 38.82% during the same period. Total net
assets in the fund were approximately $209.8 million on April 30, 1998.
ECONOMIC REVIEW
The U.S. economy continues to grow robustly with few signs of inflation
pressures. Real gross domestic product grew 3.7% during 1997, and 4.8% in the
first quarter of 1998. The unemployment rate fell to a 28-year low of 4.3%.
Consumer prices and producer prices rose 1.7% and 0.4% respectively, in 1997.
The Federal Reserve Board (the "Fed") has left short-term interest rates
unchanged since it raised the Federal Funds target rate to 5.5% in March 1997,
but longer maturity interest rates have fallen significantly during the
period. For example, after trading as high as 7.17% in April of last year, the
30-year Treasury bellwether bond fell to an all time low yield of 5.70% in
January of this year.
In terms of monetary policy, the Fed left short term rates unchanged since
it raised the federal funds target rate to 5.5% in March 1997.
While the U.S. is currently enjoying strong performance in its economic
markets and its capital markets, other parts of the world are not as
fortunate. In particular, the Asian financial crisis is sharply slowing the
economics of Indonesia, Thailand, Korea, and Japan. This, coupled with the
fact that inflation rates have declined to long-term lows virtually across the
industrialized world, will allow the Fed to maintain stable short-term
interest rates for the immediate future. After an unusually strong increase of
15.14% (as measured by the S&P 100) during the first quarter of 1998,
investors should be prepared for a tapering in the growth rate of stock prices
for the balance of the year.
The fund's investment adviser will continue to monitor economic and market
developments to best serve our shareholders.
*Standards & Poor's 100 Composite Stock Price Index is a composite index of
common stocks in industry, transportation, and financial and public utility
companies and can be used to compare the total returns of funds whose
portfolios are invested primarily in common stocks. This index is unmanaged
and investments cannot be made in an index.
+Standards & 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.
**Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate so than
an investor's shares, when redeemed, may be worth more or less than their
original cost.
INDEPENDENCE ONE EQUITY PLUS FUND
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GROWTH OF $10,000 INVESTED IN INDEPENDENCE ONE EQUITY PLUS FUND
The graph below illustrates the hypothetical investment of $10,000* in the
Independence One Equity Plus Fund (the "Fund") from September 25, 1995 (start of
performance) to April 30, 1998, compared to the Standard & Poor's 100 Composite
Stock Price Index.+
[GRAPHIC REPRESENTATION "A" OMITTED. SEE APPENDIX.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THE ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
This report must be preceded or accompanied by the Fund's prospectus dated June
30, 1998, and, together with the financial statements contained therein,
constitutes the Fund's annual report.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The Standard & Poor's 100 Composite Stock Price Index has been
adjusted to reflect reinvestment of dividends on securities in the index.
+The Standard & Poor's 100 Composite Stock Price Index is not adjusted to
reflect sales charges, expenses, or other fees that the Securities and Exchange
Commission requires to be reflected in the Fund's performance. This index is
unmanaged.
LOGO OF FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 453777872
G01184-13 (6/98)
INDEPENDENCE ONE EQUITY PLUS FUND
(A PORTFOLIO OF INDEPENDENCE ONE MUTUAL FUNDS)
PROSPECTUS
The shares of Independence One Equity Plus Fund (the "Fund") offered by this
prospectus represent interests in the Fund which is a diversified portfolio and
one of a series of investment portfolios in Independence One Mutual Funds (the
"Trust"), an open-end management investment company (a mutual fund). Michigan
National Bank professionally manages the Fund's portfolio.
The investment objective of the Fund is total return. The Fund will pursue this
objective by attempting to provide investment results that correspond to or
exceed the aggregate price and dividend performance of the Standard & Poor's 100
Composite Stock Price Index (the "S&P 100") by investing primarily in the common
stocks comprising the S&P 100. The Fund is neither affiliated with nor sponsored
by Standard & Poor's ("S&P").
Shares of the Fund are intended to be sold as an investment vehicle for
institutions, corporations, fiduciaries and individuals. Shareholders can
invest, reinvest, or redeem shares at any time without charge or penalty imposed
by the Fund. Shareholders have access to other portfolios of the Trust through
an exchange program.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
MICHIGAN NATIONAL BANK, ARE NOT ENDORSED OR GUARANTEED BY MICHIGAN NATIONAL
BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated June 30,
1998, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement is incorporated by reference into this prospectus.
You may request a copy of the Statement free of charge by calling toll-free
1-800-334-2292. To obtain other information, or make inquiries about the Trust,
contact the Trust at the address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated June 30, 1998
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Acceptable Investments 4
Equity Investment Considerations 6
Derivative Contracts and
Securities 7
Investment Limitation 7
INDEPENDENCE ONE MUTUAL FUNDS
INFORMATION 7
- -------------------------------------
Management of the Trust 7
Distribution of Shares 9
Fund Administration 9
Brokerage Transactions 9
Year 2000 Statement 9
NET ASSET VALUE 10
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INVESTING IN THE FUND 10
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Share Purchases 10
Minimum Investment Required 10
What Shares Cost 11
Confirmations and Account
Statements 11
Dividends and Capital Gains 11
Systematic Investment Program 11
EXCHANGING SECURITIES FOR FUND
SHARES 11
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EXCHANGE PRIVILEGE 12
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REDEEMING SHARES 13
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Systematic Withdrawal Program 15
Accounts with Low Balances 15
SHAREHOLDER INFORMATION 15
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Voting Rights 15
EFFECT OF BANKING LAWS 16
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TAX INFORMATION 16
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Federal Income Tax 16
PERFORMANCE INFORMATION 17
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STANDARD AND POOR'S 17
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FINANCIAL STATEMENTS 19
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INDEPENDENT AUDITORS' REPORT 33
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ADDRESSES Back Cover
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INDEPENDENCE ONE EQUITY PLUS FUND
SUMMARY OF FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price)................................................................... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of
offering price)......................................................... None
Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)..................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....... None
Exchange Fee............................................................. None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)......................................... 0.25%
12b-1 Fees............................................................... None
Total Other Expenses (after waiver)(2)................................... 0.17%
Total Fund Operating Expenses (after waivers)(3)....................... 0.42%
</TABLE>
(1) The management fee was reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any
time at its sole discretion. The maximum management fee 0.40%.
(2) Total Other Expenses have been reduced to reflect the voluntary waiver of a
portion of the administrative fee. The administrator can terminate this
voluntary waiver at any time at its sole discretion.
(3) The Total Fund Operating Expenses for the fiscal year ended April 30, 1998,
would have been 0.61% absent the voluntary waiver of portions of the
management and administrative fees.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "INVESTING IN THE FUND." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual return
and (2) redemption at the end of each time
period......................................... $ 4 $13 $24 $53
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
INDEPENDENCE ONE EQUITY PLUS FUND
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 33.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------
1998 1997 1996(A)
- ------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.04 $11.39 $10.00
- -------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------
Net investment income 0.22 0.21 0.11
- -------------------------------------------
Net realized and unrealized gain (loss) on
investments 4.85 2.70 1.38
- ------------------------------------------- -------- -------- --------
Total from investment operations 5.07 2.91 1.49
- ------------------------------------------- -------- -------- --------
LESS DISTRIBUTIONS
- -------------------------------------------
Distributions from net investment income (0.22) (0.21) (0.10)
- -------------------------------------------
Distributions from net realized gain on
investments (0.65) (0.05) --
- ------------------------------------------- -------- -------- --------
Total distributions (0.87) (0.26) (0.10)
- ------------------------------------------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $18.24 $14.04 $11.39
- ------------------------------------------- -------- -------- --------
TOTAL RETURN (B) 37.20% 26.00% 14.96%
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 0.42% 0.40% 0.39%*
- -------------------------------------------
Net investment income 1.28% 1.74% 1.92%*
- -------------------------------------------
Expense waiver (c) 0.19% 0.24% 0.31%*
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) $209,753 $169,328 $112,609
- -------------------------------------------
Average commission rate paid (d) $0.0350 $0.0350 $0.0345
- -------------------------------------------
Portfolio turnover 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated January 9, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
This prospectus relates only to the Trust's portfolio known as Independence One
Equity Plus Fund. As of the date of this prospectus, the Fund does not offer
separate classes of shares.
Shares of the Fund are designed primarily for individuals and institutions as a
convenient means of accumulating an interest in a professionally-managed,
diversified portfolio investing substantially in the common stocks of companies
with very large market capitalization. A minimum initial investment of $1,000 is
required. Subsequent investments must be in the amount of at least $100.
INVESTMENT INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is total return. The investment objective
cannot be changed without the approval of shareholders. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund will pursue its investment objective by attempting to provide
investment results that correspond to or exceed the aggregate price and dividend
performance of the S&P 100 by investing primarily in the stocks comprising the
S&P 100. Unless indicated otherwise, the investment policies of the Fund may be
changed by the Board of Trustees ("Trustees") without the approval of
shareholders. Shareholders will be notified before any material change in these
policies becomes effective.
The S&P 100 is a capitalization-weighted index of 100 stocks from a broad range
of industries. It provides a measure of overall large company performance
because it comprises 100 blue chip stocks from diverse industry groups. Stocks
selected for inclusion tend to be the leading companies in leading industries in
the U.S. economy. Selection criteria include market value, capitalization,
trading activity and liquidity, and soundness of financial and operating
conditions. The component stocks are weighted according to the total market
value of their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price times
the number of shares outstanding. These are summed for all 100 stocks and
divided by a predetermined base value. The base value for the S&P 100 is
adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights and substitutions. Inclusion of a particular stock in
the S&P 100 in no way implies an opinion by S&P as to its investment
attractiveness, nor is S&P a sponsor or in any way affiliated with the Fund.
Under normal circumstances, at least 80% of the Fund's assets will be invested
to correspond as closely as possible to the relative weighting of the S&P 100.
With respect to this 80% investment level, the Fund will attempt to achieve a
high degree of correlation between the performance of its portfolio and that of
the S&P 100. In managing this portion of the Fund's assets, Michigan National
Bank (the "Adviser") and Sosnoff Sheridan Group (the "Sub-Adviser")
(collectively, the "Advisers") will utilize a technique called index fund
management which entails the use of a computer program to track the S&P 100 on a
daily basis. The Advisers will purchase and sell securities from the Fund's
portfolio as necessary to continually and accurately duplicate the composition
of the S&P 100, as appropriate, as it changes over time. The Advisers will
continually assess the validity of the adjustments made to the Fund's portfolio.
With respect to the remaining 20% of the Fund's assets, the Advisers will
normally select common stocks that are included in the S&P 100, the weightings
of which may or may not be identical to that of the S&P 100. These weightings
will be determined by the Advisers in an effort to exceed the total return
performance of the S&P 100. Several criteria are considered in selecting those
stocks that, in the Advisers' opinion, are likely to have above-average
performance. These criteria include: (1) projections by securities analysts of
the stock's earnings and dividend growth; (2) growth potential, as measured by
reinvestment of a high portion of a company's current earnings; (3) improving
earnings outlook, as determined based upon surveys of Wall Street securities
analysts; (4) technical measures, such as rising trading volume indicating an
increasing investor interest in a stock; and (5) dividend yield, with preference
being given to high-yield stocks and stocks of companies which pay no dividends
and retain their earnings to finance growth.
The Fund's ability to provide investment results that correspond to or exceed
the aggregate price and dividend performance of the S&P 100 will depend partly
on the size and timing of cash flows into and out of the Fund. Investment
changes to accommodate these cash flows will be made to maintain the similarity
of the Fund's portfolio to the S&P 100, with respect to the 80% investment level
described above, to the maximum practicable extent. With respect to the
reciprocal 20% investment level described above, changes will be made to
accommodate cash flows, as appropriate. From time to time, adjustments may be
made in the Fund because of changes in the composition of the S&P 100 as
announced by S&P. It is anticipated that these adjustments will occur
infrequently, and therefore, the accompanying costs, including brokerage fees,
custodial expenses, and transfer taxes, are expected to be relatively low.
Portfolio turnover is also expected to be lower than for most other investment
companies. The adverse financial situation of an issuer may not directly result
in the elimination of its securities from the portfolio, unless the securities
are removed from the S&P 100. The Fund reserves the right to remove an
investment from the Fund if, in the Advisers' opinion, the merit of the
investment has been substantially impaired by extraordinary events or financial
conditions.
ACCEPTABLE INVESTMENTS
In addition to the investment policies described above, the Fund may utilize
stock index futures contracts and options on stocks, stock indices and stock
index futures contracts for the purposes of managing cash flows into and out of
the Fund's portfolio and potentially reducing transactional costs. The Fund will
only enter into stock index futures contracts for the purpose of offsetting
risks from other positions.
The Fund may hold cash reserves which may be invested in temporary investments
which include, but are not limited to, short-term money market instruments, U.S.
government securities (including variable rate U.S. government securities), and
repurchase agreements. The Fund may also invest in restricted and illiquid
securities, securities of other investment companies, and lend portfolio
securities.
STOCK INDEX FUTURES AND OPTIONS. The Fund may utilize stock index futures
contracts, options, and options on futures contracts, subject to the limitation
that the value of these futures contracts and options will not exceed 20% of the
Fund's total assets. Also the Fund will not purchase options to the extent that
more than 5% of the value of the Fund's total assets would be invested in
premiums on open option positions.
These contracts and options will serve three purposes. First, the contracts,
some of which require a small margin, will allow the Fund to maintain sufficient
liquidity to meet redemption requests, thereby handling cash flows into and out
of the Fund. In addition, the contracts will increase the level of Fund assets
that may be devoted to attempting to approximate the investment return of the
S&P 100. Third, participation in futures contracts could potentially reduce
transaction costs, since transaction costs associated with futures and options
contracts can be lower than costs stemming from direct investments in stocks.
RISKS. There are several risks accompanying the utilization of futures contracts
to effectively anticipate market movements. First, positions in futures
contracts may be closed only on an exchange or board of trade that furnishes a
secondary market for such contracts. While the Fund plans to utilize futures
contracts only if an active market for such contracts exists, there is no
guarantee that a liquid market will exist for the contracts at a specified time.
The Fund's ability to establish and close out futures and options positions
depends on this secondary market. Furthermore, because, by definition, futures
contracts look to projected price levels in the future, and not to current
levels of valuation, market circumstances may result in there being a
discrepancy between the price of the stock index future and the movement in the
corresponding stock index. The absence of a perfect price correlation between
the futures contract and its underlying stock index could stem from investors
choosing to close futures contracts by offsetting transactions, rather than
satisfying additional margin requirements. This could result in a distortion of
the relationship between the index and futures market. In addition, because the
futures market imposes less burdensome margin requirements than the securities
market, an increased amount of participation by speculators in the futures
market could result in price fluctuations.
The effective use of futures and options as hedging techniques depends on the
correlation between their prices and the behavior of the Fund's portfolio
securities as well as the Adviser's ability to accurately predict the direction
of stock prices, interest rates and other relevant economic factors. In
addition, daily limits on the fluctuation of futures and options prices could
cause the Fund to be unable to timely liquidate its futures or options position
and cause it to suffer greater losses than would otherwise be the case. In this
regard, the Fund may be unable to anticipate the extent of its losses from
futures transactions. The Statement of Additional Information includes a further
discussion of futures and options transactions.
In view of these considerations, the Fund will comply with the following
restrictions when purchasing and selling futures contracts. First, the Fund will
not participate in futures transactions if the sum of its initial margin
deposits on open contracts will exceed 5% of the market value of the Fund's
total assets, after taking into account the unrealized profits and losses on
those contracts it has entered into. Second, the Fund will not enter into these
contracts for speculative purposes. Third, since the Fund does not constitute a
commodity pool, it will not market itself as such, nor serve as a vehicle for
trading in the commodities futures or commodity options markets. In this regard,
the Fund will disclose to all prospective investors the limitations on its
futures and options transactions, and make clear that these transactions are
entered into only for bona fide hedging purposes, or other permissible purposes
pursuant to regulations promulgated by the Commodity Futures Trading Commission
("CFTC"). Finally, the Fund has claimed an exclusion from registration as a
commodity pool operator under the regulations promulgated by the CFTC.
TEMPORARY INVESTMENTS. For temporary defensive purposes, the Fund may invest
up to 100% of its total assets in cash and cash items including: short-term
money market instruments; securities issued and/or guaranteed as to payment of
principal and interest by the U.S. government, its agencies or
instrumentalities; shares of money market mutual funds; and repurchase
agreements.
The Fund may also hold the instruments described above in such amounts as
necessary: to provide funds for the settlement of portfolio transactions;
pending investment of cash receipts in the ordinary course of business; and to
meet requests for redemption of Fund shares.
U.S. GOVERNMENT SECURITIES. The Fund is permitted to invest in U.S. government
securities which are either issued or guaranteed by the U.S. government, its
agencies, or instrumentalities. These securities include, but are not limited
to, the following:
. direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and
. notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the National
Bank for Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
Farmers Home Administration; Federal Home Loan Banks; Federal Home Loan
Mortgage Corporation; Federal National Mortgage Association; Government
National Mortgage Association; and Student Loan Marketing Association.
Some of the short-term U.S. government securities the Fund may purchase carry
variable interest rates. These securities have a rate of interest subject to
adjustment at least annually. This adjusted interest rate is ordinarily tied to
some objective standard, such as a published interest rate or interest rate
index.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/ dealers, and other recognized financial institutions sell U.S.
government securities or other securities to the Fund and agree at the time of
sale to repurchase them at a mutually agreed upon time and price within one year
from the date of acquisition. To the extent that the original seller does not
repurchase the securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities.
EQUITY INVESTMENT CONSIDERATIONS
As described above, the Fund invests primarily in the common stocks comprising
the S&P 100. As with other mutual funds that invest primarily in common stocks,
the Fund is subject to market risks. That is, the possibility exists that common
stocks will decline over short or even extended periods of time, and the United
States equity market tends to be cyclical, experiencing both periods when stock
prices generally increase and periods when stocks prices generally decrease.
DERIVATIVE CONTRACTS AND SECURITIES
The term "derivative" has traditionally been applied to certain contracts
(including, futures, forward, option and swap contracts) that "derive" their
value from changes in the value of an underlying security, currency, commodity
or index. Certain types of securities that incorporate the performance
characteristics of these contracts are also referred to as "derivatives." The
term has also been applied to securities "derived" from the cash flows from
underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the response of
certain derivative contracts and securities to market changes may differ from
traditional investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Fund will only
use derivative contracts for the purposes disclosed in the applicable prospectus
sections above. To the extent that the Fund invests in securities that could be
characterized as derivatives, it will only do so in a manner consistent with its
investment objectives, policies and limitations.
INVESTMENT LIMITATION
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for at least a
percentage of its cash value with an agreement to buy it back on a set date)
except, under certain circumstances, the Fund may borrow up to one-third of the
value of its total assets and pledge securities to secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
INDEPENDENCE ONE MUTUAL FUNDS INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trustees are responsible for managing the Trust's
business affairs and for exercising all of the Trust's powers except those
reserved for the shareholders. An Executive Committee of the Board of Trustees
handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Michigan National Bank, as the
Fund's investment adviser subject to direction by the Trustees. The Adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the assets of the Fund.
ADVISORY FEES. The Adviser may receive an annual investment advisory fee equal
to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee or reimburse certain expenses of the Fund.
ADVISER'S BACKGROUND. Michigan National Bank, a national banking association, is
a wholly owned subsidiary of Michigan National Corporation ("MNC"). MNC is a
wholly owned subsidiary of National Australia Bank Limited, which is a
transnational banking organization, headquartered in Melbourne, Australia.
Through its subsidiaries and affiliates, MNC, Michigan's fourth largest bank
holding company in terms of total assets, as of December 31, 1997, offers a full
range of financial services to the public, including commercial lending,
depository services, cash management, brokerage services, retail banking,
mortgage banking, investment advisory services and trust services. Independence
One Capital Management Corporation ("IOCM"), a nationally recognized investment
advisory subsidiary of MNC, provides investment advisory services for trust and
other managed assets. IOCM and the Trust Division of Michigan National Bank (the
"Trust Division") have managed custodial assets totaling $11.4 billion. Of this
amount, IOCM and the Trust Division have investment discretion over $2.2
billion.
Michigan National Bank has managed mutual funds since May 1989. The Trust
Division has managed pools of commingled funds since 1964.
As part of its regular banking operations, Michigan National Bank may make loans
to or provide credit support for obligations issued by public companies or
municipalities. Thus, it may be possible, from time to time, for the Fund to
hold or acquire the securities of issuers which are also lending clients of
Michigan National Bank. The lending relationship will not be a factor in the
selection of securities.
Sharon Dischinger is Second Vice President and Portfolio Manager for Michigan
National Bank and Independence One Capital Management Corporation in
Farmington Hills, and has been responsible for management of the Fund's
portfolio since its inception. Ms. Dischinger joined Michigan National Bank in
1990 and is currently the head equity trader. She is also a General Securities
Representative. Prior to Michigan National Bank, Ms. Dischinger was the head
equity trader at Morison Asset Management.
SUB-ADVISER. Pursuant to the terms of an investment sub-advisory agreement
between the Adviser and Sosnoff Sheridan Corporation (doing business as Sosnoff
Sheridan Group), the Sub-Adviser furnishes certain investment advisory services
to the Adviser, including investment research, statistical and other factual
information, and recommendations, based on its analysis, and assists the Adviser
in identifying securities for potential purchase and/or sale on behalf of the
Fund's portfolio. For the services provided and the expenses incurred by the
Sub-Adviser pursuant to the sub-advisory agreement, the Sub- Adviser is entitled
to receive an annual fee of 0.035% of the average daily value of the Fund's
equity securities payable by the Adviser. The Sub-Adviser may elect to waive
some or all of its fee. In no event shall the Fund be responsible for any fees
due to the Sub-Adviser for its services to the Adviser. The Sub-Adviser, located
at 440 South LaSalle Street, Suite 2301, Chicago, Illinois, 60605, is a
corporation controlled by Tom Sosnoff, its Director and President, and Scott
Sheridan, its Director, Executive Vice- President and Secretary. In the event
that the Sub-Adviser, for any reason, ceases to furnish sub-advisory services to
the Fund, the Adviser will assume direct responsibility for all advisory
functions.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors, Inc.
FUND ADMINISTRATION
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, Inc., provides the Fund with certain administrative
personnel and services necessary to operate the Fund, such as certain legal and
accounting services. Federated Administrative Services provides these at an
annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
------------------ -----------------------
<S> <C>
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
for each portfolio in Independence One Mutual Funds. Federated Administrative
Services may choose voluntarily to waive a portion of its fee.
CUSTODIAN. Michigan National Bank, Farmington Hills, Michigan, is custodian
for the securities and cash of the Fund.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Board of Trustees.
YEAR 2000 STATEMENT
Like other mutual funds and business organizations worldwide, the Fund's service
providers (among them, the adviser, distributor, administrator and transfer
agent) must ensure that their computer systems are adjusted to properly process
and calculate date-related information from and after January 1, 2000. Many
software programs and, to a lesser extent, the computer hardware in use today
cannot distinguish the year 2000 from the year 1900. Such a design flaw could
have a negative impact in the handling of securities trades, pricing and
accounting services. The Fund and its service providers are actively working on
necessary changes to computer systems to deal with the year 2000 issue and
believe that systems will be year 2000 compliant when required. Analysis
continues regarding the financial impact of instituting a year 2000 compliant
program on the Fund's operations.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by adding the
market value of all securities and other assets of the Fund, subtracting the
liabilities of the Fund, and dividing the remainder by the total number of
shares outstanding.
INVESTING IN THE FUND
- -------------------------------------------------------------------------------
SHARE PURCHASES
Shares of the Fund may be purchased through Michigan National Bank, Independence
One Brokerage Services, Inc. ("Independence One"), or through brokers or dealers
which have a sales agreement with the distributor. Texas residents must purchase
shares through Federated Securities Corp. at 1-800-618-8573. Investors may
purchase shares of the Fund on days on which both the New York Stock Exchange
and Federal Reserve Wire System are open for business. In connection with the
sale of Fund shares, the distributor may from time to time offer certain items
of nominal value to any shareholder or investor. The Fund reserves the right to
reject any purchase request.
TO PLACE AN ORDER. Investors may call toll-free 1-800-334-2292 to purchase
shares of the Fund through Michigan National Bank or Independence One. In
addition, investors may purchase shares of the Fund by calling their authorized
broker directly. Payments may be made either by check or wire transfer of
federal funds.
Payment by wire must be received before 4:00 p.m. (Eastern time). It is the
responsibility of Michigan National Bank, Independence One or broker/dealers to
transmit orders to the Fund by 5:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price. For settlement of an order, payment must be
received by check or wire transfer within three business days of receipt of the
order. To purchase by check, the check must be included with the order and made
payable to "Independence One Equity Plus Fund." Checks must be converted into
federal funds to be considered received.
Federal funds should be wired as follows: Federated Shareholder Services Company
c/o Michigan National Bank, Farmington Hills, Michigan; Account Number:
6856238933; For Credit to: Independence One Equity Plus Fund; Fund Number (this
number can be found on the account statement or by contacting the Fund); Group
Number or Order Number; Nominee or Institution Name; and ABA
Number 072000805.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000. Subsequent investments
must be in amounts of at least $100.
WHAT SHARES COST
Shares of the Fund are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Fund.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and no
orders to purchase shares are received; and (iii) on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
CONFIRMATIONS AND ACCOUNT STATEMENTS
As transfer agent for the Fund, Federated Shareholder Services Company maintains
a share account for each shareholder of record. Share certificates are not
issued.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid quarterly. Capital gains realized by the Fund,
if any, will be distributed at least once every 12 months. Dividends and capital
gains are automatically reinvested on payment dates in additional shares without
a sales charge unless cash payments are requested by shareholders in writing to
the Fund through their Michigan National Bank or Independence One representative
or authorized broker. Shares purchased with reinvested dividends are credited to
shareholder accounts on the following day.
SYSTEMATIC INVESTMENT PROGRAM
Once the Fund account has been opened, shareholder may add to their investment
on a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Fund shares at the net asset value next determined after an order is
received. A shareholder may apply for participation in this program through
Michigan National Bank by calling 1-800-334-2292.
EXCHANGING SECURITIES FOR FUND SHARES
- -------------------------------------------------------------------------------
The Fund may accept securities in exchange for Fund shares. The Fund will allow
such exchanges only upon the prior approval of the Fund and a determination by
the Fund and the Adviser that the securities to be exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of the
Fund, must have a readily ascertainable market value. The market value of any
securities exchanged in an initial investment, plus any cash, must be at least
equal to the minimum investment in the Fund. The Fund acquires the exchanged
securities for investment and not for resale.
Securities accepted by the Fund will be valued in the same manner as the Fund
values its assets. The basis of the exchange will depend on the net asset value
of Fund shares on the day the securities are valued. One share of the Fund will
be issued for the equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription or other rights
attached to the securities become the property of the Fund, along with the
securities.
If an exchange is permitted, it will be treated as a sale for federal income tax
purposes. Depending upon the cost basis of the securities exchanged for Fund
shares, a gain or loss may be realized by the investor.
EXCHANGE PRIVILEGE
- -------------------------------------------------------------------------------
All shareholders of the Fund are shareholders of the Trust, which consists of
the Fund, Independence One Fixed Income Fund, Independence One Michigan
Municipal Bond Fund, Independence One U.S. Government Securities Fund,
Independence One International Equity Fund, and Independence One Small Cap Fund
and the following money market funds: Independence One Michigan Municipal Cash
Fund; Independence One Prime Money Market Fund; Independence One U.S. Treasury
Money Market Fund. Shareholders of the Fund have access to these funds
("participating funds") through an exchange program.
With the exception of Independence One Prime Money Market Fund, the
participating funds currently offer only one class of shares. If such funds
should add a second class of shares, exchanges may be limited to shares of the
same class of each fund. Shareholders of the Fund have access to both Class A
Shares and Class B Shares of Independence One Prime Money Market Fund through
the exchange program.
Shares of the Fund may be exchanged for shares of participating funds at net
asset value.
Shareholders who exercise this exchange privilege must exchange shares having a
net asset value at least equal to the minimum investment of the participating
fund into which they are exchanging. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the participating fund into which
the exchange is being made.
Upon receipt by the transfer agent of proper instructions and all necessary
supporting documents, shares submitted for exchange will be redeemed at the
next-determined net asset value. If the exchanging shareholder does not have an
account in the participating fund whose shares are being acquired, a new account
will be established with the same registration, dividend, and capital gain
options as the account from which shares are exchanged, unless otherwise
specified by the shareholder. In the case where the new account registration is
not identical to that of the existing account, a signature guarantee is
required. (See "Redeeming Shares--By Mail.") Exercise of this privilege is
treated as a redemption and new purchase for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may be
realized. The Fund reserves the right to modify or terminate the exchange
privilege at any time. Shareholders would be notified prior to any modification
or termination. Shareholders may obtain further information on the exchange
privilege by calling their Michigan National Bank or Independence One
representative or authorized broker.
EXCHANGE BY TELEPHONE. Shareholders may provide instructions for exchanges
between participating funds by telephone to their Michigan National Bank or
Independence One representative by calling 1-800-334-2292. In addition,
investors may exchange shares by calling their authorized brokers directly.
Shares may be exchanged by telephone only between fund accounts having identical
shareholder registrations.
An authorization form permitting the Fund to accept telephone exchange requests
must first be completed. It is recommended that investors request this privilege
at the time of their initial application. If not completed at the time of
initial application, authorization forms and information on this service can be
obtained through a Michigan National Bank or Independence One representative or
authorized broker. Telephone exchange instructions may be recorded.
Telephone exchange instructions must be received by Michigan National Bank,
Independence One or an authorized broker and transmitted to the transfer agent
before 4:00 p.m. (Eastern time) for shares to be exchanged the same day.
Shareholders who exchange into a fund will not receive a dividend from the Fund
on the date of the exchange.
Shareholders may have difficulty in making exchanges by telephone through banks,
brokers, and other financial institutions during times of drastic economic or
market changes. If shareholders cannot contact their Michigan National Bank or
Independence One representative or authorized broker by telephone, it is
recommended that an exchange request be made in writing and sent by mail for
next day delivery. Send mail requests to: Independence One Mutual Funds, 27777
Inkster Road, Mail Code 10-52, Farmington Hills, Michigan 48333-9065.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Shareholder Services Company, the transfer agent, by a
Michigan National Bank or Independence One representative or authorized broker
and deposited to the shareholder's account before being exchanged.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN EXCHANGE. A shareholder wishing to make an exchange by written request
may do so by sending it to: Independence One Mutual Funds, 27777 Inkster Road,
Mail Code 10-52, Farmington Hills, Michigan 48333-9065. In addition, an investor
may exchange shares by sending a written request to their authorized broker
directly.
REDEEMING SHARES
- -------------------------------------------------------------------------------
Shares are redeemed at their next determined net asset value after Federated
Shareholder Services Company receives the redemption request. Redemptions will
be made on days on which the Fund computes its net asset value. Redemption
requests cannot be executed on days on which the New York Stock Exchange is
closed or on federal holidays restricting wire transfers. Telephone or written
requests for redemption must be received in proper form and can be made to the
Fund through a Michigan National Bank or Independence One representative or
authorized broker. Although the transfer agent does not charge for telephone
redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
BY TELEPHONE. Shares may be redeemed by telephoning a Michigan National Bank or
an Independence One representative at 1-800-334-2292. In addition, shareholders
may redeem shares by calling their authorized brokers directly. Redemption
requests must be received and transmitted to the transfer agent before 4:00 p.m.
(Eastern time) in order for shares to be redeemed at that day's net asset value.
The Michigan National Bank or Independence One representative or authorized
broker is responsible for promptly submitting redemption requests and providing
proper written redemption instructions to the transfer agent. Registered
broker/dealers may charge customary fees and commissions for this service. If at
any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
For calls received before 4:00 p.m. (Eastern time) proceeds will normally be
wired the next day to the shareholder's account at a domestic commercial bank
that is a member of the Federal Reserve System or a check will be sent to the
address of record. In no event will proceeds be wired or a check sent more than
seven days after a proper request for redemption has been received.
An authorization form permitting the Fund to accept telephone redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service can
be obtained through a Michigan National Bank or Independence One representative
or authorized broker. Telephone redemption instructions may be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail," should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
BY MAIL. Shareholders may redeem shares by sending a written request to the Fund
through their Michigan National Bank or Independence One representative or
authorized broker. The written request should include the shareholder's name,
the Fund name, the class designation, the account number, and the share or
dollar amount requested. Shareholders redeeming through Michigan National Bank
or Independence One should mail written requests to: Independence One Mutual
Funds, 27777 Inkster Road, Mail Code 10-52, Farmington Hills, Michigan
48333-9065. Investors redeeming through an authorized broker should mail written
requests directly to their broker.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record must have signatures on written redemption requests
guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
. a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund, which is administered by the FDIC;
or
. any other "eligible guarantor institution", as defined in the Securities
& Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days after receipt of a proper written redemption request.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, shares of
the Fund are redeemed to provide for periodic withdrawal payments in an amount
directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Fund shares, and the fluctuation of the net asset value of Fund
shares redeemed under this program, redemptions may reduce, and eventually
deplete, the shareholder's investment in the Fund. For this reason, payments
under this program should not be considered as yield or income on the
shareholder's investment in the Fund. To be eligible to participate in this
program, a shareholder must have an account value of at least $10,000, other
than retirement accounts subject to required minimum distributions. A
shareholder may apply for participation in this program through Michigan
National Bank by calling 1-800-334-2292.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions. This requirement does not apply, however, if the
balance falls below $1,000 because of changes in the Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the Trust's or the Fund's operation and for
the election of Trustees under certain circumstances. As of June 5, 1998,
Pierson & Co., the nominee for Michigan National Bank may for certain purposes
be deemed to control the Equity Plus Fund because it is owner of record of
certain shares of the Fund.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
EFFECT OF BANKING LAWS
- -------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in general.
Such banking laws and regulations do not prohibit such a holding company or
affiliate from acting as an investment adviser, transfer agent or custodian to
such an investment company or from purchasing shares of such a company as agent
for and upon the order of their customers.
Some entities providing services to the Trust are subject to such banking laws
and regulations. They believe, based on the advice of its counsel, that they may
perform those services for the Trust contemplated by any agreement entered into
with the Trust without violating those laws or regulations. Changes in either
federal or state statutes and regulations relating to the permissible activities
of banks and their subsidiaries or affiliates, as well as further judicial or
administrative decisions or interpretations of present or future statutes and
regulations, could prevent these entities from continuing to perform all or a
part of the above services. If this happens, the Trustees would consider
alternative means of continuing available investment services. It is not
expected that existing shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
TAX INFORMATION
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held their shares.
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
From time to time the Fund advertises its total return and yield.
Total return represents the change, over a specific period of time, in the value
of an investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period. This number
is then annualized using semi-annual compounding. The yield does not necessarily
reflect income actually earned by the Fund and, therefore, may not correlate to
the dividends or other distributions paid to shareholders.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
STANDARD & POOR'S
- -------------------------------------------------------------------------------
"Standard & Poor's(R)", "S&P(R)", and "S&P 100(R)" are trademarks of the
McGraw-Hill Companies, Inc. and have been licensed for use by Michigan National
Bank. The Fund is not sponsored, endorsed, sold or promoted by, or affiliated
with, Standard & Poor's ("S&P").
S&P makes no representation or warranty, express or implied, to the owners of
the Fund or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly or the ability of the Standard
& Poor's 100 Index ("S&P 100 Index") to track general stock market performance.
S&P's only relationship to Michigan National Bank (the "Licensee") is the
licensing of certain trademarks and trade names of S&P and of the S&P 100 Index
which is determined, composed and calculated by S&P without regard to the
Licensee or the Fund. S&P has no obligation to take the needs of the Licensee or
the owners of the Fund into consideration in the determination of the timing of,
prices at, or quantities of the Fund to be issued or in the determination or
calculation of the equation by which the Fund is to be converted into cash. S&P
has no obligation or liability in connection with the administration, marketing
or trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 100 INDEX
OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY THE LICENSEE, OWNERS OF THE FUND, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE S&P 100 INDEX OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 100 INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY
FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
INDEPENDENCE ONE EQUITY PLUS FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS--98.2%
-----------------------------------------------
AEROSPACE & DEFENSE--2.8%
------------------------------------
53,972 Boeing Co. $ 2,701,973
------------------------------------
6,850 General Dynamics Corp. 289,413
------------------------------------
18,467 Raytheon Co., Class B 1,046,848
------------------------------------
11,373 Rockwell International Corp. 636,177
------------------------------------
12,531 United Technologies Corp. 1,233,520
------------------------------------ ------------
Total 5,907,931
------------------------------------ ------------
AUTOMOTIVE--3.4%
------------------------------------
36,081 Chrysler Corp. 1,450,005
------------------------------------
66,133 Ford Motor Co. 3,029,718
------------------------------------
38,521 General Motors Corp. 2,595,352
------------------------------------ ------------
Total 7,075,075
------------------------------------ ------------
BANKING--4.0%
------------------------------------
37,299 BankAmerica Corp. 3,170,415
------------------------------------
15,636 First Chicago NBD Corp. 1,452,194
------------------------------------
51,206 NationsBank Corp. 3,878,855
------------------------------------ ------------
Total 8,501,464
------------------------------------ ------------
CAPITAL GOODS--1.1%
------------------------------------
8,088 Homestake Mining Co. 134,711
------------------------------------
22,258 Minnesota Mining & Manufacturing Co. 2,100,599
------------------------------------ ------------
Total 2,235,310
------------------------------------ ------------
CHEMICALS--3.6%
------------------------------------
12,509 Dow Chemical Co. 1,209,464
------------------------------------
61,630 Du Pont (E.I.) de Nemours & Co. 4,487,434
------------------------------------
3,972 Mallinckrodt, Inc. 128,097
------------------------------------
31,910 Monsanto Co. 1,687,241
------------------------------------ ------------
Total 7,512,236
------------------------------------ ------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
------------------------------------------------
COMMERCIAL--1.2%
-------------------------------------
59,611 Ameritech Corp. $ 2,537,193
------------------------------------- ------------
COMPUTERS--13.5%
-------------------------------------
4,159 (a)Ceridian Corp. 235,243
-------------------------------------
54,800 (a)Cisco Systems, Inc. 4,014,100
-------------------------------------
8,458 (a)Computer Sciences Corp. 446,160
-------------------------------------
55,986 Hewlett-Packard Co. 4,216,446
-------------------------------------
52,270 International Business Machines Corp. 6,056,786
-------------------------------------
131,442 (a)Microsoft Corp. 11,846,210
-------------------------------------
52,755 (a)Oracle Corp. 1,365,036
-------------------------------------
9,690 (a)Unisys Corp. 217,419
------------------------------------- ------------
Total 28,397,400
------------------------------------- ------------
CONSUMER--1.2%
-------------------------------------
25,314 American Express Co. 2,582,028
------------------------------------- ------------
ELECTRIC--0.6%
-------------------------------------
13,436 Entergy Corp. 334,221
-------------------------------------
38,028 Southern Co. 1,007,742
------------------------------------- ------------
Total 1,341,963
------------------------------------- ------------
ELECTRICAL EQUIPMENT--7.8%
-------------------------------------
5,164 Black & Decker Corp. 266,592
-------------------------------------
8,152 (a)Digital Equipment Corp. 453,455
-------------------------------------
176,085 General Electric Co. 14,989,236
-------------------------------------
6,850 Honeywell, Inc. 637,906
------------------------------------- ------------
Total 16,347,189
------------------------------------- ------------
ELECTRONICS--4.5%
-------------------------------------
12,127 AMP, Inc. 476,743
-------------------------------------
88,027 Intel Corp. 7,113,682
-------------------------------------
8,890 (a)National Semiconductor Corp. 195,580
-------------------------------------
2,445 Polaroid Corp. 107,580
-------------------------------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
--------------------------------------------------
ELECTRONICS--CONTINUED
---------------------------------------
2,758 Tektronix, Inc. $ 118,594
---------------------------------------
21,255 Texas Instruments, Inc. 1,361,648
--------------------------------------- ------------
Total 9,373,827
--------------------------------------- ------------
ENTERTAINMENT--2.2%
---------------------------------------
36,770 Disney (Walt) Co. 4,570,971
---------------------------------------
5,565 (a)Harrah's Entertainment, Inc. 145,038
--------------------------------------- ------------
Total 4,716,009
--------------------------------------- ------------
FINANCIAL SERVICES--2.9%
---------------------------------------
24,572 Citicorp 3,698,086
---------------------------------------
6,430 Hartford Financial Services Group, Inc. 712,123
---------------------------------------
17,929 Merrill Lynch & Co., Inc. 1,573,270
--------------------------------------- ------------
Total 5,983,479
--------------------------------------- ------------
FOOD & BEVERAGE--8.3%
---------------------------------------
133,069 Coca-Cola Co. 10,096,610
---------------------------------------
19,998 Heinz (H.J.) Co. 1,089,891
---------------------------------------
37,472 McDonald's Corp. 2,318,580
---------------------------------------
82,626 PepsiCo, Inc. 3,279,219
---------------------------------------
5,803 Ralston Purina Co. 615,118
--------------------------------------- ------------
Total 17,399,418
--------------------------------------- ------------
FOREST PRODUCTS & PAPER--0.9%
---------------------------------------
3,094 Boise Cascade Corp. 116,218
---------------------------------------
5,299 Champion International Corp. 285,152
---------------------------------------
16,661 International Paper Co. 869,496
---------------------------------------
10,872 Weyerhaeuser Co. 626,499
--------------------------------------- ------------
Total 1,897,365
--------------------------------------- ------------
HOMEBUILDERS--0.1%
---------------------------------------
4,566 Fluor Corp. 215,744
--------------------------------------- ------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ---------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------
HOUSEHOLD PRODUCTS--0.7%
----------------------------------
16,111 Colgate-Palmolive Co. $ 1,444,955
---------------------------------- ------------
INSURANCE--3.2%
----------------------------------
13,266 American General Corp. 883,847
----------------------------------
38,206 American International Group, Inc. 5,026,477
----------------------------------
3,984 CIGNA Corp. 824,439
---------------------------------- ------------
Total 6,734,763
---------------------------------- ------------
MANUFACTURING--0.7%
----------------------------------
9,491 Allegheny Teledyne, Inc. 240,834
----------------------------------
17,695 Eastman Kodak Co. 1,277,358
---------------------------------- ------------
Total 1,518,192
---------------------------------- ------------
MEDICAL SUPPLIES--1.0%
----------------------------------
15,253 Baxter International, Inc. 845,588
----------------------------------
35,268 Columbia/HCA Healthcare Corp. 1,161,640
---------------------------------- ------------
Total 2,007,228
---------------------------------- ------------
METALS & MINING--0.3%
----------------------------------
9,393 Aluminum Co. of America 727,958
---------------------------------- ------------
OFFICE EQUIPMENT--1.1%
----------------------------------
4,367 Harris Corp. 211,254
----------------------------------
17,749 Xerox Corp. 2,014,512
---------------------------------- ------------
Total 2,225,766
---------------------------------- ------------
OIL--10.1%
----------------------------------
53,040 Amoco Corp. 2,347,020
----------------------------------
17,470 Atlantic Richfield Co. 1,362,660
----------------------------------
9,095 Baker Hughes, Inc. 368,348
----------------------------------
5,776 Coastal Corp. 412,623
----------------------------------
134,303 Exxon Corp. 9,795,725
----------------------------------
14,268 Halliburton Co. 784,740
----------------------------------
42,722 Mobil Corp. 3,375,038
----------------------------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ---------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------
OIL--CONTINUED
----------------------------------------
18,666 Occidental Petroleum Corp. $ 549,480
----------------------------------------
26,640 Schlumberger Ltd. 2,207,790
---------------------------------------- ------------
Total 21,203,424
---------------------------------------- ------------
PERSONAL CARE PRODUCTS--0.4%
----------------------------------------
7,190 Avon Products, Inc. 590,928
----------------------------------------
5,873 International Flavors & Fragrances, Inc. 287,410
---------------------------------------- ------------
Total 878,338
---------------------------------------- ------------
PHARMACEUTICALS--9.5%
----------------------------------------
54,152 Bristol-Myers Squibb Co. 5,733,343
----------------------------------------
73,246 Johnson & Johnson 5,227,933
----------------------------------------
64,472 Merck & Co., Inc. 7,768,876
----------------------------------------
27,636 Pharmacia & Upjohn, Inc. 1,162,439
---------------------------------------- ------------
Total 19,892,591
---------------------------------------- ------------
RECREATION--0.1%
----------------------------------------
5,430 Brunswick Corp. 176,475
---------------------------------------- ------------
RETAIL--4.8%
----------------------------------------
26,881 (a)K Mart Corp. 468,737
----------------------------------------
14,987 Limited, Inc. 503,001
----------------------------------------
12,597 May Department Stores Co. 777,077
----------------------------------------
21,350 Sears, Roebuck & Co. 1,266,322
----------------------------------------
5,809 Tandy Corp. 288,998
----------------------------------------
15,733 (a)Toys 'R' Us, Inc. 433,641
----------------------------------------
124,236 Wal-Mart Stores, Inc. 6,281,683
---------------------------------------- ------------
Total 10,019,459
---------------------------------------- ------------
STEEL--0.1%
----------------------------------------
6,217 (a)Bethlehem Steel Corp. 96,752
---------------------------------------- ------------
TELECOMMUNICATIONS--6.2%
----------------------------------------
89,525 AT&T Corp. 5,377,095
----------------------------------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------------------
TELECOMMUNICATIONS--CONTINUED
--------------------------------------------------
42,299 Bell Atlantic Corp. $ 3,957,600
--------------------------------------------------
37,934 MCI Communications Corp. 1,908,554
--------------------------------------------------
28,559 Northern Telecom Ltd. 1,738,529
-------------------------------------------------- ------------
Total 12,981,778
-------------------------------------------------- ------------
TRANSPORTATION--1.2%
--------------------------------------------------
8,507 Burlington Northern Santa Fe 842,193
--------------------------------------------------
4,031 Delta Air Lines, Inc. 468,604
--------------------------------------------------
6,266 (a)FDX Corp. 426,088
--------------------------------------------------
20,536 Norfolk Southern Corp. 686,673
-------------------------------------------------- ------------
Total 2,423,558
-------------------------------------------------- ------------
UTILITIES--0.3%
--------------------------------------------------
22,382 Williams Cos., Inc. (The) 707,831
-------------------------------------------------- ------------
UTILITIES-ELECTRIC--0.4%
--------------------------------------------------
10,327 American Electric Power Co., Inc. 493,114
--------------------------------------------------
11,932 Unicom Corp. 414,635
-------------------------------------------------- ------------
Total 907,749
-------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $108,178,946) 205,970,448
-------------------------------------------------- ------------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- --------------------------------------------------- ------------
<C> <S> <C>
(B) REPURCHASE AGREEMENT--1.6%
--------------------------------------------------------------
$3,429,000 First Chicago Capital Markets, Inc., 5.52%, dated
4/30/1998, due 5/1/1998 $ 3,429,000
--------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $111,607,946)(C) $209,399,448
--------------------------------------------------- ------------
</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 $111,710,005.
The net unrealized appreciation of investments on a federal tax basis
amounts to $97,689,443 which is comprised of $97,801,707 appreciation and
$112,264 depreciation at April 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($209,753,144) at April 30, 1998.
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------
Total investments in securities, at value
(identified cost $111,607,946 and tax cost
$111,710,005) $209,399,448
- -------------------------------------------
Cash 564
- -------------------------------------------
Income receivable 208,581
- -------------------------------------------
Receivable for shares sold 270,632
- -------------------------------------------
Deferred organizational costs 14,374
- -------------------------------------------
Other assets 10,371
- ------------------------------------------- ------------
Total assets 209,903,970
- -------------------------------------------
LIABILITIES:
- ----------------------------------
Payable for investments purchased $ 42,123
- ----------------------------------
Payable for shares redeemed 88,452
- ----------------------------------
Accrued expenses 20,251
- ---------------------------------- --------
Total liabilities 150,826
- ------------------------------------------- ------------
NET ASSETS for 11,496,485 shares
outstanding $209,753,144
- ------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -------------------------------------------
Paid in capital $109,067,271
- -------------------------------------------
Net unrealized appreciation of investments 97,791,502
- -------------------------------------------
Accumulated net realized gain on
investments 2,809,476
- -------------------------------------------
Undistributed net investment income 84,895
- ------------------------------------------- ------------
Total Net Assets $209,753,144
- ------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------
$209,753,144/11,496,485 shares outstanding $18.24
- ------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------
Dividends $ 2,987,137
- -------------------------------------------------------------
Interest 236,911
- ------------------------------------------------------------- -----------
Total income 3,224,048
- -------------------------------------------------------------
EXPENSES:
- -------------------------------------------------
Investment advisory fee $ 758,348
- -------------------------------------------------
Administrative personnel and services fee 202,102
- -------------------------------------------------
Custodian fees 39,564
- -------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 28,306
- -------------------------------------------------
Trustees' fees 8,000
- -------------------------------------------------
Auditing fees 13,500
- -------------------------------------------------
Legal fees 5,500
- -------------------------------------------------
Portfolio accounting fees 53,283
- -------------------------------------------------
Share registration costs 19,849
- -------------------------------------------------
Printing and postage 15,276
- -------------------------------------------------
Insurance premiums 3,000
- -------------------------------------------------
Miscellaneous 8,001
- ------------------------------------------------- ----------
Total expenses 1,154,729
- -------------------------------------------------
Waivers--
- ---------------------------------------
Waiver of investment advisory fee $(284,380)
- ---------------------------------------
Waiver of administrative personnel and
services fee (80,996)
- --------------------------------------- ---------
Total waivers (365,376)
- ------------------------------------------------- ----------
Net expenses 789,353
- ------------------------------------------------------------- -----------
Net investment income 2,434,695
- ------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------
Net realized gain on investments 8,506,760
- -------------------------------------------------------------
Net change in unrealized appreciation of investments 48,813,788
- ------------------------------------------------------------- -----------
Net realized and unrealized gain on investments 57,320,548
- ------------------------------------------------------------- -----------
Change in net assets resulting from operations $59,755,243
- ------------------------------------------------------------- -----------
</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>
YEAR ENDED APRIL 30,
--------------------------
1998 1997
- --------------------------------------------------- ------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------
OPERATIONS--
- ---------------------------------------------------
Net investment income $ 2,434,695 $ 2,555,704
- ---------------------------------------------------
Net realized gain on investments ($8,551,167 and
$1,787,648 net gains, respectively, as computed for
federal tax purposes) 8,506,760 1,757,572
- ---------------------------------------------------
Net change in unrealized appreciation 48,813,788 31,063,371
- --------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 59,755,243 35,376,647
- --------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------
Distributions from net investment income (2,497,120) (2,489,618)
- ---------------------------------------------------
Distributions from net realized gains (7,427,247) (594,000)
- --------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions
to shareholders (9,924,367) (3,083,618)
- --------------------------------------------------- ------------ ------------
SHARE TRANSACTIONS--
- ---------------------------------------------------
Proceeds from sale of shares 29,050,872 50,948,693
- ---------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 6,777,113 1,995,104
- ---------------------------------------------------
Cost of shares redeemed (45,233,940) (28,517,581)
- --------------------------------------------------- ------------ ------------
Change in net assets resulting from share
transactions (9,405,955) 24,426,216
- --------------------------------------------------- ------------ ------------
Change in net assets 40,424,921 56,719,245
- ---------------------------------------------------
NET ASSETS:
- ---------------------------------------------------
Beginning of period 169,328,223 112,608,978
- --------------------------------------------------- ------------ ------------
End of period (including undistributed net
investment income of $84,895 and $147,320,
respectively) $209,753,144 $169,328,223
- --------------------------------------------------- ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INDEPENDENCE ONE EQUITY PLUS FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
- -------------------------------------------------------------------------------
(1) ORGANIZATION
Independence One Mutual Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of nine portfolios. The financial
statements 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 costs incurred by the Fund with respect to registration
of its shares in its first fiscal year, excluding the initial expense of
registering its shares, have been deferred and are being amortized over a
period not to exceed five years from the Fund's commencement date.
Organizational expenses of $23,832 were borne initially by the Adviser. The
Fund has reimbursed the Adviser for these expenses. These expenses have been
deferred and are being amortized over the five year period following the
Fund's effective date. For the year ended April 30, 1998, the Fund expensed
$4,569 of organizational expenses.
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>
YEAR ENDED APRIL 30,
----------------------
1998 1997
- ---------------------------------------------- ---------- ----------
<S> <C> <C>
Shares sold 1,818,823 4,175,707
- ----------------------------------------------
Shares issued to shareholders in payment of
distributions declare 436,421 164,811
- ----------------------------------------------
Shares redeemed (2,818,913) (2,168,967)
- ---------------------------------------------- ---------- ----------
Net change resulting from share transactions (563,669) 2,171,551
- ---------------------------------------------- ---------- ----------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- -------------------------------------------------------------------------------
(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 0.40% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a sub-advisory agreement between the Adviser and Sosnoff
Sheridan Corporation, Sosnoff Sheridan Corporation receives an annual fee from
the Adviser equal to .035% of the average daily value of the Fund's equity
securities. Sosnoff Sheridan Corporation may voluntarily
choose to reduce its compensation.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Fund with certain administrative personnel and services. The fee paid to FAS
is based on the level of average aggregate net assets of the Trust for the
period. 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 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 April 30, 1998, were as follows:
<TABLE>
<S> <C>
- ---------
PURCHASES $19,452,363
- --------- -----------
SALES $33,899,681
- --------- -----------
</TABLE>
INDEPENDENCE ONE EQUITY PLUS FUND
- -------------------------------------------------------------------------------
(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.
(7) SUBSEQUENT EVENT
Subsequent to the year ended April 30, 1998, the Trust added Independence One
Small Cap Fund and Independence One International Equity Fund, which will become
effective June 16, 1998.
REPORT OF KPMG PEAT MARWICK LLP,
INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
To the Board of Trustees and Shareholders INDEPENDENCE ONE MUTUAL FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Independence One Equity Plus Fund (a portfolio
within Independence One Mutual Funds) as of April 30, 1998, and the related
statement of operations for the year then ended, and the statements of changes
in net assets for each of the years in the two-year period then ended, and the
financial highlights, which is presented on page 2 of this prospectus, for the
years or period from September 25, 1995 (commencement of operations) to April
30, 1998. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at April
30, 1998 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statements presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Independence One Equity Plus Fund as of April 30, 1998, and the results of its
operations, changes in its net assets, and its financial highlights for each of
the periods listed above, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
June 12, 1998
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
Cusip 453777872
G00979-08 (6/98)
RECYCLED LOGO
Independence One(R)
Equity Plus Fund
(Distributed by Federated Securities Corp.)
Prospectus dated
June 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF MICHIGAN NATIONAL BANK Investment Adviser]
Independence One Equity Plus Fund
(A Portfolio of Independence One Mutual Funds)
Statement of Additional Information
This Statement of Additional Information should be read with the prospectus
of Independence One Equity Plus Fund (the "Fund"), a portfolio of
Independence One Mutual Funds (the "Trust") dated June 30, 1998. This
Statement is not a prospectus. You may request a copy of a prospectus free
of charge by calling 1-800-334-2292. Independence One Mutual Funds 5800
Corporate Drive Pittsburgh, Pennsylvania 15237-7010
Statement dated June 30, 1998
[GRAPHIC OMITTED]
Cusip 453777872
G01198 -01 (6/98)
<PAGE>
I
Table of Contents
<PAGE>
General Information About the Fund 1
Investment Objective and Policies 1
Types of Investments 1
Portfolio Turnover 3
Investment Limitations 3
Independence One Mutual Funds Management 6
Officers and Trustees 6
Fund Ownership 7
Trustees' Compensation 8
Trustee Liability 8
Massachusetts Partnership Law 8
Investment Advisory Services 8
Adviser to the Fund 8
Advisory Fees 9
Sub-Adviser to the Fund 9
Sub-Advisory Fees 9
Brokerage Transactions 9
Other Services 9
Trust Administration 9
Custodian 9
Transfer Agent and Dividend Disbursing Agent 9
Independent Auditors 10
Purchasing Shares 10
Conversion to Federal Funds 10
Determining Net Asset Value 10
Determining Market Value of Securities10
Redeeming Shares 10
Redemption in Kind 10
Tax Status 11
The Fund's Tax Status 11
Shareholders' Tax Status 11
Capital Gains 11
Total Return 11
Yield 11
Performance Comparisons 12
Economic and Market Information 12
<PAGE>
General Information About the Fund
The Fund is a portfolio in Independence One Mutual Funds (the "Trust"), which
was established as a Massachusetts business trust under a Declaration of Trust
dated January 9, 1989.
Investment Objective and Policies
The Fund's investment objective is total return. This investment objective
cannot be changed without the approval of shareholders.
Types of Investments
In addition to the common stocks described in the prospectus, the Fund may also
invest in temporary investments which include, but are not limited to,
short-term money market instruments and U.S. government obligations, and
securities in such proportions as, in the judgment of the Fund's investment
adviser, prevailing market conditions warrant. The following discussion
supplements the description of the Fund's investment policies in the prospectus.
Unless otherwise indicated, the investment policies described below may be
changed by the Board of Trustees (the "Trustees") without shareholder approval.
Shareholders will be notified before any material change in the policies becomes
effective.
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are: Farm Credit System,
including the National Bank for Cooperatives, Farm Credit Banks, and Banks
for Cooperatives; Farmers Home Administration; Federal Home Loan Banks;
Federal Home Loan Mortgage Corporation; Federal National Mortgage
Association; Government National Mortgage Association; and Student Loan
Marketing Association.
Variable Rate U.S. Government Securities
In the case of certain U.S. government securities purchased by the Fund
that carry variable interest rates, these rates will reduce the changes in
the market value of such securities from their original purchase prices.
Accordingly, the potential for capital appreciation or capital
depreciation should not be greater than the potential for capital
appreciation or capital depreciation of fixed interest rate U.S.
government securities having maturities equal to the interest rate
adjustment dates of the variable rate U.S. government securities.
The Fund may purchase variable rate U.S. government securities upon the
determination by the Trustees that the interest rate as adjusted will
cause the instrument to have a current market value that approximates its
par value on the adjustment date.
Money Market Instruments
The Fund may invest in the following money market instruments:
o instruments of domestic and foreign banks and savings associations
having capital, surplus, and undivided profits of over $100,000,000, or
if the principal amount of the instrument is insured in full by the
Federal Deposit Insurance Corporation ("FDIC");
o commercial paper issued by domestic or foreign corporations rated A-1
by Standard & Poor's Ratings Group ("S&P") Prime-1 by Moody's Investors
Service, Inc., or F-1 by Fitch Investors Service, Inc. or, if unrated,
of comparable quality as determined by the Fund's investment adviser;
o time and savings deposits whose accounts are insured by the Bank
Insurance Fund ("BIF") or in institutions whose accounts are insured by
the Savings Association Insurance Fund, which is also administered by
the FDIC, including certificates of deposit issued by, and other time
deposits in, foreign branches of BIF-insured banks; or
o bankers' acceptances.
Repurchase Agreements
The Fund requires its custodian to take possession of the securities
subject to repurchase agreements and these securities will be marked to
market daily. To the extent that the original seller does not repurchase
the securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that a
defaulting seller of the securities filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject
to repurchase agreements, a court of competent jurisdiction would rule in
favor of the Fund and allow retention or disposition of such securities.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are
deemed by the Fund's investment adviser to be creditworthy pursuant to
guidelines established by the Trustees.
Stock Index Futures and Options
The Fund may utilize stock index futures contracts, options, and options
on futures contracts as discussed in the prospectus.
A stock index futures contract is a bilateral agreement which obligates
the seller to deliver (and the purchaser to take delivery of) an amount of
cash equal to a specific dollar amount times the difference between the
value of a specific stock index at the close of trading of the contract
and the price at which the agreement is originally made. There is no
physical delivery of the stocks constituting the index, and no price is
paid upon entering into a futures contract. In general, contracts are
closed out prior to their expiration. The Fund, when purchasing or selling
a futures contract, will initially be required to deposit in a segregated
account in the broker's name with the Fund's custodian an amount of cash
or U.S. government securities approximately equal to 5-10% of the contract
value. This amount is known as "initial margin," and it is subject to
change by the exchange or board of trade on which the contract is traded.
Subsequent payments to and from the broker are made on a daily basis as
the price of the index or the securities underlying the futures contract
fluctuates. These payments are known as "variation margins," and the
fluctuation in value of the long and short positions in the futures
contract is a process referred to as "marking to market." The Fund may
decide to close its position on a contract at any time prior to the
contract's expiration. This is accomplished by the Fund taking an opposite
position at the then prevailing price, thereby terminating its existing
position in the contract. Because both the initial and variation margin
resemble a performance bond or good faith deposit on the contract, they
are returned to the Fund upon the termination of the contract, assuming
that all contractual obligations have been satisfied. Therefore, the
margin utilized in futures contracts is readily distinguishable from the
margin employed in security transactions, since futures contracts margin
does not involve the borrowing of funds to finance the transaction.
A put option gives the Fund, in return for a premium, the right to sell
the underlying security to the writer (seller) at a specified price during
the term of the option. Put options on stock indices are similar to put
options on stocks except for the delivery requirements. Instead of giving
the Fund the right to make delivery of stock at a specified price, a put
option on a stock index gives the Fund, as holder, the right to receive an
amount of cash upon exercise of the option.
The Fund may also write covered call options. As the writer of a call
option, the Fund has the obligation upon exercise of the option during the
option period to deliver the underlying security upon payment of the
exercise price. Writing of call options is intended to generate income for
the Fund and thereby protect against price movements in particular
securities in the Fund's portfolio.
The Fund may only: (1) buy listed put options on stock indices; (2) buy
listed put options on securities held in its portfolio; and (3) sell
listed call options either on securities held in its portfolio or on
securities which it has the right to obtain without payment of further
consideration (or has segregated cash in the amount of any such additional
consideration). The Fund will maintain its positions in securities, option
rights, and segregated cash subject to puts and calls until the options
are exercised, closed, or expired.
Reverse Repurchase Agreements
The Fund also may enter into reverse repurchase agreements under certain
circumstances. This transaction is similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a portfolio
instrument to another person, such as a financial institution, broker, or
dealer, in return for a percentage of the instrument's market value in
cash, and agrees that on a stipulated date in the future the Fund will
repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
the ability to enter into reverse repurchase agreements does not ensure
that the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked
to market daily and maintained until the transaction is settled.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend portfolio
securities on a short-term or long-term basis, or both, to broker/dealers,
banks, or other institutional borrowers of securities. The Fund will only
enter into loan arrangements with broker/dealers, banks, or other
institutions which the Fund's investment adviser has determined are
creditworthy and will receive collateral in the form of cash or U.S.
government securities equal to at least 102% of the value of the
securities loaned.
There is the risk that when lending portfolio securities, the securities
may not be available to the Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable
price. In addition, in the event that a borrower of securities would file
for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker. The Fund does not
have the right to vote securities on loan. In circumstances where the Fund
does not, the Fund would terminate the loan and regain the right to vote
if that were considered important with respect to the investment.
Portfolio Turnover
The Fund may trade or dispose of portfolio securities as considered necessary to
meet its investment objective. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual rate of portfolio turnover
exceeding 100%. For the fiscal years ended April 30, 1998 and 1997, the Fund's
portfolio turnover rates were 11% and 8%, respectively.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as are necessary for
clearance of transactions. The deposit or payment by the Fund of initial
or variation margin in connection with futures contracts or related
options transactions is not considered the purchase of a security on
margin.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amount borrowed.
The Fund will not purchase any securities while borrowings in excess of 5%
of the value of the Fund's total assets are outstanding.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure to facilitate management of the portfolio by enabling
the Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. For the purpose of this limitation, the
following are not deemed to be pledges: margin deposits for the purchase
and sale of futures contracts and related options, and segregation or
collateral arrangements made in connection with options activities.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in the securities of issuers
whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.
Investing in Commodities, Commodity Contracts, or Commodity Futures
Contracts
The Fund will not purchase or sell commodities, commodity contracts or
commodity futures contracts except to the extent that the Fund may engage
in transactions involving futures contracts and related options.
Underwriting
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
Diversification of Investments
With respect to securities comprising 75% of the value of its assets, the
Fund will not purchase securities of any one issuer (other than securities
issued or guaranteed by the government of the United States or its
agencies or instrumentalities) if, as a result, more than 5% of the value
of its total assets would be invested in the securities of that issuer.
Also, the Fund will not acquire more than 10% of the voting securities of
any one issuer.
Concentration of Investments
The Fund will not invest 25% or more of the value of its total assets in
any one industry, except that the Fund may invest 25% or more of the value
of its total assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase agreements
secured by such instruments.
Lending Cash or Securities
The Fund will not lend any of its assets except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the
Fund from purchasing U.S. government obligations, money market
instruments, bonds, debentures, notes, certificates of indebtedness, or
other debt securities, entering into repurchase agreements, or engaging in
other transactions where permitted by the Fund's investment objective,
policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
The following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.
Investing in Securities of Other Investment Companies
The Fund can acquire up to 3% of the total outstanding stock of other
investment companies, and may invest in the securities of affiliated money
market funds as an efficient means of managing the Fund's uninvested cash.
The Fund will not be subject to any other limitations with regard to the
acquisition of securities of other investment companies so long as the
public offering price of the Fund's shares does not include a sales charge
exceeding 1-1/2 percent. However, these limitations are not applicable if
the securities are acquired in a merger, consolidation, reorganization, or
acquisition of assets. It should be noted that investment companies incur
certain expenses, such as investment advisory, custodian and transfer
agent fees, and therefore, any investment by the Fund in shares of another
investment company would be subject to such duplicate expenses.
Investing in Restricted and Illiquid Securities
The Fund will not invest more than 15% of the value of its net assets in
illiquid obligations including repurchase agreements providing for
settlement in more than seven days after notice, over-the-counter options,
certain restricted securities not determined by the Trustees to be liquid,
and non-negotiable fixed income time deposits with maturities over seven
days.
Investing in Put Options
The Fund will not purchase put options on securities, other than put
options on stock indices, unless the securities are held in the Fund's
portfolio and not more than 5% of the value of the Fund's total assets
would be invested in premiums on open put option positions.
Writing Covered Call Options
The Fund will not write call options on securities unless the securities
are held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the
amount of any further payment.
Investing in Warrants
The Fund will not invest more than 5% of its assets in warrants.
Purchasing Securities to Exercise Control
The Fund will not purchase securities of a company for purposes of
exercising control or management.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association, having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items."
The Fund does not intend to borrow money in excess of 5% of the value of its
total assets during the current year.
<PAGE>
Independence One Mutual Funds Management
Officers and Trustees
Officers and Trustees are listed with their addresses, birthdates, principal
occupations, and present positions, including any affiliation with Michigan
National Bank, Michigan National Corporation, Federated Investors, Inc.,
Federated Securities Corp., Federated Administrative Services, and Federated
Services Company.
Robert E. Baker*
4327 Stoneleigh Road
Bloomfield Hills, MI
Birthdate: May 6, 1930
Trustee
Retired; formerly, Vice Chairman, Chrysler Financial Corporation.
Harold Berry*
Berry Enterprises
290 Franklin Center
29100 Northwestern Highway
Southfield, MI
Birthdate: September 17, 1925
Trustee
Managing Partner, Berry Enterprises; Chairman, Independent Sprinkler Companies,
Inc.; Chairman, Berry, Ziegelman & Company.
Nathan Forbes**
1945 Long Point Drive
Bloomfield Hills, MI
Birthdate: December 5, 1962
Trustee
President, Forbes/Cohen Properties, President and Partner, The Forbes Company.
Harry J. Nederlander+
231 S. Old Woodward, Suite 219
Birmingham, MI
Birthdate: September 5, 1917
Trustee
Chairman, Nederlander Enterprises.
<PAGE>
Thomas S. Wilson+
Two Championship Drive
Auburn Hills, MI
Birthdate: October 8, 1949
Trustee
President and Executive Administrator of the Detroit Pistons; President and CEO,
Palace Sports and Entertainment.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President and Treasurer
Vice Chairman, Federated Investors, Inc.; Vice President, Federated Advisers,
Federated Management, Federated Research, Federated Research Corp., Federated
Global Research Corp. and Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated Shareholder Services
Company; Trustee or Director of some of the Funds distributed by Federated
Securities Corp.; President, Executive Vice President and Treasurer of some of
the Funds distributed by Federated Securities Corp.
Jeffrey W. Sterling
Federated Investors Tower
Pittsburgh, PA
Birthdate: February 5, 1947
Vice President and Assistant Treasurer
Vice President and Assistant Treasurer of various Funds distributed by Federated
Securities Corp.
Jay S. Neuman
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 22, 1950
Secretary
Corporate Counsel, Federated Investors, Inc.
* Members of the Trust's Audit Committee.
** This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
Fund Ownership
Officers and Trustees own less than 1% of the outstanding shares of the Fund.
The following list indicates the beneficial ownership of shareholders who are
the beneficial owners of more than 5% of the outstanding shares of the Equity
Plus Fund as of June 5, 1998: Pierson & Co., the nominee for Michigan National
Bank, acting in various capacities for numerous accounts, owned, of record,
approximately 11,286,967 shares (97.18%).
Trustees' Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
tHE TRUST THE TRUST*
Robert E. Baker $12,000
Trustee
Harold Berry $12,000
Trustee
Nathan Forbes $0+
Trustee
Harry J. Nederlander $12,000
Trustee
Thomas S. Wilson $12,000
Trustee
*Information is furnished for the fiscal year ended April 30, 1998. The Trust is
the only Investment Company in the Fund Complex. The aggregate compensation is
provided for the Trust which is comprised of seven portfolios.
+Information is furnished for the period from March 4, 1998 (date of election as
Trustee of the Trust) through April 30, 1998.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use the
property of the Fund to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them from its
assets.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Michigan National Bank (the "Adviser").
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Because of the internal controls maintained by Michigan National Bank to
restrict the flow of non-public information, Fund investments are typically made
without any knowledge of Michigan National Bank's or its affiliates' lending
relationships with an issuer.
Advisory Fees
For its advisory services, Michigan National Bank receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended April
30, 1998, 1997 and for the period from September 25, 1995 (date of initial
public investment) through April 30, 1996, the Adviser earned $758,348, $588,469
and $208,897, of which $284,380, $262,493 and $104,448, respectively, were
voluntarily waived.
Sub-Adviser to the Fund
The Fund's sub-adviser is Sosnoff Sheridan Corporation (doing business as
Sosnoff Sheridan Group)(the "Sub-Adviser").
Sub-Advisory Fees
For its sub-advisory services, the Sub-Adviser receives an annual sub-advisory
fee as described in the prospectus.
For the fiscal years ended April 30, 1998, 1997 and for the period from
September 25, 1995 (date of initial public investment) through April 30, 1996,
the Sub-Adviser earned $65,680, $50,260 and $19,633, respectively, none of which
was voluntarily waived.
Brokerage Transactions
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
For the fiscal years ended April 30, 1998 and 1997, the Fund paid $20,319 and
$26,727, respectively, in brokerage commissions on brokerage transactions.
Although investment decisions for the Funds are made independently from those of
the other accounts managed by the Adviser, investments of the type the Funds may
make may also be made by those other accounts. When the Funds and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Funds or the size of the position obtained or disposed of by the Funds. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Funds.
Other Services
Trust Administration
Federated Administrative Services, a subsidiary of Federated Investors, Inc.,
provides administrative personnel and services to the Funds for the fees set
forth in the prospectus. For the fiscal years ended April 30, 1998, 1997 and for
the period from September 25 1995 (date of initial public investment) to April
30, 1996, the administrator earned $202,102, $160,370 and $58,574, of which
$80,996, $88,264 and $57,628, respectively, were voluntarily waived.
Custodian
Michigan National Bank, Farmington Hills, Michigan, is custodian for the
securities and cash of the Fund. For the services to be provided to the Trust
pursuant to the Custodian Agreement, the Trust pays the custodian an annual fee
based upon the average daily net assets of the Fund and which is payable
monthly. The custodian will also charge transaction fees and out-of-pocket
expenses.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company, Boston, Massachusetts, through its subsidiary
Federated Shareholder Services Company, is transfer agent for the shares of the
Funds and dividend disbursing agent for the Funds.
Independent Auditors
The independent auditors for the Fund is KPMG Peat Marwick LLP, Pittsburgh,
Pennsylvania.
Purchasing Shares
Shares are sold at their net asset value without a sales charge on days when
both the New York Stock Exchange and the Federal Reserve Wire System are open
for business. The procedure for purchasing shares of the Fund is explained in
the prospectus under "Investing in the Fund."
Conversion to Federal Funds
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Michigan National Bank acts as the shareholder's agent in
depositing checks and converting them to federal funds.
Determining Net Asset Value
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.
Determining Market Value of Securities
The market values of the Fund's portfolio securities are determined as follows:
o for equity securities, according to the last sale price on a national
securities exchange, if applicable;
o in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked prices;
o for unlisted equity securities, latest bid prices;
o for bonds and other fixed income securities, as determined by an
independent pricing service;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, or for
short-term obligations with remaining maturities of 60 days or less at
the time of purchase, at amortized cost; or
o for all other securities, at fair value as determined in good faith by
the Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
The Fund will value futures contracts and options at their market values
established by the exchanges at the close of options trading on such exchanges
unless the Trustees determine in good faith that another method of valuing
option positions is necessary.
Redeeming Shares
The Fund redeems shares at the next computed net asset value after Federated
Shareholder Services Company receives the redemption request. Redemption
procedures are explained in the prospectus under "Redeeming Fund Shares."
Redemption in Kind
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio. To satisfy registration
requirements in a particular state, redemption in kind will be made (for any
shareholder requesting redemption) in readily marketable securities to the
extent that such securities are available. If this state's policy changes, the
Fund reserves the right to redeem in kind by delivering those securities it
deems appropriate.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Trustees determine to be fair and
equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
Tax Status
The Fund's Tax Status
The Fund expects to pay no federal income tax because it intends to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
Shareholders' Tax Status
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. The dividends received deduction for corporations will apply
to ordinary income distributions to the extent the distribution represents
amounts that would qualify for the dividends received deduction to the Fund if
the Fund were a regular corporation, and to the extent designated by the Fund as
so qualifying. These dividends, and any short-term capital gains, are taxable as
ordinary income.
Capital Gains
Long-term capital gains distributed to shareholders will be treated as long-term
capital gains regardless of how long shareholders have held shares.
Total Return
The average annual total returns for the Fund for the 1-year period ended April
30, 1998 and the period from September 25, 1995 (date of initial public
investment) through April 30, 1998 were 37.20% and 30.25%, respectively.
The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the net asset value per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, less any applicable sales charge, adjusted
over the period by any additional shares, assuming the reinvestment of all
dividends and distributions.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on nonstandardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
quarterly reinvestment of dividends over a specified period of time.
Yield
The Fund's yield for the thirty-day period ended April 30, 1998 was 1.06%.
The yield for the Fund is determined each day by dividing the net investment
income per share (as defined by the SEC) earned by the Fund over a thirty-day
period by the maximum offering price per share of the Fund on the last day of
the period. This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a 12-month period and is reinvested
every six months. The yield does not necessarily reflect income actually earned
by the Fund because of certain adjustments required by the SEC and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
the performance will be reduced for those shareholders paying those fees.
Performance Comparisons
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and the maximum offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors, such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
o Standard & Poor's Composite Index of 500 Stocks and Standard & Poor's
100 Index, a composite indices of common stocks in industry,
transportation, and financial and public utility companies can be used
to compare to the total returns of funds whose portfolios are invested
primarily in common stocks. In addition, the Standard & Poor's index
assumes reinvestments of all dividends paid by stocks listed on its
index. Taxes due on any of these distributions are not included, nor
are brokerage or other fees calculated in Standard & Poor's figures.
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in the maximum offering
price over a specific period of time. From time to time, the Fund will
quote its Lipper ranking in the "index funds" category in advertising
and sales literature.
o Morningstar, Inc., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment, and may refer to the Fund's
participation in asset allocation or other investment programs. In addition, the
Fund can compare its performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
Economic and Market Information
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Fund. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.
APPENDIX
A. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The shares of
Independence One Equity Plus Fund (the "Fund") are represented by a solid line
and Standard & Poor's 100 Composite Stock Price Index (the "S&P 100") is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the shares
of the Fund and the S&P 100. The "x" axis reflects computation periods from
9/25/95 to 4/30/98. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund's
shares as compared to the S&P 100. The ending values were $19,873 and $20,261,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Fund shares' Average Annual Total Return for the one-year period
ended 4/30/98 and from the start of performance of the Fund's shares (9/25/95)
to 4/30/98. The total returns were 37.20% and 30.25%, respectively.
