9
1933 Act File No. 33-26516
1940 Act File No. 811-5752
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ....................
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Post-Effective Amendment No. 29 ...................... X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 28 .................................... X
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INDEPENDENCE ONE MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower
1000 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) _ on _____________ pursuant to
paragraph (b) _X 60 days after filing pursuant to paragraph (a)(i) __ on
_____________ pursuant to paragraph (a)(i) _ 75 days after filing pursuant to
paragraph (a)(ii) on pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a previously
filed post-effective amendment.
Copies To:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, NW
Washington, DC 20037-1526
Prospectus
Independence One(R)
Mutual Funds
Independence One(R) Mutual Funds offers eight portfolios, including three equity
funds, two income funds and three money market funds. This prospectus relates to
Class A Shares of Independence One Equity Plus Fund.
Independence One
Equity Plus Fund
Class A Shares
April 14, 2000
[LOGO APPEARS HERE]
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense. For
more information about any of the Independence One(R) Mutual Funds, please call
800-334-2292 for a prospectus, which should be read carefully before investing.
Independence One(R) Mutual Funds
Contents
Fund Goals, Strategies, Performance and Risk 1
Principal Risks of the Fund 2
What are the Fund's Fees and Expenses? 4
Principal Securities in Which the Fund Invests 5
Specific Risks of Investing in the Fund 6
What do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 8
How to Redeem and Exchange Shares 10
Account and Share Information 13
Who Manages the Fund? 14
Financial Information 16
Fund Goals, Strategies, Performance and Risk
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The following describes the investment goals, strategies, and principal risks of
the Fund. There can be no assurance that the Fund will achieve its goal.
Independence One Equity Plus Fund
Goal: Seeks to provide total return.
The Fund's total return will consist of two components: (1) changes in the
market value of its portfolio securities (both realized and unrealized
appreciation); and (2) income received from its portfolio securities. The Fund
expects that capital appreciation will comprise the largest component of its
total return.
Strategy: The Fund pursues its investment objective by investing primarily in
the common stocks that comprise the Standard & Poor's Composite Stock Price
Index ("S&P 100"), in an effort to provide investment results that correspond to
or exceed the aggregate price and dividend performance of the S&P 100.
The S&P 100 is a market capitalization-weighted index of 100 common stocks from
a broad range of industries. The S&P 100 provides a measure of overall large
company performance because the stocks selected for inclusion tend to be the
leading companies in leading industries in the U.S. economy. Selection criteria
include total market value of an issuer's outstanding shares (market
capitalization), trading activity and liquidity of the issuer's shares, and the
issuer's financial and operating soundness.
Normally 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 in order to attempt
to achieve a high degree of correlation between the performance of the Fund's
portfolio and that of the S&P 100. The remaining 20% of the Fund's assets will
normally also be invested in stocks that are included in the S&P 100, but the
Fund's position in such stocks may be greater (overweighted) compared to such
stocks' weightings in the S&P 100. These weightings will be determined by the
Fund's Adviser and Subadviser in an effort to exceed the total return
performance of the S&P 100.
Principal Risks of the Fund
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In addition to the risks set forth below that are specific to an investment in
the Fund, there are risks common to all mutual funds.
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factor that may reduce the Fund's return
is:
Stock Market Risks
The value of equity securities rise and fall.
Independence One Equity Plus Fund Risk/Return Bar Chart and Table
The Shares offered by this prospectus are not deposits or obligations of any
bank including Michigan National Bank, and are not endorsed or guaranteed by the
U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other government agency.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Trust Shares, another Class of the Fund, as of the
calendar year-end for each of four years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 5% up to 35%.
The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's Trust Shares start of business through the
calendar year ended 1999. The light gray shaded chart features four distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Class for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1996
through 1999, The percentages noted are: ___%, 24.48%, 28.69%, and 31.64%.
The total returns shown here are for Trust Shares which is another class of
shares offered by Independence One Equity Plus Fund. Trust Shares are not
offered in this prospectus for the Fund's Class A Shares. The total returns for
Trust Shares are disclosed here because Class A Shares have only been offered
since April 14, 2000. These total returns would be substantially similar to the
annual returns for Class A Shares over the same period and would differ only to
the extent that the two classes do not have the same expenses. It is anticipated
that expenses of Class A Shares will exceed those of the Trust Shares.
The bar chart shows the variability of the Fund's Trust Shares total returns on
a calendar year-end basis.
The Fund's Trust Shares are not sold subject to a sales charge (load). The total
returns displayed above are based upon net asset value.
The Fund's Trust Shares total return from January 1, 2000 to March 31, 2000 was
- ------%.
Within the period shown in the Chart, the Fund's Trust Shares highest quarterly
return was ______% (quarter ended December 31, 1998). Its lowest quarterly
return was (10.63%) (quarter ended September 30, 1998).
Independence One Equity Plus Fund Average Annual Total Return Table
The following table represents the Fund's Trust Shares Average Annual Total
Returns for the calendar periods ended December 31, 1999. The table shows the
Fund's total returns averaged over a period of years relative to the Standard &
Poor's 100 Composite Stock Price Index (S&P 100), a broad-based market index.
Total returns for the index shown do not reflect sales charges, expenses or
other fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. Indexes are unmanaged, and it is not possible to
invest directly in an index.
Calendar Period Trust Shares 1 S&P 100
1 Year _____% _____%
Start of Performance2 _____% _____%
1The Fund's Trust Shares total returns have been adjusted to reflect the sales
charge and expenses applicable to Class A Shares. This adjustment shows the
total returns you would have received if Class A Shares had existed over the
calculation period.
2The Fund's start of performance date was September 25, 1995.
Past performance does not necessarily predict future performance. This
information provides you with historical performance so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.
What are the Fund's Fees and Expenses?
INDEPENDENCE ONE EQUITY PLUS FUND
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
the Fund's Class A Shares.
SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price).............4.00%
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or
redemption proceeds, as applicable). .......None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends (and other Distributions)
(as a percentage of offering price).............None
Redemption Fee (as a percentage of amount
redeemed, if applicable)........................None
Exchange Fee....................................None
ANNUAL FUND OPERATING EXPENSES (Before Waiver) 1
EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Management Fee2 ...............................................0.40%
Distribution (12b-1) Fee.......................................0.25%
Shareholder Services Fee.......................................None
Other Expenses.................................................0.20%
Total Annual Fund Operating Expenses...........................0.85%
- --------------------------------------------------------------------------------
1 Although not contractually obligated to do so, the Adviser will waive certain
amounts. These are shown below along with the net expenses the Fund expects to
pay for the fiscal year ending April 30, 2001.
Total Waiver of Fund Expenses...............................0.10%
Total Actual Annual Fund Operating Expenses (after waiver)..0.75%
2 The Adviser expects to voluntarily waive a portion of the managment fee. The
Adviser can terminate this voluntary waiver at any time. The management fee the
Fund expects to pay (after the voluntary waiver) will be 0.30% for the fiscal
year ending April 30, 2001.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Class A Shares with the cost of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund's Class A Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Class A Shares operating expenses are before waiver as shown
in the table and remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
..................1 YEAR............3 YEARS 5 YEARS
- -------------------------------------------------------------
10 YEARS
....................................
.......$483........$660 $852 $1,407
- ------------------------------------------------------------------
What are the Fund's Fees and Expenses?
[GRAPH APPEARS HERE]
Independence One(R) Equity Plus Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
the Fund's Class A Shares.
Shareholder Fees
Fees Paid Directly from Your Investment
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.00%
Maximum Deferred Sales Charge (Load) (as a percentage
of original purchase price or redemption proceeds, as
applicable) ....................... None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends (and other Distributions) (as a percentage of
offering price) ................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable)......................... None
Exchange Fee ...................... None
Annual Fund Operating Expenses (Before Waiver) 1
Expenses That are Deducted From Fund Assets
(as percentage of average net assets)
Management Fee 2 .................. 0.40%
Distribution (12b-1) Fee ......... 0.25%
Shareholder Services Fee ......... None
Other Expenses 3 .................. ____%
Total Annual Fund Operating Expenses ____%
1 Although not contractually obligated to do so, the Adviser will waive certain
amounts. These are shown below along with the net expenses the Fund expects to
pay for the fiscal year ending April 30, 2001.
Total Waiver of Fund Expenses . ____%
Total Annual Fund Operating Expenses (after waiver) ____%
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee the Fund expects to pay (after the anticipated voluntary waiver)
will be 0.30% for the year ending April 30, 2001.
Example
This Example is intended to help you compare the cost of investing in the Fund's
Class A Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Class A Shares for the
time periods indicated and then redeem all of your Shares at the end of those
periods. Expenses assuming no redemption are also shown. The Example also
assumes that your investment has a 5% return each year and that the Fund's Class
A Shares operating expenses are before waivers as estimated in the table and
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
Fund Expenses assuming redemption $___ $___ $___ $___
Expenses assuming no redemption $___ $___ $___ $___
Principal Securities in Which the Fund Invests
[GRAPHIC APPEARS HERE]
Equity Securities
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business.
The following describes the principal types of equity securities in which the
Fund may invest.
Common Stocks
The Fund may invest in common stocks. Common stocks are the most prevalent
type of equity security. Common stocks receive the issuer's earnings after the
issuer pays its creditors and any preferred stockholders. As a result, changes
in an issuer's earnings may influence the value of its common stock.
Temporary Defensive Investments
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher-quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.
Specific Risks of Investing in the Fund
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Stock Market Risks
. The value of equity securities in the Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. The Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's share price may
decline.
. The Adviser attempts to manage market risk by limiting the amount the Fund may
invest in each company's equity securities. However, diversification will not
protect the Fund against widespread or prolonged declines in the stock market.
What Do Shares Cost?
[GRAPHIC APPEARS HERE]
You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. Shares of the Fund are sold at net asset value (NAV). When the
Fund receives your transaction request in proper form, it is processed at the
next calculated NAV plus any applicable front-end sales charge (public offering
price). Investors who purchase, redeem or exchange through a financial
intermediary may be charged a service fee by that financial intermediary.
Financial intermediaries are authorized to accept purchase and redemption orders
from their customers on behalf of the Fund. NAV is determined at the end of
regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open. The
Fund generally values equity securities according to the last sale price in the
market in which they are primarily traded (either a national securities exchange
or the over-the-counter market), if available.
Class A Shares are sold at NAV plus a front-end sales charge as follows:
SALES CHARGE WHEN YOU PURCHASE
Class A Shares
Sales Charge as a Sales Charge as a
Purchase Amount Percentage of Percentage of NAV
Public Offering
Price
Less than $100,000 4.00% 4.17%
$100,000 but less than
$250,000 3.25% 3.36%
$250,000 but less than
$500,000 2.50% 2.56%
$500,000 but less than
$750,000 1.75% 1.78%
----------------------------------------
$750,000 but less than
$1 million 1.00% 1.01%
$1 million or greater 0.00% 0.00%
The minimum initial investment is $1,000. Subsequent investments must be in the
amounts of at least $100.
THE SALES CHARGE AT PURCHASE MAY BE REDUCED OR ELIMINATED BY:
o purchasing Shares in greater quantities to reduce the applicable sales
charge;
o combining concurrent purchases of Shares:
- by you, your spouse, and your children under age 21; or
- - of the same share class of two or more Independence One Funds (other than
money market funds);
o accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still invested
in the Fund); or
o signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).
THE SALES CHARGE WILL BE ELIMINATED WHEN YOU PURCHASE SHARES:
o within 120 days of redeeming Shares of an equal or lesser amount;
o by exchanging shares from the same share class of another Independence One
Fund (other than a money market fund);
o on Shares purchased through entities having no transaction fee agreements
with Michigan National;
o through investment professionals that receive no portion of the sales
charge; or
o as a Trustee or employee of the Fund, the Adviser, the Distributor and their
affiliates, and the immediate family members of these individuals.
If your investment qualifies for a reduction or elimination of the sales charge
as described above, you or your investment professional should notify the Fund's
Distributor at the time of purchase. If the Distributor is not notified, you
will receive the reduced sales charge only on additional purchases, and not
retroactively on previous purchases.
How is the Fund Sold?
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The Fund offers three share classes: Class A Shares, Class B Shares and Trust
Shares, each representing interests in a single portfolio of securities. This
prospectus relates only to Class A Shares. Each Share class has different sales
charges and other expenses, which affect its performance. Contact your
investment professional or call 1-800-334-2292 for more information concerning
the other class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to institutions, corporations, fiduciaries and individuals.
When the Distributor receives marketing fees and sales charges, it may pay some
or all of them to investment professionals. The Distributor and its affiliates
may pay out of their assets other amounts (including items of material value) to
investment professionals for marketing and servicing Shares. The Distributor is
a subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN (CLASS A SHARES)
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class A Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.
How to Purchase Shares
[GRAPHIC APPEARS HERE]
You may purchase Shares through Michigan National Bank and Independence One
Brokerage Services, Inc. ("Independence One"), or through brokers or dealers
which have a sales agreement with the Distributor. The Fund reserves the right
to reject any request to purchase or exchange Shares.
[GRAPHIC APPEARS HERE]
Through an Investment Professional
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive
the public offering price if the investment professional forwards the order to
the Fund before 5:00 p.m. on the same day and the Fund receives payment within
three business days.
[GRAPHIC APPEARS HERE]
Through Michigan National Bank or Independence One
. Establish your account with the Fund by calling toll free 1-800-334-2292; and
. Send your payment to the Fund by Federal Reserve wire or check.
Orders must be received by 4:00 (Eastern time) in order for Shares to be
purchased at that day's price. For Shares purchased directly from the
Distributor, payment by wire or check must be received within three business
days.
[GRAPHIC APPEARS HERE]
By Wire
Place your order with an investment professional or call 1-800-334-2292 and send
your wire to:
Federated Shareholder Services Company c/o Michigan National Bank
Farmington Hills, MI
Dollar Amount of Wire
For Credit to: Independence One Equity Plus Fund - Class A Shares
Account Number: 6856238933
ABA Number: 072000805
Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
[GRAPHIC APPEARS HERE]
By Check
Make your check payable to "Independence One Equity Plus Fund--Class A Shares",
note your account number on the check, and mail it to:
Independence One Mutual Funds
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or the Fund).
Through an Exchange
You may purchase Shares through an exchange from Class A Shares of Independence
One Fixed Income Fund, Class K Shares of Independence One Prime Money Market
Fund and Shares of Federated Michigan Intermediate Municipal Trust. You must
meet the minimum initial investment requirement for purchasing Shares and both
accounts must have identical registrations.
[GRAPHIC APPEARS HERE]
By Systematic Investment Program
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis in a minimum amount of $100. A shareholder may apply
for participation in this program through Michigan National Bank by calling
1-800-334-2292.
By Automated Clearing House (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
Retirement Investments
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
How to Redeem and Exchange Shares
You should redeem or exchange Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. through Michigan National Bank or Independence One.
[GRAPHIC APPEARS HERE]
Through an Investment Professional
Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.
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Through Michigan National Bank or Independence One
By Telephone
You may redeem or exchange Shares by calling 1-800-334-2292 once you have
completed the appropriate authorization form for telephone transactions. If you
call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern
time) you will receive a redemption amount based on that day's NAV.
[GRAPHIC APPEARS HERE]
By Mail
You may redeem or exchange Shares by mailing a written request to the Fund
through Michigan National Bank, Independence One or an authorized broker.
Shareholders redeeming or exchanging through an authorized broker should mail
requests directly to the broker. You will receive a redemption amount based on
the next calculated NAV after the Fund receives your written request in proper
form.
Redemption or exchange requests through Michigan National Bank or Independence
One should be sent to:
Independence One(R) Mutual Funds
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
All requests must include:
. Fund Name, account number and account registration;
. amount to be redeemed or exchanged;
. signatures of all shareholders exactly as registered; and
. if exchanging, the Fund Name, account number and account registration into
which you are exchanging.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days;
. a redemption is payable to someone other than the shareholder(s) of record;
or
. if exchanging (transferring) into another fund with a different shareholder
registration.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
Payment Methods for Redemptions
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
Limitations on Redemption Proceeds
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
Redemptions from Retirement Accounts
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
Exchange Privileges
You may exchange Shares of the Fund into Class A Shares of Independence One
Fixed Income Fund, Class K Shares of Independence One Prime Money Market Fund
and Shares of Federated Michigan Intermediate Municipal Trust. Shareholders of
the Fund have access to these funds ("participating funds") through an exchange
program.
To execute an order to exchange, you must:
. ensure that the account registrations are identical;
. meet any minimum initial investment requirements; and
. receive a prospectus for the fund into which you wish to exchange.
An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.
The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other participating funds.
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Systematic Withdrawal Program
Shareholders may automatically redeem Shares in an amount directed by the
shareholder on a regular basis. 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. To apply for
participation in this program, contact Michigan National Bank at 1-800-334-2292.
This program may reduce, and eventually deplete, your account. Payments should
not be considered yield or income.
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Additional Conditions
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund does not issue share certificates.
Account and Share Information
Confirmations and Account Statements
You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.
Dividends and Capital Gains
The Fund declares and pays dividends quarterly. Dividends are paid to all
shareholders invested in the Fund on the record date. The record date is the
date on which a shareholder must officially own Shares in order to earn a
dividend.
In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
If you purchase Shares just before the Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.
Accounts with Low Balances
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.
Tax Information
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be both dividends and capital gains.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state, and local tax liability.
Who Manages the Fund?
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The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Michigan National Bank. The Adviser manages the Fund's assets,
including buying and selling portfolio securities. The Adviser's address is
27777 Inkster Road, Mail Code 10-52, Farmington Hills, Michigan, 48333-9065.
The Adviser has delegated daily management of some of the Fund's assets to a
Sub-Adviser, Sosnoff Sheridan Weiser Corporation (doing business as Sosnoff
Sheridan Group), who is paid by the Adviser and not by the Fund. Sosnoff
Sheridan Weiser Corporation is controlled by Tom Sosnoff, its Director and
President, and Scott Sheridan, its Director, Executive Vice-President and
Secretary. The Corporation's address is 440 South LaSalle Street, Suite 2301,
Chicago, Illinois 60605.
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 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 $9 billion. Of this amount, IOCM and the Trust Division have
investment discretion over $1.7 billion.
Michigan National Bank has managed mutual funds since May 1989. The Trust
Division has managed pools of commingled funds since 1964.
Sharon Dischinger is the portfolio manager of the Fund. Ms. 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 Equity Plus Fund since its inception. Ms. Dischinger
joined Michigan National in 1990 and is currently the head equity trader. She is
also a General Securities Representative. Prior to joining Michigan National,
Ms. Dischinger was the head equity trader at Morison Asset Management. Ms.
Dischinger is responsible for the supervision of Sosnoff Sheridan Weiser
Corporation's management of the Equity Plus Fund and Small Cap Fund portfolios.
Advisory Fees
The Adviser receives 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 operating expenses of the Fund.
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 S&P 100 Index which
are 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.
Financial Information
[GRAPHIC APPEARS HERE]
Financial Highlights
The Fund's fiscal year end is April 30. As this is the Fund's Class A Shares
first fiscal year, financial information is not yet available.
A Statement of Additional Information (SAI) dated April 14, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Trust Shares
Semi-Annual Report and will be contained in the Class A Shares Annual Report as
soon as it becomes available. The Annual Report's Management Discussion &
Analysis discusses market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. To
obtain the SAI, the Annual Report, Semi-Annual Report and other information
without charge, and make inquiries, call your investment professional or the
Fund at 1-800-334-2292.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, D.C. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, D.C 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
Independence One(R)
Mutual Funds
Independence One
Equity Plus Fund
Class A Shares
800-334-2292
www.MichiganNational.com
Investment Company Act File No: 811-5752
Cusip ________
- --------------
[INDEPENDENCE ONE LOGO] .....MICHIGAN NATIONAL LOGO]
INDEPENDENCE ONE MUTUAL FUNDS
INDEPENDENCE ONE EQUITY PLUS FUND
CLASS A SHARES
STATEMENT OF ADDITIONAL INFORMATION
APRIL 14, 2000
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the Class A Share prospectus of the Independence One
Equity Plus Fund dated April 14, 2000.
Obtain the prospectus without charge by calling 1-800-334-2292.
CONTENTS
HOW IS THE FUND ORGANIZED?............................................2
SECURITIES IN WHICH THE FUND INVESTS..................................2
WHAT DO SHARES COST?..................................................9
HOW IS THE FUND SOLD?.................................................9
EXCHANGING SECURITIES FOR FUND SHARES................................10
SUBACCOUNTING SERVICES...............................................10
REDEMPTION IN KIND...................................................10
MASSACHUSETTS PARTNERSHIP LAW........................................10
ACCOUNT AND SHARE INFORMATION........................................11
TAX INFORMATION......................................................11
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?.......................11
FEES PAID BY THE FUND FOR SERVICES...................................14
HOW DOES THE FUND MEASURE PERFORMANCE?...............................14
ADDRESSES....................................................BACK COVER
Federated Securities Corp., Distributor,
subsidiary of Federated Investors, Inc.
_________ (4/00)
HOW IS THE FUND ORGANIZED?
Independence One Mutual Funds (Trust) is an open-end, management investment
company that was established under the laws of the Commonwealth of Massachusetts
on January 9, 1989. The Trust may offer separate series of shares representing
interests in separate portfolios of securities. The Trust currently offers eight
portfolios: Independence One Prime Money Market Fund (Class K Shares and Class Y
Shares), Independence One U.S. Treasury Money Market Fund (Class K Shares) and
Independence One Michigan Municipal Cash Fund (Class K Shares) (the "Money
Market Funds"); Independence One U.S. Government Securities Fund (Class K
Shares) and Independence One Fixed Income Fund (Class A Shares, Class B Shares
and Trust Shares) (the "Income Funds"); and Independence One Equity Plus Fund
(Class A Shares, Class B Shares and Trust Shares), Independence One Small Cap
Fund (Class Y Shares) and Independence One International Equity Fund (Class Y
Shares) (the "Equity Funds"). This SAI relates to Class A Shares of Independence
One Equity Plus Fund only.
SECURITIES IN WHICH THE FUND INVESTS
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective. The
following tables indicate which types of securities are a: o P = PRINCIPAL
investment of the Fund; o A = ACCEPTABLE (but not principal) investment of the
Fund; or o N = NOT AN ACCEPTABLE investment of the Fund.
- ------------------------------------
SECURITIES EQUITY
PLUS FUND
- ------------------------------------
COMMON STOCKS P
- ------------------------------------
PREFERRED STOCKS N
- ------------------------------------
WARRANTS N
- ------------------------------------
- ------------------------------------
WORLD EQUITY BENCHMARK N
SHARES
- ------------------------------------
- ------------------------------------
OPTIMIZED PORTFOLIOS AS N
LISTED SECURITIES
- ------------------------------------
- ------------------------------------
TREASURY SECURITIES A
- ------------------------------------
- ------------------------------------
AGENCY SECURITIES A
- ------------------------------------
- ------------------------------------
CORPORATE DEBT A
SECURITIES
- ------------------------------------
- ------------------------------------
COMMERCIAL PAPER A
- ------------------------------------
- ------------------------------------
DEMAND INSTRUMENTS A
- ------------------------------------
- ------------------------------------
MUNICIPAL SECURITIES N
- ------------------------------------
- ------------------------------------
MORTGAGE BACKED N
SECURITIES
- ------------------------------------
- ------------------------------------
COLLATERALIZED MORTGAGE N
OBLIGATIONS
- ------------------------------------
- ------------------------------------
ASSET BACKED SECURITIES N
- ------------------------------------
- ------------------------------------
ZERO COUPON SECURITIES N
- ------------------------------------
- ------------------------------------
BANK INSTRUMENTS A
- ------------------------------------
- ------------------------------------
CREDIT ENHANCEMENT N
- ------------------------------------
- ------------------------------------
CONVERTIBLE SECURITIES N
- ------------------------------------
- ------------------------------------
TAX EXEMPT SECURITIES N
- ------------------------------------
- ------------------------------------
GENERAL OBLIGATION BONDS N
- ------------------------------------
- ------------------------------------
SPECIAL REVENUE BONDS N
- ------------------------------------
- ------------------------------------
PRIVATE ACTIVITY BONDS N
- ------------------------------------
- ------------------------------------
MUNICIPAL NOTES N
- ------------------------------------
- ------------------------------------
VARIABLE RATE DEMAND N
INSTRUMENTS
- ------------------------------------
- ------------------------------------
MUNICIPAL LEASES N
- ------------------------------------
- ------------------------------------
FOREIGN SECURITIES N
- ------------------------------------
- ------------------------------------
FOREIGN EXCHANGE N
CONTRACTS
- ------------------------------------
- ------------------------------------
FOREIGN GOVERNMENT N
SECURITIES
- ------------------------------------
- ------------------------------------
DERIVATIVES A
-----------
- ------------------------------------
FUTURES CONTRACTS (5) A
- ------------------------------------
- ------------------------------------
OPTIONS (6) A
- ------------------------------------
- ------------------------------------
REPURCHASE AGREEMENTS A
- ------------------------------------
- ------------------------------------
REVERSE REPURCHASE A
AGREEMENTS
- ------------------------------------
- ------------------------------------
DELAYED DELIVERY N
TRANSACTIONS (7)
- ------------------------------------
- ------------------------------------
SECURITIES LENDING A
- ------------------------------------
- ------------------------------------
INVESTING IN SECURITIES A
OF OTHER INVESTMENT
COMPANIES
- ------------------------------------
1. The value of futures contracts will not exceed 20% of the Equity Plus Fund's
total assets. The Equity Plus Fund will not enter into futures contracts and
options on futures contracts, for purposes other than "bona fide hedging" as
defined in regulations adopted by the Commodity Futures Trading Commission for
which aggregate initial margin and premiums paid for unexpired options exceed 5%
of the fair market value of the Fund's total assets.
2. The Equity Plus 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.
SECURITIES DESCRIPTIONS AND TECHNIQUES
EQUITY SECURITIES
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value may increase with the value of the issuer's business. The following
describes the types of equity securities in which the Fund invests.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings may
influence the value of its common stock.
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields. The following describes the types of fixed income securities in
which the Fund may invest.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the
lowest credit risks.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities. Agency
securities are generally regarded as having low credit risks, but not as low
as treasury securities.
The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the market and prepayment risks of these mortgages.
CORPORATE DEBT SECURITIES
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans
to companies. The credit risks of corporate debt securities vary widely among
issuers.
In addition, the credit risk of an issuer's debt security may vary based on
its priority for repayment. For example, higher ranking (senior) debt
securities have a higher priority than lower ranking (subordinated)
securities. This means that the issuer might not make payments on
subordinated securities while continuing to make payments on senior
securities. In addition, in the event of bankruptcy, holders of senior
securities may receive amounts otherwise payable to the holders of
subordinated securities. Some subordinated securities, such as trust
preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer
any payment that would reduce its capital below regulatory requirements.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default. DEMAND INSTRUMENTS Demand instruments are corporate debt
securities that the issuer must repay upon demand. Other demand
instruments require a third party, such as a dealer or bank, to repurchase
the security for its face value upon demand. The Fund treats demand
instruments as short-term securities, even though their stated maturity
may extend beyond one year.
BANK INSTRUMENTS
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks.
DERIVATIVE CONTRACTS Derivative contracts are financial instruments that require
payments based upon changes in the values of designated (or underlying)
securities, currencies, commodities, financial indices or other assets. Some
derivative contracts (such as futures, forwards and options) require payments
relating to a future trade involving the underlying asset. Other derivative
contracts (such as swaps) require payments relating to the income or returns
from the underlying asset. The other party to a derivative contract is referred
to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
The Fund may trade in the following types of derivative contracts.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset is
commonly referred to as buying a contract or holding a long position in the
asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
The Fund may buy and sell stock index futures contracts, financial futures
and futures on portfolio securities. OPTIONS Options are rights to buy or
sell an underlying asset for a specified price (the exercise price) during,
or at the end of, a specified period. A call option gives the holder (buyer)
the right to buy the underlying asset from the seller (writer) of the option.
A put option gives the holder the right to sell the underlying asset to the
writer of the option. The writer of the option receives a payment, or
premium, from the buyer, which the writer keeps regardless of whether the
buyer uses (or exercises) the option.
The Fund may:
Buy call options on portfolio securities and on stock index and financial
futures contracts in anticipation of an increase in the value of the
underlying asset; Buy put options on portfolio securities and on stock index
and financial futures contracts in anticipation of a decrease in the value of
the underlying asset; and Buy or write options to close out existing options
positions. The Fund may also write call options on portfolio securities to
generate income from premiums, and in anticipation of a decrease or only
limited increase in the value of the underlying asset. If a call written by
the Fund is exercised, the Fund foregoes any possible profit from an increase
in the market price of the underlying asset over the exercise price plus the
premium received. When the Fund writes options on futures contracts, it will
be subject to margin requirements similar to those applied to futures
contracts.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from
a dealer or bank and agree to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
the Fund's return on the transaction. This return is unrelated to the
interest rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to counterparty risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to counterparty risks.
SECURITIES LENDING
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if
the market value of the loaned securities increases. Also, the borrower must
pay the Fund the equivalent of any dividends or interest received on the
loaned securities. The Fund will reinvest cash collateral in securities that
qualify as an acceptable investment for the Fund. However, the Fund must pay
interest to the borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower.
The Fund will not have the right to vote on securities while they are on
loan, but they will terminate a loan in anticipation of any important vote.
The Fund may pay administrative and custodial fees in connection with a loan
and may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker.
Securities lending activities are subject to market risks and counterparty
risks. These transactions create leverage risks. ASSET COVERAGE In order to
secure their obligations in connection with derivatives contracts or special
transactions, the Fund will either own the underlying assets, enter into an
offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has
other readily marketable assets to set aside, it cannot trade assets used to
secure such obligations without entering into an offsetting derivative
contract or terminating a special transaction. This may cause the Fund to
miss favorable trading opportunities or to realize losses on derivative
contracts or special transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
risks are described below.
STOCK MARKET RISKS
o The value of equity securities in a Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. A
Fund's portfolio will reflect changes in prices of individual portfolio
stocks or general changes in stock valuations. Consequently, the Fund's
share price may decline.
o The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company's equity securities. However, diversification will
not protect the Fund against widespread or prolonged declines in the stock
market.
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 may be necessary for
clearance of transactions. The deposit or payment by the Fund of initial or
variation margin in connection with financial 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 borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or 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. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of the Fund's total
assets are outstanding.
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 collateralized by
such securities.
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.
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.
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.
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 outstanding voting securities of any
one issuer.
The above Investment Limitations cannot be changed unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act of 1940 (1940 Act). The following limitations, however,
may be changed by the Board of Trustees (Board) without shareholder approval.
Shareholders will be notified before any material change in these limitations
becomes effective.
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 time deposits with maturities over seven days.
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 %. 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 PUT OPTIONS
The Fund will not purchase put options on securities unless the securities
are held in the Fund's portfolio and not more than 5% of the value of the
Fund's total assets would be invested in premiums on open put option
positions.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities are
held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the
amount of any further payment.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for purpose 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 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."
DETERMINING MARKET VALUE OF SECURITIES Market values of the Fund's portfolio
securities are determined as follows:
for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;
in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices;
o for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;
o futures contracts and options are valued at market values established by the
exchanges on which they are traded at the close of trading on such exchanges.
Options traded in the over-the-counter market are valued according to the
mean between the last bid and the last asked price for the option as provided
by an investment dealer or other financial institution that deals in the
option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value;
for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and
for all other securities at fair value as determined in good faith by the
Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.
WHAT DO SHARES COST?
You can purchase, redeem or exchange Fund shares any day the New York Stock
Exchange (NYSE) is open. The Fund's net asset value (NAV) per Shares fluctuates
and is based on the market value of all securities and other assets of the Fund.
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE
You can reduce or eliminate the applicable front-end sales charge, as follows:
QUANTITY DISCOUNTS
Larger purchases of the same Share class reduce or eliminate the sales charge
you pay. You can combine purchases of Shares made on the same day by you, your
spouse and your children under age 21. In addition, purchases made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.
ACCUMULATED PURCHASES
If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.
CONCURRENT PURCHASES
You can combine concurrent purchases of the same share class of two or more
Independence One Funds in calculating the applicable sales charge.
LETTER OF INTENT - CLASS A SHARES
You can sign a Letter of Intent committing to purchase a certain amount of the
same class of Shares within a 13-month period to combine such purchases in
calculating the sales charge. The Fund's custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the Custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the Custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.
REINVESTMENT PRIVILEGE
You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV without any sales charge.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN (CLASS A SHARES)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets. The Fund may compensate the
Distributor more or less than its actual marketing expenses. In no event will
the Fund pay for any expenses of the Distributor that exceed the maximum Rule
12b-1 Plan fee.
For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.
EXCHANGING SECURITIES FOR FUND SHARES
You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as they value their assets. This exchange is
treated as a sale of your securities for federal tax purposes.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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 its
property 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 itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
ACCOUNT AND SHARE 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 the Trust have
equal voting rights, except that in matters affecting only a particular Fund
class are entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of March 14, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Trust Shares:
Pierson & Co., Farmington Hills, MI, owned approximately10,973,032 Trust Shares
(81%) and
Fidelity Investments Institutional Operations Co. Inc., owned approximately
2,099,494 Trust Shares (15.50%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, they will not receive special tax treatment and will pay federal income
tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year. The Trust is comprised of eight funds.
As of March 14, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act. A pound sign (#) denotes a Member of the Board's
Executive Committee, which handles the Board's responsibilities between its
meetings.
NAME AGGREGATE
BIRTH DATE COMPENSATION
ADDRESS FROM TRUST
POSITION WITH TRUST PRINCIPAL OCCUPATIONS
FOR PAST FIVE YEARS
ROBERT E. BAKER Retired; formerly, Vice Chairman, $12,000
Birth Date: May 6, Chrysler Financial Corporation.
1930
4327 Stoneleigh
Road
Bloomfield Hills,
MI
TRUSTEE
HAROLD BERRY Managing Partner, Berry Enterprises; $12,000
Birth Date: Chairman, Independent Sprinkler
September 17, 1925 Companies, Inc.; Chairman, Berry
290 Franklin Center Ziegelman & Company.
29100 Northwestern
Highway
Southfield, MI
TRUSTEE
NATHAN FORBES* President, Forbes/Cohen Properties, $12,000
Birth Date: President and Partner, The Forbes
December 5, 1962 Company.
1945 Long Point
Drive
Bloomfield Hills, MI
TRUSTEE
HARRY J. Chairman, Nederlander Enterprises. $10,800
NEDERLANDER#
Birth Date:
September 5, 1917
231 S. Old
Woodward, Suite 219
Birmingham, MI
TRUSTEE
THOMAS S. WILSON# President and Executive Administrator $12,000
Birth Date: October of the Detroit Pistons; President and
8, 1949 CEO, Palace Sports Entertainment.
Two Championship
Drive
Auburn Hills, MI
TRUSTEE
EDWARD C. GONZALES President, Executive Vice President
Birth Date: October and Treasurer of some of the Funds in $0
22, 1930 the Federated Fund Complex; Vice
Federated Investors Chairman, Federated Investors, Inc.;
Tower Trustee, Federated Administrative
1001 Liberty Avenue Services; formerly: Trustee or
Pittsburgh, PA Director of some of the Funds in the
PRESIDENT AND Federated Fund Complex; CEO and
TREASURER Chairman, Federated Administrative
Services; Vice President, Federated
Investment Management Company,
Federated Investment Counseling,
Federated Global Investment Management
Corp. and Passport Research, Ltd.;
Director and Executive Vice President,
Federated Securities Corp.; Director,
Federated Services Company; Trustee,
Federated Shareholder Services Company.
JEFFREY W. STERLING Treasurer of the Federated Fund $0
Birth Date: Complex; Vice President - Funds
February 5, 1947 Financial Services Division, Federated
Federated Investors Investors, Inc.; formerly: various
Tower management positions within Funds
1001 Liberty Avenue Financial Services Division of
Pittsburgh, PA Federated Investors, Inc.
VICE PRESIDENT AND
ASSISTANT TREASURER
C. GRANT ANDERSON Corporate Counsel, Federated $0
Birth Date: Investors, Inc.
November 6, 1940
Federated Investors
Tower
1001 Liberty Avenue
Pittsburgh, PA
SECRETARY
- ----------------------------------------------------------------------------
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). 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 the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.
RESEARCH SERVICES
Research services 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 may be used by the Adviser in advising other accounts. To the extent
that receipt of these services may replace 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 those 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, 1999, 1998 and 1997, the Trust Shares of
the Equity Plus Fund paid total brokerage commissions of $56,051 $20,319 and
$26,727, respectively.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Administrative Services, a subsidiary of Federated, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Administrative
Services provides these at the following annual rate of the average aggregate
daily net assets of the Trust as specified below:
MAXIMUM AVERAGE AGGREGATE DAILY NET ASSETS OF THE ADMINISTRATIVE FEE TRUST 0.150
of 1% on the first $250 million 0.125 of 1% on the next $250 million 0.100 of 1%
on the next $250 million 0.075 of 1% on assets in excess of $750 million The
administrative fee received during any fiscal year shall be at least $50,000 per
portfolio. Federated Administrative Services may voluntarily waive a portion of
its fee and may reimburse the Fund for expenses.
Federated Administrative Services also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments for a
fee based on the Fund's assets plus out-of-pocket expenses.
CUSTODIAN
Michigan National Bank, Farmington Hills, Michigan, is custodian for the
securities and cash of the Fund. Under the Custodian Agreement, Michigan
National Bank holds the Fund's portfolio securities in safekeeping and keeps all
necessary records and documents relating to its duties.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, KPMG LLP, plans and performs their audit
so that it may provide an opinion as to whether the Fund's financial statements
and financial highlights are free of material misstatements.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEES PAID BY THE FUND FOR SERVICES
- -------------------------------------------------------------------------------------------
TRUST SHARES ADVISORY FEE PAID/ SUB-ADVISORY FEE ADMINISTRATIVE FEE
ADVISORY FEE WAIVED PAID/ PAID/
SUB-ADVISORY FEE ADMINISTRATIVE FEE
WAIVED WAIVED
----------------------------------------------
--------------------------------------------------------------------------
FOR THE FISCAL YEAR ENDED FOR THE FISCAL YEAR FOR THE FISCAL YEAR
APRIL 30, ENDED ENDED
APRIL 30, APRIL 30,
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------
EQUITY PLUS FUND $946,337/$758,348/$588,469/ $85,083$65,680/$50,260$241,610/$202,102$160,370/
$259,906 $284,380 $262,493 $0 $0 $0 $80,996 $88,264
- -------------------------------------------------------------------------------------------
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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 annual reinvestment of all
dividends and distributions.
When Shares of a Fund are in existence for less than a year, the Fund may
advertise cumulative total return for that specific period of time, rather than
annualizing the total return.
YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The effective yield is calculated by
compounding the unannualized base-period return by: adding one to the
base-period return, raising the sum to the 365/7th power; and subtracting one
from the result. The yield and effective yield do not necessarily reflect income
actually earned by Shares 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 investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which they invest, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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, STANDARD & POOR'S 100 INDEX
AND STANDARD & POOR'S SMALLCAP 600 COMPOSITE STOCK PRICE INDEX, which are
composite indices of common stocks in industry, transportation, and financial
and public utility companies, can be compared to the total returns of funds
whose portfolios are invested primarily in common stocks. In addition, the
Standard & Poor's indices assume reinvestment of all dividends paid by stocks
listed on the index. Taxes due on any of these distributions are not included,
nor are brokerage or other fees calculated in Standard & Poor's figures.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in the maximum offering price over a specific period
of time. From time to time, the Fund will quote its Lipper ranking and
category in advertising and sales literature.
o MORNINGSTAR, INC. is 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.
77
ADDRESSES
INDEPENDENCE ONE MUTUAL FUNDS
Equity Plus Fund
Class A Shares
5800 Corporate Drive
Pittsburgh, PA 15237-7010
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Michigan National Bank.
27777 Inkster Road
Mail Code 10-30
Farmington Hills, Michigan 48333-9065
INVESTMENT SUB-ADVISER
Sosnoff Sheridan Weiser Corporation
440 South LaSalle Street
Suite 2301
Chicago, Illinois 60605
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, MA 02266-8600
INDEPENDENT AUDITORS
KPMG LLP
99 High Street
Boston, MA 02110-2371
Cusip __________
Prospectus
Independence One(R)
Mutual Funds
Independence One(R) Mutual Funds offers eight portfolios, including three equity
funds, two income funds and three money market funds. This prospectus relates to
Class A Shares and Class B Shares of Independence One Fixed Income Fund.
Independence One
Fixed Income Fund
Class A Shares
Class B Shares
April 14, 2000
[LOGO APPEARS HERE]
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense. For
more information about any of the Independence One(R) Mutual Funds, please call
800-334-2292 for a prospectus, which should be read carefully before investing.
Independence One(R) Mutual Funds
Contents
Fund Goals, Strategies, Performance and Risk 1
Principal Risks of the Fund 2
What are the Fund's Fees and Expenses? 4
Principal Securities in Which the Fund Invests 5
Specific Risks of Investing in the Fund 6
What do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 8
How to Redeem and Exchange Shares 10
Account and Share Information 13
Who Manages the Fund? 14
Financial Information 16
Fund Goals, Strategies, Performance and Risk
[GRAPHIC APPEARS HERE]
The following describes the investment goals, strategies, and principal risks of
the Fund. There can be no assurance that the Fund will achieve its goal.
Independence One Fixed Income Fund
Goal: Seeks to provide total return.
Strategy: The Fund pursues its investment objective by investing at least 65% of
its assets in a diversified portfolio of fixed income securities consisting
primarily of corporate obligations rated A or higher by a national rating
agency; U.S. government securities; and mortgage backed and asset backed
securities. The Fund will attempt to deliver share price and/or income
performance in excess of the bond market in general as measured by such broad
indices as the Lehman Brothers Intermediate Government/Corporate Bond Index. The
Fund currently expects to maintain an average dollar-weighted maturity of
between 3 and 8 years, although securities of longer or shorter maturities may
be purchased.
In an effort to manage the Fund's total return, the Adviser attempts to
anticipate the opportunities and risks of changes in market interest rates. When
the Adviser expects that market interest rates may decline, it may extend the
average maturity of the Fund's portfolio, and when, in the Adviser's judgment,
market interest rates may rise, it may shorten the average maturity of the Fund.
The Adviser may also attempt to improve the Fund's total return by weighing the
relative value of the various types of fixed income securities having similar
maturities in selecting portfolio securities.
Principal Risks of the Fund
[GRAPHIC APPEARS HERE]
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's return
are:
Credit Risks
There is a possibility that issuers of securities in which the Fund may invest
may default in the payment of interest or principal on the securities when due,
which would cause the Fund to lose money.
Interest Rate Risks
Prices of fixed income securities rise and fall in response to interest rate
changes. Interest rate changes have a greater effect on the price of fixed
income securities with longer durations.
Call Risks
The Fund's performance may be adversely affected by the possibility that an
issuer of a security held by the Fund may redeem the security prior to maturity
at a price below its current market value.
Prepayment Risks
When homeowners prepay their mortgages in response to lower interest rates, the
Fund will be required to reinvest the proceeds at the lower interest rates
available. Also, when interest rates fall, the price of mortgage backed
securities may not rise to as great an extent as that of other fixed income
securities.
The Shares offered by this prospectus are not deposits or obligations of any
bank including Michigan National Bank, and are not endorsed or guaranteed by the
U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other government agency.
Independence One Fixed Income Fund Risk/Return Bar Chart and Table
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Trust Shares, another Class of the Fund, as of the
calendar year-end for each of four years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 5% up to 35%.
The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's Trust Shares start of business through the
calendar year ended 1999. The light gray shaded chart features four distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Class for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1996
through 2000, The percentages noted are: ___%, 3.45%, 7.47% and 7.77%.
The total returns shown here are for Trust Shares which is another class of
shares offered by Independence One Fixed Income Fund. Trust Shares are not
offered in this prospectus for the Fund's Class A and B Shares. The total
returns for Trust Shares are disclosed here because Class A and B Shares have
only been offered since April 14, 2000. These total returns would be
substantially similar to the annual returns for Class A and B Shares over the
same period and would differ only to the extent that the classes do not have the
same expenses. It is anticipated that expenses of Class A and B Shares will
exceed those of the Trust Shares.
The bar chart shows the variability of the Fund's Trust Shares total returns on
a calendar year-end basis.
The Fund's Trust Shares are not sold subject to a sales charge (load). The total
returns displayed above are based upon net asset value.
The Fund's Trust Shares total return from January 1, 2000 to March 31, 2000 was
- ------%.
Within the period shown in the Chart, the Fund's Trust Shares highest quarterly
return was ______% (quarter ended December 31, 1998). Its lowest quarterly
return was (10.63%) (quarter ended September 30, 1998).
Independence One Fixed Income Fund Average Annual Total Return Table
The following table represents the Fund's Trust Shares Average Annual Total
Returns for the calendar periods ended December 31, 1999. The table shows the
Fund's total returns averaged over a period of years relative to the Standard &
Poor's 100 Composite Stock Price Index (S&P 100), a broad-based market index.
Total returns for the index shown do not reflect sales charges, expenses or
other fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. Indexes are unmanaged, and it is not possible to
invest directly in an index.
Calendar Period Trust Shares 1 S&P 100
1 Year _____% _____%
Start of Performance2 _____% _____%
1The Fund's Trust Shares total returns have been adjusted to reflect the sales
charge and expenses applicable to Class A Shares. This adjustment shows the
total returns you would have received if Class A Shares had existed over the
calculation period.
2The Fund's start of performance date was September 25, 1995.
Past performance does not necessarily predict future performance. This
information provides you with historical performance so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.
WHAT ARE THE FUND'S FEES AND EXPENSES?
INDEPENDENCE ONE FIXED INCOME FUND
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
the Fund's Class A and B Shares.
SHAREHOLDER FEES CLASS A CLASS
B
FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases (as a 4.00% None
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of None 5.00%
original purchase price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None None
(and other Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None None
applicable)
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES (Before Waiver)1
EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS (AS PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fee2 0.75% 0.75%
Distribution (12b-1) Fee 0.25% 0.75%
Shareholder Services Fee None 0.25%
Other Expenses 0.38% 0.38%
Total Annual Fund Operating Expenses 1.38% 2.13%
1Although not contractually obligated to do so, the Adviser will waive certain
amounts. These are shown below along with the net expenses the Fund expects to
PAY for the fiscal year ending April 30, 2001.
Total Waiver of Fund Expenses 0.45% 0.45%
Total Actual Annual Fund Operating Expenses (after waiver) 0.93% 1.68%
2 The Adviser voluntary will waive a portion of the management fee. The advisor
can terminate this voluntary waiver at any time. The management fee that the
Fund expects to pay (after the anticipated voluntary waiver) will be 0.30% for
the fiscal year ending April 30, 2001.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Class A and B Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Class A and B Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. Expenses assuming no redemption are also shown. The Example also
assumes that your investment has a 5% return each year and that the Fund's Class
A and B Shares operating expenses are BEFORE WAIVERS as shown in the table and
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A
Expenses assuming $535 $819 $1,125 $1,991
redemption
Expenses assuming no $535 $819 $1,125 $1,991
redemption
CLASS B
Expenses assuming $716 $967 $1,344 $1,912
redemption
Expenses assuming no $216 $667 $1,144 $1,912
redemption
Principal Securities in Which the Fund Invests
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Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the principal types of fixed income securities in which
the Fund may invest.
Treasury Securities
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers. In addition, the credit risk of an issuer's debt security may vary
based on its priority for repayment. For example, higher ranking (senior) debt
securities have a higher priority than lower ranking (subordinated) securities.
This means that the issuer might not make payments on subordinated securities
while continuing to make payments on senior securities. In addition, in the
event of bankruptcy, holders of senior securities may receive amounts otherwise
payable to the holders of subordinated securities. Some subordinated securities,
such as trust preferred and capital securities notes, also permit the issuer to
defer payments under certain circumstances. For example, insurance companies
issue securities known as surplus notes that permit the insurance company to
defer any payment that would reduce its capital below regulatory requirements.
Commercial Paper
The Fund may invest in commercial paper. Commercial paper is an issuer's
obligation with a maturity of less than nine months. Companies typically issue
commercial paper to pay for current expenditures. Most issuers constantly
reissue their commercial paper and use the proceeds (or bank loans) to repay
maturing paper. If the issuer cannot continue to obtain liquidity in this
fashion, its commercial paper may default.
Demand Instruments
Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.
Mortgage Backed Securities
The mortgage backed securities which may be held by the Fund represent interests
in pools of mortgages. The mortgages that comprise a pool normally have similar
interest rates, maturities and other terms. Mortgages may have fixed or
adjustable interest rates. Interests in pools of adjustable rate mortgages are
known as ARMs. Mortgage backed securities come in a variety of forms. Many have
extremely complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and pre-payments from the underlying mortgages.
As a result, the holders assume all the prepayment risks of the underlying
mortgages.
Collateralized Mortgage Obligations (CMOs)
CMOs, including interests in real estate mortgage investment conduits
(REMICs), allocate payments and prepayments from an underlying pass-through
certificate among holders of different classes of mortgage backed securities.
The Fund will only invest in CMOs which, at the time of purchase, are rated
AAA by a nationally recognized statistical rating organization ("NRSRO") or
are of comparable quality as determined by the Adviser, and which may be: (a)
collateralized by pools of mortgages in which each mortgage is guaranteed as
to payment of principal and interest by an agency or instrumentality of the
U.S. government; (b) collateralized by pools of mortgages in which payment of
principal and interest is guaranteed by the issuer and such guarantee is
collateralized by U.S. government securities; or (c) collateralized by pools
of mortgages without a government guarantee as to payment of principal and
interest, but which have some form of credit enhancement. This creates
different prepayment and interest rate risks for each CMO class.
Sequential CMOs
In a sequential pay CMO, one class of CMOs receives all principal payments
and prepayments. The next class of CMOs receives all principal payments after
the first class is paid off. This process repeats for each sequential class
of CMO. As a result, each class of sequential pay CMOs reduces the prepayment
risks of subsequent classes. The degree of increased or decreased prepayment
risks depends upon the structure of the CMOs. However, the actual returns on
any type of mortgage backed security depend upon the performance of the
underlying pool of mortgages, which is difficult to predict and will vary
among pools.
Asset Backed Securities
The Fund may invest in asset backed securities. Asset backed securities are
payable from pools of obligations other than mortgages. Most asset backed
securities involve consumer or commercial debts with maturities of less than ten
years. However, almost any type of fixed income assets (including other fixed
income securities) may be used to create an asset backed security. Asset backed
securities may take the form of notes or pass through certificates. Asset backed
securities have prepayment risks.
Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based in part upon its credit enhancement.
Certain of the Fund's investments may be credit enhanced. Common types of credit
enhancement include guarantees, letters of credit, bond insurance and surety
bonds. Credit enhancement also includes arrangements where securities or other
liquid assets secure payment of a fixed income security. If a default occurs,
these assets may be sold and the proceeds paid to security's holders. Either
form of credit enhancement reduces credit risks by providing another source of
payment for a fixed income security.
Portfolio Turnover
The Fund may actively trade its portfolio securities in an attempt to achieve
its investment objective. Active trading will cause the Fund to have an
increased portfolio turnover rate, which is likely to generate shorter-term
gains (losses) for its shareholders, which are taxed at a higher rate than
longer-term gains (losses). Actively trading portfolio securities increases the
Fund's trading costs and may have an adverse impact on the Fund's performance.
Temporary Defensive Investments
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher-quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.
Specific Risks of Investing in the Fund
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Credit Risks
Credit risk is the possibility that an issuer will default on a security
by failing to pay interest or principal when due. If an issuer defaults, the
Fund will lose money.
Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, the Fund must rely entirely upon the Adviser's credit
assessment.
Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the additional interest paid for risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security's rating is lowered, or
the security is perceived to have an increased credit risk. An increase in
the spread will cause the price of the security to decline.
Credit risk includes the possibility that a party to a transaction
involving the Fund will fail to meet its obligations. This could cause the
Fund to lose the benefit of the transaction or prevent the Fund from selling
or buying other securities to implement its investment strategy.
Call Risks
Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a call) at a price below its current market price.
An increase in the likelihood of a call may reduce the security's price.
If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
Prepayment Risks
Unlike traditional fixed income securities, which may pay a fixed rate of
interest until maturity, when the entire principal amount is due, payments on
mortgage backed securities include both interest and a partial payment of
principal. This partial payment of principal may be comprised of a scheduled
principal payment as well as an unscheduled payment from the voluntary
prepayment, refinancing, or foreclosure of the underlying loans. These
unscheduled payments of principal can adversely affect the price and yield of
mortgage backed securities held by the Fund. For example, during periods of
declining interest rates, prepayments can be expected to accelerate, and the
Fund would be required to reinvest the proceeds at the lower interest rates
then available. In addition, like other interest-bearing securities, the
values of mortgage backed securities generally fall when interest rates rise.
Since rising interest rates generally result in decreased prepayments of
mortgage backed securities, this could cause mortgage securities to have
greater average lives than expected and their value may decline more than
other fixed income securities. Conversely, when interest rates fall, their
potential for capital appreciation is limited due to the existence of the
prepayment feature.
Generally, mortgage backed securities compensate for greater prepayment
risk by paying a higher yield. The additional interest paid for risk is
measured by the difference between the yield of a mortgage backed security
and the yield of a U.S. Treasury security with a comparable maturity (the
spread). An increase in the spread will cause the price of the security to
decline. Spreads generally increase in response to adverse economic or market
conditions.
Interest Rate Risks
o Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates
rise, prices of fixed income securities fall. However, market factors, such
as the demand for particular fixed income securities, may cause the price of
certain fixed income securities to fall while the prices of other securities
rise or remain unchanged.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
What Do Shares Cost?
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You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. Shares of the Fund are sold at net asset value (NAV). When the
Fund receives your transaction request in proper form, it is processed at the
next calculated NAV plus any applicable front-end sales charge (public offering
price). Investors who purchase, redeem or exchange through a financial
intermediary may be charged a service fee by that financial intermediary.
Financial intermediaries are authorized to accept purchase and redemption orders
from their customers on behalf of the Fund. NAV is determined at the end of
regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open. The
Fund generally values fixed income securities according to the last sale price
on a national securities exchange, if available, and otherwise, as determined by
an independent pricing service. Short-term obligations with remaining maturities
of less than 60 days at the time of purchase may be valued at amortized cost or
at fair market value as determined in good faith by the Board of Trustees
(Board).
Class A Shares are sold at NAV plus a front-end sales charge as follows:
SALES CHARGE WHEN YOU PURCHASE
Class A Shares
Sales Charge as a Sales Charge as a
Purchase Amount Percentage of Percentage of NAV
Public Offering
Price
Less than $100,000 4.00% 4.17%
$100,000 but less than
$250,000 3.25% 3.36%
$250,000 but less than
$500,000 2.50% 2.56%
$500,000 but less than
$750,000 1.75% 1.78%
----------------------------------------
$750,000 but less than
$1 million 1.00% 1.01%
$1 million or greater 0.00% 0.00%
The minimum initial investment is $1,000. Subsequent investments must be in the
amounts of at least $100.
THE SALES CHARGE AT PURCHASE MAY BE REDUCED OR ELIMINATED BY:
o purchasing Shares in greater quantities to reduce the applicable sales
charge;
o combining concurrent purchases of Shares:
- by you, your spouse, and your children under age 21; or
- - of the same share class of two or more Independence One Funds (other than
money market funds);
o accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still invested
in the Fund); or
o signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).
THE SALES CHARGE WILL BE ELIMINATED WHEN YOU PURCHASE SHARES:
o within 120 days of redeeming Shares of an equal or lesser amount;
o by exchanging shares from the same share class of another Independence One
Fund (other than a money market fund);
o on Shares purchased through entities having no transaction fee agreements
with Michigan National;
o through investment professionals that receive no portion of the sales
charge; or
o as a Trustee or employee of the Fund, the Adviser, the Distributor and their
affiliates, and the immediate family members of these individuals.
If your investment qualifies for a reduction or elimination of the sales charge
as described above, you or your investment professional should notify the Fund's
Distributor at the time of purchase. If the Distributor is not notified, you
will receive the reduced sales charge only on additional purchases, and not
retroactively on previous purchases.
SALES CHARGE WHEN YOU REDEEM
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).
Class B Shares
Shares Held Up to: CDSC
1 year 5.0%
2 years 4.0%
3 years 3.0%
4 years 3.0%
5 years 2.0%
6 years 1.0%
7 years or more 0.0%
Class B Shares will automatically convert into Class A Shares after six full
years from the purchase date. This conversion is a non-taxable event.
You will not be charged a CDSC when redeeming Shares:
. purchased with reinvested dividends or capital gains;
. that you exchanged into the same share class of another Independence One Fund
as long as the Shares were held for the applicable CDSC holding period;.
purchased through investment professionals who did not receive advanced sales
payments; . if, after you purchase Shares, you become disabled as defined by the
IRS; . if the Fund redeems your Shares and closes your account for not meeting
the
minimum balance requirement;
. if your redemption is a required retirement plan distribution; or . upon the
death of the last surviving shareholder of the account.
If your redemption qualifies, you or your investment professional should notify
the Distributor at the time of redemption to eliminate the CDSC. If the
Distributor is not notified, the CDSC will apply.
To keep the sales charge as low as possible, the Fund redeems your Shares in
this order: . Shares that are not subject to a CDSC; and . Shares held the
longest, other than a money market fund, (to determine the number of years your
Shares have been held, include the time you held shares of other Independence
One Funds that have been exchanged for Shares of this Fund).
The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.
How is the Fund Sold?
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The Fund offers three share classes: Class A Shares, Class B Shares and Trust
Shares, each representing interests in a single portfolio of securities. This
prospectus relates only to Class A and B Shares. Each Share class has different
sales charges and other expenses, which affect its performance. Contact your
investment professional or call 1-800-334-2292 for more information concerning
the other class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to institutions, corporations, fiduciaries and individuals.
When the Distributor receives marketing fees and sales charges, it may pay some
or all of them to investment professionals. The Distributor and its affiliates
may pay out of their assets other amounts (including items of material value) to
investment professionals for marketing and servicing Shares. The Distributor is
a subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN (CLASS A SHARES and CLASS B SHARES)
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class A and B Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.
How to Purchase Shares
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You may purchase Shares through Michigan National Bank and Independence One
Brokerage Services, Inc. ("Independence One"), or through brokers or dealers
which have a sales agreement with the Distributor. The Fund reserves the right
to reject any request to purchase or exchange Shares.
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Through an Investment Professional
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive
the public offering price if the investment professional forwards the order to
the Fund before 5:00 p.m. on the same day and the Fund receives payment within
three business days.
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Through Michigan National Bank or Independence One
. Establish your account with the Fund by calling toll free 1-800-334-2292; and
. Send your payment to the Fund by Federal Reserve wire or check.
Orders must be received by 4:00 (Eastern time) in order for Shares to be
purchased at that day's price. For Shares purchased directly from the
Distributor, payment by wire or check must be received within three business
days.
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By Wire
Place your order with an investment professional or call 1-800-334-2292 and send
your wire to:
Federated Shareholder Services Company c/o Michigan National Bank
Farmington Hills, MI
Dollar Amount of Wire
For Credit to: Independence One Fixed Income Fund
Account Number: 6856238933
ABA Number: 072000805
Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
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By Check
Make your check payable to "Independence One Fixed Income Fund", note your
account number on the check, and mail it to:
Independence One Mutual Funds
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or the Fund).
Through an Exchange
You may purchase Shares through an exchange from the same Share Class of
Independence One Equity Plus Fund, Class K Shares of Independence One Prime
Money Market Fund and Shares of Federated Michigan Intermediate Municipal Trust.
You must meet the minimum initial investment requirement for purchasing Shares
and both accounts must have identical registrations. Class B Share exchanges
will not be subject to a CDSC. However, if a shareholder redeems the
exchanged-for shares within six years of the original purchase of Class B
Shares, a CDSC will be imposed. For purposes of computing the CDSC fee, the
length of time a shareholder has owned Class B Shares will be measured from the
date of the original purchase and will not be affected by the exchange.
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By Systematic Investment Program
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis in a minimum amount of $100. A shareholder may apply
for participation in this program through Michigan National Bank by calling
1-800-334-2292.
By Automated Clearing House (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
Retirement Investments
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
How to Redeem and Exchange Shares
You should redeem or exchange Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. through Michigan National Bank or Independence One.
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Through an Investment Professional
Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.
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Through Michigan National Bank or Independence One
By Telephone
You may redeem or exchange Shares by calling 1-800-334-2292 once you have
completed the appropriate authorization form for telephone transactions. If you
call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern
time) you will receive a redemption amount based on that day's NAV.
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By Mail
You may redeem or exchange Shares by mailing a written request to the Fund
through Michigan National Bank, Independence One or an authorized broker.
Shareholders redeeming or exchanging through an authorized broker should mail
requests directly to the broker. You will receive a redemption amount based on
the next calculated NAV after the Fund receives your written request in proper
form.
Redemption or exchange requests through Michigan National Bank or Independence
One should be sent to:
Independence One(R) Mutual Funds
27777 Inkster Road
Mail Code 10-52
Farmington Hills, Michigan 48333-9065
All requests must include:
. Fund Name, account number and account registration;
. amount to be redeemed or exchanged;
. signatures of all shareholders exactly as registered; and
. if exchanging, the Fund Name, account number and account registration into
which you are exchanging.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days;
. a redemption is payable to someone other than the shareholder(s) of record;
or
. if exchanging (transferring) into another fund with a different shareholder
registration.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
Payment Methods for Redemptions
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
Limitations on Redemption Proceeds
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
Redemptions from Retirement Accounts
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
Exchange Privileges
You may exchange Shares of the Fund into the same share class of Independence
One Equity Plus Fund, Class K Shares of Independence One Prime Money Market Fund
and Shares of Federated Michigan Intermediate Municipal Trust. Shareholders of
the Fund have access to these funds ("participating funds") through an exchange
program.
To execute an order to exchange, you must:
. ensure that the account registrations are identical;
. meet any minimum initial investment requirements; and
. receive a prospectus for the fund into which you wish to exchange.
An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.
The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other participating funds.
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Systematic Withdrawal Program
Shareholders may automatically redeem Shares in an amount directed by the
shareholder on a regular basis. 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. To apply for
participation in this program, contact Michigan National Bank at 1-800-334-2292.
This program may reduce, and eventually deplete, your account. Payments should
not be considered yield or income.
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Additional Conditions
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund does not issue share certificates.
Account and Share Information
Confirmations and Account Statements
You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.
Dividends and Capital Gains
The Fund declares and pays dividends monthly. Dividends are paid to all
shareholders invested in the Fund on the record date. The record date is the
date on which a shareholder must officially own Shares in order to earn a
dividend.
In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
If you purchase Shares just before the Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.
Accounts with Low Balances
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.
Tax Information
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be both dividends and capital gains.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.
Who Manages the Fund?
[GRAPHIC APPEARS HERE]
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Michigan National Bank. The Adviser manages the Fund's assets,
including buying and selling portfolio securities. The Adviser's address is
27777 Inkster Road, Mail Code 10-52, Farmington Hills, Michigan, 48333-9065.
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 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 $9 billion. Of this amount, IOCM and the Trust Division have
investment discretion over $1.7 billion.
Michigan National Bank has managed mutual funds since May 1989. The Trust
Division has managed pools of commingled funds since 1964.
The Fund's portfolio manager is Bruce Beaumont. Mr. Beaumont has been Vice
President and Portfolio Manager for Michigan National Bank and IOCM in
Farmington Hills since 1994. Mr. Beaumont has been responsible for management of
the Fund's portfolio since February 1998. He joined Michigan National Bank in
1987 and served as Vice President--Head Government Bond Trader until 1994. He
earned his BA from Alma College and a MBA from Northwestern University. Mr.
Beaumont is a Chartered Financial Analyst and a Certified Public Accountant.
Advisory Fees
The Adviser receives an annual investment advisory fee equal to 0.75% of the
Fund's average daily net assets. The Adviser may voluntarily waive a portion of
its fee or reimburse the Fund for certain operating expenses.
Financial Information
[GRAPHIC APPEARS HERE]
Financial Highlights
The Fund's fiscal year end is April 30. As this is the Fund's Class A and B
Shares first fiscal year, financial information is not yet available.
A Statement of Additional Information (SAI) dated April 14, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Trust Shares
Semi-Annual Report and will be contained in the Class A and B Shares Annual
Report as soon as it becomes available. The Annual Report's Management
Discussion & Analysis discusses market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. To
obtain the SAI, the Annual Report, Semi-Annual Report and other information
without charge, and make inquiries, call your investment professional or the
Fund at 1-800-334-2292.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, D.C. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, D.C 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
Independence One(R)
Mutual Funds
Independence One
Fixed Income Fund
Class A Shares
Class B Shares
800-334-2292
www.MichiganNational.com
Investment Company Act File No: 811-5752
Cusip ________
Cusip ________
- --------------
[INDEPENDENCE ONE LOGO] MICHIGAN NATIONAL LOGO]
INDEPENDENCE ONE MUTUAL FUNDS
INDEPENDENCE ONE FIXED INCOME FUND
CLASS A SHARES
CLASS B SHARES
STATEMENT OF ADDITIONAL INFORMATION
APRIL 14, 2000
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the Class A and Class B Share prospectus of the
Independence One Fixed Income Fund dated April 14, 2000. Obtain the prospectus
without charge by calling 1-800-334-2292.
CONTENTS
HOW IS THE FUND ORGANIZED?............................................2
SECURITIES IN WHICH THE FUND INVESTS..................................2
WHAT DO SHARES COST?.................................................20
HOW IS THE FUND SOLD?................................................20
EXCHANGING SECURITIES FOR FUND SHARES................................20
SUBACCOUNTING SERVICES...............................................20
REDEMPTION IN KIND...................................................21
MASSACHUSETTS PARTNERSHIP LAW........................................21
ACCOUNT AND SHARE INFORMATION........................................21
TAX INFORMATION......................................................22
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?.......................23
FEES PAID BY THE FUND FOR SERVICES...................................26
HOW DOES THE FUND MEASURE PERFORMANCE?...............................27
INVESTMENT RATINGS...................................................32
ADDRESSES....................................................BACK COVER
Federated Securities Corp., Distributor,
subsidiary of Federated Investors, Inc.
________ (4/00)
HOW IS THE FUND ORGANIZED?
Independence One Mutual Funds (Trust) is an open-end, management investment
company that was established under the laws of the Commonwealth of Massachusetts
on January 9, 1989. The Trust may offer separate series of shares representing
interests in separate portfolios of securities. The Trust currently offers eight
portfolios: Independence One Prime Money Market Fund (Class K Shares and Class Y
Shares), Independence One U.S. Treasury Money Market Fund (Class K Shares) and
Independence One Michigan Municipal Cash Fund (Class K Shares) (the "Money
Market Funds"); Independence One U.S. Government Securities Fund (Class K
Shares), Independence One Fixed Income Fund (Class A Shares, Class B Shares and
Trust Shares) (the "Income Funds"); and Independence One Equity Plus Fund (Class
A Shares, Class B Shares and Trust Shares), Independence One Small Cap Fund
(Class Y Shares) and Independence One International Equity Fund (Class Y Shares)
(the "Equity Funds"). This SAI relates to Class A Shares and Class B Shares of
Independence One Fixed Income Fund only.
SECURITIES IN WHICH THE FUND INVESTS
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective. The
following tables indicate which types of securities are a: o P = PRINCIPAL
investment of the Fund; o A = ACCEPTABLE (but not principal) investment of the
Fund; or o N = NOT AN ACCEPTABLE investment of the Fund.
- --------------------------------------
SECURITIES FIXED
INCOME FUND
- --------------------------------------
COMMON STOCKS N
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PREFERRED STOCKS N
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WARRANTS A
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WORLD EQUITY BENCHMARK N
SHARES
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OPTIMIZED PORTFOLIOS AS N
LISTED SECURITIES
- --------------------------------------
- --------------------------------------
TREASURY SECURITIES P
- --------------------------------------
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AGENCY SECURITIES P
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CORPORATE DEBT P
SECURITIES(1)
- --------------------------------------
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COMMERCIAL PAPER (2) A
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- --------------------------------------
DEMAND INSTRUMENTS A
- --------------------------------------
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MUNICIPAL SECURITIES N
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MORTGAGE BACKED A
SECURITIES
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COLLATERALIZED MORTGAGE A
OBLIGATIONS
- --------------------------------------
- --------------------------------------
ASSET BACKED SECURITIES A
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ZERO COUPON SECURITIES A
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BANK INSTRUMENTS A
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CREDIT ENHANCEMENT A
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CONVERTIBLE SECURITIES A
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TAX EXEMPT SECURITIES N
- --------------------------------------
- --------------------------------------
GENERAL OBLIGATION BONDS N
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SPECIAL REVENUE BONDS N
- --------------------------------------
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PRIVATE ACTIVITY BONDS N
- --------------------------------------
- --------------------------------------
MUNICIPAL NOTES N
- --------------------------------------
- --------------------------------------
VARIABLE RATE DEMAND N
INSTRUMENTS
- --------------------------------------
- --------------------------------------
MUNICIPAL LEASES N
- --------------------------------------
- --------------------------------------
FOREIGN SECURITIES N
- --------------------------------------
- --------------------------------------
FOREIGN EXCHANGE N
CONTRACTS
- --------------------------------------
- --------------------------------------
FOREIGN GOVERNMENT N
SECURITIES
-------------
- --------------------------------------
DEPOSITARY RECEIPTS N
- --------------------------------------
- --------------------------------------
DERIVATIVES A
- --------------------------------------
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FUTURES CONTRACTS A
- --------------------------------------
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OPTIONS A
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REPURCHASE AGREEMENTS A
- --------------------------------------
- --------------------------------------
REVERSE REPURCHASE A
AGREEMENTS
- --------------------------------------
- --------------------------------------
DELAYED DELIVERY A
TRANSACTIONS (3)
- --------------------------------------
- --------------------------------------
SECURITIES LENDING A
- --------------------------------------
- --------------------------------------
INVESTING IN SECURITIES A
OF OTHER INVESTMENT
COMPANIES
- --------------------------------------
1. The Fund may invest in corporate debt obligations rated Aaa, Aa, or A by
Moody's Investor's Service, Inc. ("Moody's"), or A by Standard & Poor's (S&P)
and Fitch IBCA, Inc. ("Fitch), or if unrated, of comparable quality as
determined by the investment adviser.
2. The commercial paper in which the Fund invests will be rated A-1 by S&P, P-1
by Moody's, or F-1 by Fitch. 3. The Fund does not intend to engage in
when-issued and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the value of its respective total assets.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields. The following describes the types of fixed income securities in
which the Fund may invest.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the
lowest credit risks.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities. Agency
securities are generally regarded as having low credit risks, but not as low
as treasury securities.
The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the market and prepayment risks of these mortgage
CORPORATE DEBT SECURITIES
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans
to companies. The credit risks of corporate debt securities vary widely among
issuers.
In addition, the credit risk of an issuer's debt security may vary based on
its priority for repayment. For example, higher ranking (senior) debt
securities have a higher priority than lower ranking (subordinated)
securities. This means that the issuer might not make payments on
subordinated securities while continuing to make payments on senior
securities. In addition, in the event of bankruptcy, holders of senior
securities may receive amounts otherwise payable to the holders of
subordinated securities. Some subordinated securities, such as trust
preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer
any payment that would reduce its capital below regulatory requirements.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default. DEMAND INSTRUMENTS Demand instruments are corporate debt
securities that the issuer must repay upon demand. Other demand
instruments require a third party, such as a dealer or bank, to repurchase
the security for its face value upon demand. The Fund treats demand
instruments as short-term securities, even though their stated maturity
may extend beyond one year.
MORTGAGE BACKED SECURITIES
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates,
maturities and other terms. Mortgages may have fixed or adjustable interest
rates. Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer
deducts its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates
receive a pro rata share of all payments and pre-payments from the underlying
mortgages. As a result, the holders assume all the prepayment risks of the
underlying mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
CMOs, including interests in real estate mortgage investment conduits
(REMICs), allocate payments and prepayments from an underlying
pass-through certificate among holders of different classes of mortgage
backed securities. This creates different prepayment and interest rate
risks for each CMO class. The degree of increased or decreased prepayment
risks depends upon the structure of the CMOs. However, the actual returns
on any type of mortgage backed security depend upon the performance of the
underlying pool of mortgages, which no one can predict and will vary among
pools.
SEQUENTIAL CMOS
In a sequential pay CMO, one class of CMOs receives all principal
payments and prepayments. The next class of CMOs receives all principal
payments after the first class is paid off. This process repeats for
each sequential class of CMO. As a result, each class of sequential pay
CMOs reduces the prepayment risks of subsequent classes.
PACS, TACS AND COMPANION CLASSES
More sophisticated CMOs include planned amortization classes (PACs) and
targeted amortization classes (TACs). PACs and TACs are issued with
companion classes. PACs and TACs receive principal payments and
prepayments at a specified rate. The companion classes receive
principal payments and prepayments in excess of the specified rate. In
addition, PACs will receive the companion classes' share of principal
payments, if necessary, to cover a shortfall in the prepayment rate.
This helps PACs and TACs to control prepayment risks by increasing the
risks to their companion classes. IOS AND POS CMOs may allocate
interest payments to one class (Interest Only or IOs) and principal
payments to another class (Principal Only or POs). POs increase in
value when prepayment rates increase. In contrast, IOs decrease in
value when prepayments increase, because the underlying mortgages
generate less interest payments. However, IOs tend to increase in value
when interest rates rise (and prepayments decrease), making IOs a
useful hedge against interest rate risks.
FLOATERS AND INVERSE FLOATERS
Another variant allocates interest payments between two classes of
CMOs. One class (Floaters) receives a share of interest payments based
upon a market index such as LIBOR. The other class (Inverse Floaters)
receives any remaining interest payments from the underlying mortgages.
Floater classes receive more interest (and Inverse Floater classes
receive correspondingly less interest) as interest rates rise. This
shifts prepayment and interest rate risks from the Floater to the
Inverse Floater class, reducing the price volatility of the Floater
class and increasing the price volatility of the Inverse Floater class.
Z CLASSES AND RESIDUAL CLASSES
CMOs must allocate all payments received from the underlying mortgages
to some class. To capture any unallocated payments, CMOs generally have
an accrual (Z) class. Z classes do not receive any payments from the
underlying mortgages until all other CMO classes have been paid off.
Once this happens, holders of Z class CMOs receive all payments and
prepayments. Similarly, REMICs have residual interests that receive any
mortgage payments not allocated to another REMIC class.
ASSET BACKED SECURITIES
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed
income assets (including other fixed income securities) may be used to create
an asset backed security. Asset backed securities may take the form of
commercial paper, notes, or pass through certificates. Asset backed
securities have prepayment risks. Like CMOs, asset backed securities may be
structured like Floaters, Inverse Floaters, IOs and POs.
ZERO COUPON SECURITIES
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred
to as a coupon payment). Investors buy zero coupon securities at a price
below the amount payable at maturity. The difference between the purchase
price and the amount paid at maturity represents interest on the zero coupon
security. Investors must wait until maturity to receive interest and
principal, which increases the interest rate risks and credit risks of a zero
coupon security. There are many forms of zero coupon securities. Some are
issued at a discount and are referred to as zero coupon or capital
appreciation bonds. Others are created from interest bearing bonds by
separating the right to receive the bond's coupon payments from the right to
receive the bond's principal due at maturity, a process known as coupon
stripping. Treasury STRIPs, IOs and POs are the most common forms of stripped
zero coupon securities. In addition, some securities give the issuer the
option to deliver additional securities in place of cash interest payments,
thereby increasing the amount payable at maturity. These are referred to as
pay-in-kind or PIK securities.
BANK INSTRUMENTS
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks. CREDIT
ENHANCEMENT Credit enhancement consists of an arrangement in which a company
agrees to pay amounts due on a fixed income security if the issuer defaults. In
some cases the company providing credit enhancement makes all payments directly
to the security holders and receives reimbursement from the issuer. Normally,
the credit enhancer has greater financial resources and liquidity than the
issuer. For this reason, the Adviser usually evaluates the credit risk of a
fixed income security based in part upon its credit enhancement.
Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income security. If
a default occurs, these assets may be sold and the proceeds paid to security's
holders. Either form of credit enhancement reduces credit risks by providing
another source of payment for a fixed income security.
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities that the Fund has the option
to exchange for equity securities at a specified conversion price. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities. Convertible securities have lower yields
than comparable fixed income securities. In addition, at the time a convertible
security is issued the conversion price exceeds the market value of the
underlying equity securities. Thus, convertible securities may provide lower
returns than non-convertible fixed income securities or equity securities
depending upon changes in the price of the underlying equity securities.
However, convertible securities permit the Fund to realize some of the potential
appreciation of the underlying equity securities with less risk of losing its
initial investment.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
The Fund may trade in the following types of derivative contracts.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset is
commonly referred to as buying a contract or holding a long position in the
asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
The Fund may buy and sell stock index futures contracts, financial futures
and futures on portfolio securities and may buy and sell financial futures
contracts. OPTIONS Options are rights to buy or sell an underlying asset for
a specified price (the exercise price) during, or at the end of, a specified
period. A call option gives the holder (buyer) the right to buy the
underlying asset from the seller (writer) of the option. A put option gives
the holder the right to sell the underlying asset to the writer of the
option. The writer of the option receives a payment, or premium, from the
buyer, which the writer keeps regardless of whether the buyer uses (or
exercises) the option.
The Fund may:
Buy call options on portfolio securities and on financial futures contracts
in anticipation of an increase in the value of the underlying asset; Buy put
options on portfolio securities and on financial futures contracts in
anticipation of a decrease in the value of the underlying asset; and Buy or
write options to close out existing options positions.
The Fund may also write call options on portfolio securities to generate
income from premiums, and in anticipation of a decrease or only limited
increase in the value of the underlying asset. If a call written by the Fund
is exercised, the Fund foregoes any possible profit from an increase in the
market price of the underlying asset over the exercise price plus the premium
received. When the Fund writes options on futures contracts, it will be
subject to margin requirements similar to those applied to futures contracts.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from
a dealer or bank and agree to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
the Fund's return on the transaction. This return is unrelated to the
interest rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to counterparty risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to counterparty risks.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the
price of its shares. Settlement dates may be a month or more after entering
into these transactions so that the market values of the securities bought
may vary from the purchase prices. Therefore, delayed delivery transactions
create market risks for the Fund. Delayed delivery transactions also involve
credit risks in the event of a counterparty default. These transactions
create leverage risks.
SECURITIES LENDING
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if
the market value of the loaned securities increases. Also, the borrower must
pay the Fund the equivalent of any dividends or interest received on the
loaned securities. The Fund will reinvest cash collateral in securities that
qualify as an acceptable investment for the Fund. However, the Fund must pay
interest to the borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower.
The Fund will not have the right to vote on securities while they are on
loan, but they will terminate a loan in anticipation of any important vote.
The Fund may pay administrative and custodial fees in connection with a loan
and may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker.
Securities lending activities are subject to market risks and counterparty
risks. These transactions create leverage risks. ASSET COVERAGE In order to
secure its obligations in connection with derivatives contracts or special
transactions, the Fund will either own the underlying assets, enter into an
offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has
other readily marketable assets to set aside, it cannot trade assets used to
secure such obligations without entering into an offsetting derivative
contract or terminating a special transaction. This may cause the Fund to
miss favorable trading opportunities or to realize losses on derivative
contracts or special transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
risks are described below. CREDIT RISKS o Credit risk is the possibility that an
issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.
o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, The Fund must rely entirely upon the Adviser's credit
assessment.
o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the additional interest paid for risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security's rating is lowered, or
the security is perceived to have an increased credit risk. An increase in
the spread will cause the price of the security to decline.
o Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to lose
the benefit of the transaction or prevent the Fund from selling or buying
other securities to implement its investment strategy.
INTEREST RATE RISKS
o Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates
rise, prices of fixed income securities fall. However, market factors, such
as the demand for particular fixed income securities, may cause the price of
certain fixed income securities to fall while the prices of other securities
rise or remain unchanged.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
CALL RISKS
o Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a call) at a price below its current market price.
An increase in the likelihood of a call may reduce the security's price.
o If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
PREPAYMENT RISKS
o Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate mortgages
when mortgage rates fall. This results in the prepayment of mortgage backed
securities with higher interest rates. Conversely, prepayments due to
refinancing decrease when mortgage rates increase. This extends the life of
mortgage backed securities with lower interest rates. Other economic factors
can also lead to increases or decreases in prepayments. Increases in
prepayments of high interest rate mortgage backed securities, or decreases in
prepayments of lower interest rate mortgage backed securities, may reduce
their yield and price. These factors, particularly the relationship between
interest rates and mortgage prepayments makes the price of mortgage backed
securities more volatile than many other types of fixed income securities
with comparable credit risks.
o Mortgage backed securities generally compensate for greater prepayment risk
by paying a higher yield. The difference between the yield of a mortgage
backed security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk. Spreads
may increase generally in response to adverse economic or market conditions.
A security's spread may also increase if the security is perceived to have an
increased prepayment risk or perceived to have less market demand. An
increase in the spread will cause the price of the security to decline.
o The Fund may have to reinvest the proceeds of mortgage prepayments in other
fixed income securities with lower interest rates, higher prepayment risks,
or other less favorable characteristics.
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 may be necessary for
clearance of transactions. The deposit or payment by the Fund of initial or
variation margin in connection with financial 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 it may borrow money and
engage in reverse repurchase agreements in amounts up to one-third of the
value of its respective total assets, including the amounts borrowed. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or 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. The Fund will not purchase any
securities while borrowings in excess of 5% of its respective total assets
are outstanding.
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 collateralized by
such securities.
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 restricted securities in accordance with its investment
objective, policies, and limitations.
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, and
purchasing variable rate demand notes, entering into repurchase agreements,
or engaging in other transactions where permitted by the Fund's investment
objective, policies and limitations.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. For purposes of this limitation, the following
are not deemed to be pledges: margin deposits for the purchase and sale of
futures contract and related options, and segregation or collateral
arrangements made in connection with options activities. The purchase of
securities on a when-issued basis is not deemed to be a pledge of assets.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited partnership
interests, although they 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.
DIVERSIFICATION OF INVESTMENTS
With respect to 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 outstanding voting securities of any one issuer.
The above Investment Limitations cannot be changed unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act of 1940 (1940 Act). The following limitations, however,
may be changed by the Board without shareholder approval. Shareholders will be
notified before any material change in these limitations becomes effective.
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 time deposits with maturities over seven days.
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.
These limitations are not applicable if the securities are acquired in a
merger, consolidation, reorganization, or acquisition of assets. Nor are they
applicable to securities of investment companies that have been exempted from
registration under the 1940 Act.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities unless the securities
are held in the Fund's portfolio and not more than 5% of the value of the
Fund's total assets would be invested in premiums on open put option
positions.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities are
held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the
amount of any further payment.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for purpose 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 the Fund's 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." DETERMINING MARKET VALUE OF SECURITIES
The market values of the Fund's portfolio securities are determined as follows:
o for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;
for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and
for all other securities at fair value as determined in good faith by the Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.
WHAT DO SHARES COST?
You can purchase, redeem or exchange Fund shares any day the New York Stock
Exchange (NYSE) is open. The Fund's net asset value (NAV) per Shares fluctuates
and is based on the market value of all securities and other assets of the Fund.
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each Share class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE
You can reduce or eliminate the applicable front-end sales charge, as follows:
QUANTITY DISCOUNTS
Larger purchases of the same Share class reduce or eliminate the sales charge
you pay. You can combine purchases of Shares made on the same day by you, your
spouse and your children under age 21. In addition, purchases made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.
ACCUMULATED PURCHASES
If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.
CONCURRENT PURCHASES
You can combine concurrent purchases of the same share class of two or more
Independence One Funds in calculating the applicable sales charge.
LETTER OF INTENT - CLASS A SHARES
You can sign a Letter of Intent committing to purchase a certain amount of the
same class of Shares within a 13-month period to combine such purchases in
calculating the sales charge. The Fund's custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the Custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the Custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.
REINVESTMENT PRIVILEGE
You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV without any sales charge.
REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE
These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Shares; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts
are associated with the original purchase of Shares.
Upon notification to the Distributor or the Fund's transfer agent, no CDSC will
be imposed on redemptions:
o following the death or post-purchase disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, of the last surviving
shareholder;
o representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age
of 70 1/2;
o of Shares that represent a reinvestment of dividends and capital gains;
o of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third party administrator has
entered into certain arrangements with the Distributor or its affiliates, or
any other investment professional, to the extent that no payments were
advanced for purchases made through these entities;
o representing a portion of proceeds attributable to increases in value of
the account due to increases in the net asset value per share;
o which are involuntary redemptions processed by the Fund because the
accounts do not meet the minimum balance requirements; and
o which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN (CLASS A SHARES AND CLASS B SHARES)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets. The Fund may compensate the
Distributor more or less than its actual marketing expenses. In no event will
the Fund pay for any expenses of the Distributor that exceed the maximum Rule
12b-1 Plan fee.
The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be
sufficient to cover the marketing-related expenses the Distributor has incurred.
Therefore, it may take the Distributor a number of years to recoup these
expenses.
EXCHANGING SECURITIES FOR FUND SHARES
You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it value its assets. This exchange is treated
as a sale of your securities for federal tax purposes.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, they reserve the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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 its
property 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 itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
ACCOUNT AND SHARE 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 the Trust have
equal voting rights, except that in matters affecting only a particular Fund
class are entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of March 14, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Trust Shares:
Pierson & Co., Farmington Hills, MI, owned approximately 8,853,619 Trust Shares
(92.06%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, they will not receive special tax treatment and will pay federal income
tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year. The Trust is comprised of eight funds.
As of March 14, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act. A pound sign (#) denotes a Member of the Board's
Executive Committee, which handles the Board's responsibilities between its
meetings.
NAME AGGREGATE
BIRTH DATE COMPENSATION
ADDRESS FROM TRUST
POSITION WITH TRUST PRINCIPAL OCCUPATIONS
FOR PAST FIVE YEARS
ROBERT E. BAKER Retired; formerly, Vice Chairman, $12,000
Birth Date: May 6, Chrysler Financial Corporation.
1930
4327 Stoneleigh
Road
Bloomfield Hills,
MI
TRUSTEE
HAROLD BERRY Managing Partner, Berry Enterprises; $12,000
Birth Date: Chairman, Independent Sprinkler
September 17, 1925 Companies, Inc.; Chairman, Berry
290 Franklin Center Ziegelman & Company.
29100 Northwestern
Highway
Southfield, MI
TRUSTEE
NATHAN FORBES* President, Forbes/Cohen Properties, $12,000
Birth Date: President and Partner, The Forbes
December 5, 1962 Company.
1945 Long Point
Drive
Bloomfield Hills, MI
TRUSTEE
HARRY J. Chairman, Nederlander Enterprises $10,800
NEDERLANDER#
Birth Date:
September 5, 1917
231 S. Old
Woodward, Suite 219
Birmingham, MI
TRUSTEE
THOMAS S. WILSON# President and Executive Administrator $12,000
Birth Date: October of the Detroit Pistons; President and
8, 1949 CEO, Palace Sports Entertainment.
Two Championship
Drive
Auburn Hills, MI
TRUSTEE
EDWARD C. GONZALES President, Executive Vice President $0
Birth Date: October and Treasurer of some of the Funds in
22, 1930 the Federated Fund Complex; Vice
Federated Investors Chairman, Federated Investors, Inc.;
Tower Trustee, Federated Administrative
1001 Liberty Avenue Services; formerly: Trustee or
Pittsburgh, PA Director of some of the Funds in the
PRESIDENT AND Federated Fund Complex; CEO and
TREASURER Chairman, Federated Administrative
Services; Vice President, Federated
Investment Management Company,
Federated Investment Counseling,
Federated Global Investment Management
Corp. and Passport Research, Ltd.;
Director and Executive Vice President,
Federated Securities Corp.; Director,
Federated Services Company; Trustee,
Federated Shareholder Services
Company.Trustee or Director of some of
the Funds in the Federated Fund
Complex; President, Executive Vice
President and Treasurer of some of the
Funds in the Federated Fund Complex;
Vice Chairman, Federated Investors,
Inc.; Vice President, Federated
Investment Management Company and
Federated Investment Counseling,
Federated Global Investment Management
Corp. and Passport Research, Ltd.;
Executive Vice President and Director,
Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.
JEFFREY W. STERLING Treasurer of the Federated Fund $0
Birth Date: Complex; Vice President - Funds
February 5, 1947 Financial Services Division, Federated
Federated Investors Investors, Inc.; formerly: various
Tower management positions within Funds
1001 Liberty Avenue Financial Services Division of
Pittsburgh, PA Federated Investors, Inc.
VICE PRESIDENT AND
ASSISTANT TREASURER
C. GRANT ANDERSON Corporate Counsel, Federated a$0
Birth Date: Investors, Inc.
November 6, 1940
Federated Investors
Tower
1001 Liberty Avenue
Pittsburgh, PA
SECRETARY
- ----------------------------------------------------------------------------
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). 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 the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.
RESEARCH SERVICES
Research services 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 may be used by the Adviser in advising other accounts. To the extent
that receipt of these services may replace 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 those 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.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Administrative Services, a subsidiary of Federated, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Administrative
Services provides these at the following annual rate of the average aggregate
daily net assets of the Trust as specified below:
MAXIMUM AVERAGE AGGREGATE DAILY NET ASSETS OF THE ADMINISTRATIVE FEE TRUST 0.150
of 1% on the first $250 million 0.125 of 1% on the next $250 million 0.100 of 1%
on the next $250 million 0.075 of 1% on assets in excess of $750 million The
administrative fee received during any fiscal year shall be at least $50,000 per
portfolio. Federated Administrative Services may voluntarily waive a portion of
its fee and may reimburse the Fund for expenses.
Federated Administrative Services also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments for a
fee based on the Fund's assets plus out-of-pocket expenses.
CUSTODIAN
Michigan National Bank, Farmington Hills, Michigan, is custodian for the
securities and cash of the Fund. Under the Custodian Agreement, Michigan
National Bank holds the Fund's portfolio securities in safekeeping and keeps all
necessary records and documents relating to its duties.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, KPMG LLP, plans and performs their audit
so that it may provide an opinion as to whether the Fund's financial statements
and financial highlights are free of material misstatements.
<TABLE>
<CAPTION>
FEES PAID BY THE FUND FOR SERVICES
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
TRUST SHARES ADVISORY FEE PAID/ SUB-ADVISORY FEE ADMINISTRATIVE FEE
ADVISORY FEE WAIVED PAID/ PAID/
SUB-ADVISORY FEE ADMINISTRATIVE FEE
WAIVED WAIVED
----------------------------------------------
--------------------------------------------------------------------------
FOR THE FISCAL YEAR ENDED FOR THE FISCAL YEAR FOR THE FISCAL YEAR
APRIL 30, ENDED ENDED
APRIL 30, APRIL 30,
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
FIXED INCOME $608,131/$574,565/$500,293/ N/A N/A N/A $82,964/ $81,673/$72,776/
FUND $372,219 $383,043 $333,528 $0 $0 $0
- -------------------------------------------------------------------------------------------
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees, which are borne only by the applicable
class of Shares.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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 annual reinvestment of all
dividends and distributions.
When Shares of the Fund are in existence for less than a year, the Fund may
advertise cumulative total return for that specific period of time, rather than
annualizing the total return.
YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The effective yield is calculated by
compounding the unannualized base-period return by: adding one to the
base-period return, raising the sum to the 365/7th power; and subtracting one
from the result. The yield and effective yield do not necessarily reflect income
actually earned by Shares 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 investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which they invest, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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 net asset value over a specific period of time.
From time to time, a Fund will quote its ranking from its respective Lipper
category in advertising and sales literature.
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.
LEHMAN BROTHERS GOVERNMENT BOND INDEX is an unmanaged index comprised of
all publicly issued, non-convertible domestic debt of the U.S. government, or
any agency thereof, or any quasi-federal corporation and of corporate debt
guaranteed by the U.S. government. Lehman Brothers Government/Corporate
(Total) Index is comprised of approximately 5,000 issues which include:
non-convertible bonds publicly issued by the U.S. government or its agencies;
corporate bonds guaranteed by the U.S. government and quasi-federal
corporations; and publicly issued, fixed rate, non-convertible domestic bonds
of companies in industry, public utilities, and finance. The average maturity
of these bonds approximates nine years. Tracked by Lehman Brothers, the index
calculates total returns for one-month, three-month, twelve-month, and
ten-year periods and year-to-date.
INVESTMENT RATINGS
STANDARD & POOR'S (S&P) LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
MOODY'S INVESTOR SERVICES LONG-TERM DEBT RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
FITCH IBCA, INC. SHORT-TERM DEBT RATING DEFINITIONS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment, only slightly less in degree than issues rated
F-1+.
F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ and F-1 ratings.
STANDARD & POOR'S LONG-TERM DEBT RATING DEFINITIONS
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B rating.
CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS
AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated BAA are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are imminent default in payment of interest or principal.
ADDRESSES
INDEPENDENCE ONE MUTUAL FUNDS
Fixed Income Fund
Class A Shares
Class B Shares
5800 Corporate Drive
Pittsburgh, PA 15237-7010
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Michigan National Bank.
27777 Inkster Road
Mail Code 10-30
Farmington Hills, Michigan 48333-9065
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, MA 02266-8600
INDEPENDENT AUDITORS
KPMG LLP
99 High Street
Boston, MA 02110-2371
Cusip __________
Cusip __________
PART C. OTHER INFORMATION.
Item 24. Exhibits:
(a) Conformed copy of Declaration of Trust of the Registrant; (1)
(i) Conformed copy of Amendment No. 1 to the Declaration of
Trust; (2)
(ii) Conformed copy of Amendment No. 2 to the Declaration of
Trust; (2)
(iii) Conformed copy of Amendment No. 3 to the Declaration of
Trust; (4)
(iv) Conformed copy of Amendment No. 4 to the Declaration of
Trust; (6)
(v) Conformed copy of Amendment No. 5 to the Declaration of
Trust; (6)
(vi) Conformed copy of Amendment No. 6 to the Declaration of
Trust; (10)
(vii) Conformed copy of Amendment No. 8 to the Declaration of
Trust; (10)
(viii) Conformed copy of Certification dated December 6, 1994; (10)
(ix) Conformed copy of Amendment No. 9 to the Declaration of
Trust; (12)
(x) Conformed copy of Amendment No. 10 to the Declaration of
Trust; (20)
(b) Copy of By-Laws of the Registrant; (1)
- --------------------
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed on January 13, 1989. (File Nos. 33-26516 and
811-5752)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed on May 5, 1989. (File Nos. 33-26516 and
811-5752)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed on June 27, 1990. (File Nos. 33-26516
and 811-5752)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed June 24, 1992. (File Nos. 33-26516 and
811-5752)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed February 8, 1995. (File Nos. 33-26516
and 811-5752)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on June 28, 1995. (File Nos. 33-26516
and 811-5752)
20. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed on June 26, 1998. (File Nos. 33-26516
and 811-5752)
(c) (i) Copy of Specimen Certificate for Shares of Beneficial
Interest of Independence One U.S. Government Securities Fund; (7)
(ii) Copy of Specimen Certificate for Shares of Beneficial Interest of
Independence One Equity Plus Fund, Independence One Fixed Income
Fund, and Independence One Michigan Municipal Bond Fund; (14)
(iii)Copy of Specimen Certificate for Shares of Beneficial Interest
of Independence One U.S. Treasury Money Market Fund; (2)
(iv) Copy of Specimen Certificates for Shares of Beneficial Interest
of Independence One Michigan Municipal Cash Fund and Independence
One Prime Money Market Fund-Class A Shares and Class B Shares;
(16)
(v) Copy of Specimen Certificates for Shares of Beneficial Interest
of Independence One Small Cap Fund and Independence One
International Equity Fund; (19)
(d) Conformed copy of Investment Advisory Contract of the Registrant
as amended; (8)
(i) Conformed copy of Investment Sub-Advisory Contract for
Independence One U.S. Government Securities Fund; (8)
(ii) Conformed copy of Exhibit G to the Present Investment Advisory
Contract of the Registrant to add Independence One Fixed Income
Fund to the Present Investment Advisory Contract of the
Registrant; (14)
(iii)Conformed copy of Exhibit H to the Present Investment Advisory
Contract of the Registrant to add Independence One Michigan
Municipal Bond Fund to the Present Investment Advisory Contract
of the Registrant; (14) --------------------
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed on May 5, 1989. (File Nos. 33-26516 and
811-5752)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed September 2, 1992. (File Nos. 33-26516
and 811-5752)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed June 24, 1993. (File Nos. 33-26516 and
811-5752)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed on August 29, 1995. (File Nos. 33-26516
and 811-5752)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on June 28, 1996. (File Nos. 33-26516
and 811-5752)
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed on April 2, 1998. (File Nos. 33-26516
and 811-5752)
(iv) Conformed copy of Exhibit I to the Present Investment
Advisory Contract of the Registrant to add Independence
One Equity Plus Fund to the Present Investment Advisory
Contract of the Registrant; (14)
(v) Conformed copy of Exhibit H to the Present Investment
Advisory Contract of the Registrant to add Independence
One International Equity Fund; (19)
(vi) Conformed copy of Exhibit I to the Present Investment
Advisory Contract of the Registrant to add Independence
One Small Cap Fund; (19)
(vii)Conformed copy of Investment Sub-Advisory Agreement for
Independence One Equity Plus Fund; (14)
(viii) Conformed Copy of Investment Sub-Advisory Agreement
for Independence One Small Cap Fund; (21)
(ix) Conformed Copy of Sub-Advisory Agreement for
Independence One International Equity Fund; (21)
(e) Conformed Copy of Distributor's Contract of Registrant
through and including Exhibit C; (16)
(i) Conformed Copy of Exhibit D to the Distributor's
Contract; (10)
(ii) Conformed Copy of Exhibit E to the Distributor's
Contract; (10)
(iii)Conformed copy of Exhibit F to the Distributor's
Contract; (13)
(iv) Conformed copy of Exhibit G to the Distributor's
Contract; (13)
(v) Conformed copy of Exhibit H to the Distributor's
Contract; (13)
(vi) Conformed copy of Exhibit I to the Distributor's
Contract; (13)
(vii)Conformed copy of Exhibit J to the Distributor's
Contract; (13)
(viii) Conformed copy of Exhibit K to the Distributor's
Contract; (13)
- --------------------
+ All exhibits have been filed electronically.
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed February 8, 1995. (File Nos. 33-26516 and
811-5752)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed on July 25, 1995. (File Nos. 33-26516 and
811-5752)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed on August 29, 1995. (File Nos. 33-26516 and
811-5752)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on June 28, 1996. (File Nos. 33-26516 and
811-5752)
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed on April 2, 1998. (File Nos. 33-26516 and
811-5752)
21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed on June 24, 1999. (File Nos. 33-26516 and
811-5752)
(ix) Conformed copy of Exhibit L to the Distributor's
Contract; +
(f) Not applicable;
(g) (i) Conformed Copy of Custodian Agreement of the
Registrant through and including Exhibit A; (16)
(a) Conformed Copy of Amendment No. 2 to Exhibit A of the
Custodian Agreement; (19)
(ii) Conformed Copy of the Agency Agreement of the
Registrant; (3)
(iii)Conformed Copy of the Administrative Services
Agreement of the Registrant; (16)
(iv) Conformed Copy of Amendment No. 1 to Exhibit A of
Agency Agreement of the Registrant; (7)
(h) (i) Conformed Copy of Agreement for Fund Accounting,
Shareholder Recordkeeping, and Custody Services
Procurement; (10)
(a) Amendment to Exhibit 1 of the Agreement for Fund
Accounting, Shareholder Recordkeeping, and Custody
Services Procurement; +
(ii) Conformed copy of Shareholder Services Plan; (13)
(iii) Conformed Copy of Exhibit 1 to the Shareholder
Services
Plan of the Registrant; (12)
(iv) Conformed copy of Shareholder Services Agreement
(Amended and Restated 9/19/95); (15)
(v) Conformed Copy of Exhibit 1 to the Shareholder
Services Agreement of the Registrant; (12)
- --------------------
+ All exhibits have been filed electronically.
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed on December 12, 1989. (File Nos.
33-26516 and 811-5752)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed September 2, 1992. (File Nos. 33-26516
and 811-5752)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed February 8, 1995. (File Nos. 33-26516
and 811-5752)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on June 28, 1995. (File Nos. 33-26516
and 811-5752)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed on July 25, 1995. (File Nos. 33-26516
and 811-5752)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed on December 5, 1995. (File Nos.
33-26516 and 811-5752)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on June 28, 1996. (File Nos. 33-26516
and 811-5752)
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed on April 2, 1998. (File Nos. 33-26516
and 811-5752)
(vi) Conformed Copy of Amendment #1 to Exhibit 1 to the
Shareholder Services Agreement of the Registrant; +
(i) Conformed Copy of Opinion and Consent of Counsel as to
legality of shares being registered; (16)
(j) Conformed Copy of Independent Auditors Consent; (22)
(k) Not applicable;
(l) Conformed Copy of Initial Capital Understanding; (16)
(m) (i) Conformed Copy of Distribution Plan through and
including Exhibit A; (16)
(ii) Copy of Sales Agreement with Federated Securities
Corp. and Administrative Agreement -
Appendix B; (2)
(iii) Conformed copy of Exhibit B of Distribution Plan;
(8) (iv) Conformed copies of Exhibit C and D of
Distribution Plan; + (v) Copy of Schedule A of Sales
Agreement with Federated
Securities Corp.; (7)
(vi) Copy of Fee Schedule for Rule 12b-1 Agreement with
Federated Securities Corp.; (7)
(n) Conformed copy of Multiple Class Plan (Amended and Restated
as of 10/1/99); +
(o) (i) Conformed copy of Power of Attorney; (16)
(ii) Conformed copy of Power of Attorney (adding Nathan
Forbes as Trustee). (20)
- --------------------
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed on May 5, 1989. (File Nos. 33-26516 and
811-5752)
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed on December 12, 1989. (File Nos.
33-26516 and 811-5752)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed September 2, 1992. (File Nos. 33-26516
and 811-5752)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed June 24, 1993. (File Nos. 33-26516 and
811-5752)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed on June 28, 1996. (File Nos. 33-26516
and 811-5752)
20. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed on June 26, 1998. (File Nos. 33-26516
and 811-5752)
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed on August 26, 1999. (File Nos. 33-26516
and 811-5752)
Item 24. Persons Controlled by or Under Common Control with Registrant:
None
Item 25. Indemnification: (4)
Item 26. Business and Other Connections of Investment Adviser:
Michigan National Bank, a national banking association (the
"Adviser"), is a wholly owned subsidiary of Michigan National
Corporation ("MNC"). Through its subsidiaries and affiliates, MNC,
offers a full range of financial services to the public including
commercial lending, depository services, cash management, brokerage
services, retail banking, credit card services, mortgage banking,
investment advisory services and trust services. Michigan National
Bank has managed mutual funds since May 1989. The Trust Division has
managed pools of commingled funds since 1964. For more information
on the business of the Adviser, see the Prospectus under the heading
"Who Manages the Funds?"
- --------------------
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed on June 27, 1990. (File Nos. 33-26516
and 811-5752)
The officers and directors of the Adviser and any other business, profession,
vocation or employment of a substantial nature in which each such officer and
director is or has been engaged during the past two years is set forth below.
Unless otherwise noted, the position listed under Other Business, Profession,
Vocation or Employment is with Michigan National Bank. The business address of
each such director and officer is 27777 Inkster Road, Farmington Hills,
Michigan, 48333-9065.
<TABLE>
<CAPTION>
<S> <C> <C>
Other Substantial Business
Position with Profession, Vocation or
NAME THE ADVISER EMPLOYMENT
Glenn L. Barnes Director Executive General Manager,
Business and Personal Financial Services,
National Australia Bank Limited.
John S. Carton Director Director, Michigan National Corporation;
Chairman, President, and CEO,
Pine View, Inc.
Sidney E. Forbes Director Director, Michigan National Corporation;
Partner, Forbes/Cohen Properties.
William F. Pickard Director Director, Michigan National Corporation,
Chairman and Chief Executive Officer, Regal
Plastics Company.
Douglas E. Ebert Director, Chief Executive Officer,
and Chief Michigan National Corporation
Executive Officer
Stephen A. VanAndel Director Director, Michigan National Corporation;
Chairman, Amway Corporation.
Frank J. Cicutto Director Managing Director & Chief
Executive Officer, National Australia Bank Limited
James B. Meyer Director Director, Michigan National
Corporation, President and
Chief Operating Officer,
Spartan Stores, Inc.
James A. Williams Chairman Chairman, Michigan National Corporation;
Chairman and President Williams, Williams,
Ruby & Plunkett P.C.
Other Substantial Business
Position with Profession, Vocation or
NAME THE ADVISER EMPLOYMENT
- ---- ------------- --------------------
Richard C. Webb Head CBFS Head, Custom Business
Financial Services ("CBFS"), Michigan National Corporation.
Susan Barbour Head of Preminum Head of Premium Financial
Financial Services Services, Michigan National
Corporation
Joel Blom Head-Direct Retailing
& Channel Mgt.
Robert Hutchinson Head of Retail Head of Retail Financial Services
Financial Services Michigan National Corporation
Robert Stapleton Head-Investment
Services
Leslie V. Starr Head-Information
Technology
Charles Van Swearingen Chief Financial Chief Financial Officer,
Officer Michigan National Corporation.
Kevin J. Van Solkema Head/Risk Head of Risk
Management,
Management Michigan National Bank.
Errol Talbott Chief Operations Director, Michigan
Officer National Corporation.
Joseph L. Fritzsche Head-Corporate Human Head-Corporate Human Resources,
Resources Michigan National Corporation.
James C. Rose Acting General Counsel Acting General Counsel &
& Secretary Secretary
</TABLE>
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 ("Trust Division") have managed custodial assets totaling
$9 billion. IOCM and the Trust Division have investment discretion over $1.7
billion.
For further information about IOCM, its officers and directors, response is
incorporated by reference to IOCM's Form ADV, File No. 801-29728, dated
September 14, 1994, as amended.
Michigan National Bank has delegated daily management of some of the Equity Plus
Fund and Small Cap Fund's assets to a Sub-Adviser, Sosnoff Sheridan Weiser
Corporation (doing business as Sosnoff Sheridan Group), who is paid by the
Adviser and not by the Funds. Sosnoff Sheridan Weiser Corporation is controlled
by Tom Sosnoff, its Director and President, and Scott Sheridan, it Director,
Executive Vice-President and Secretary. The Corporation's address is 440 South
LaSalle Street, Suite 2301, Chicago, Illinois 60605.
For further information about Sosnoff Sheridan Weiser Corporation, its officers
and directors, response is incorporated by reference to IOCM's Form ADV, File
No. 801-49181, dated May 17, 1995, as amended.
National Australia Bank Limited ("NAB") is a transnational banking organization
headquartered at 333 Collins Street, Melbourne, Australia. NAB is a publicly
owned company, whose shares are widely held and traded on the Australian Stock
Exchange Limited. On February 4, 1995, the Board of Directors of MNC approved a
definitive agreement for the acquisition (the "Merger") of MNC by NAB.
Shareholders of MNC approved the Merger on June 2, 1995. As a result, MNC and
its subsidiaries, including the Adviser, would become direct or indirect
subsidiaries of NAB upon completion of the Merger. The Merger was completed on
November 2, 1995 and Operations will continue to be conducted under the Michigan
National Corporation and Michigan National
For further information about NAB, its officers and directors, response is
incorporated by reference to NAB's Form ADV, File No. 801-55308, dated May 1,
1998 as amended.
ITEM 27. PRINCIPAL UNDERWRITERS:
(a)...Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following open-end
investment companies, including the Registrant:
Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fixed Income Securities, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; Federated High Income Bond Fund,
Inc.; Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust;
Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Series Funds, Inc.; Federated Managed Allocation
Portfolios; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Securities Income Trust;
Federated Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return Series,
Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government Securities
Fund: 1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years; Federated
U.S. Government Securities Fund: 5-10 Years; Federated Utility Fund, Inc.;
FirstMerit Funds; Hibernia Funds; Independence One Mutual Funds; Intermediate
Municipal Trust;
International Series, Inc.; Marshall Funds, Inc.; Money Market Obligations
Trust; Regions Funds; RIGGS Funds; SouthTrust Funds;
Tax-Free Instruments Trust; The Wachovia Funds; The Wachovia Municipal Funds;
Vision Group of Funds, Inc.; and World Investment Series, Inc.;
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Richard B. Fisher Chairman,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales
Federated Investors Tower and Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Executive Vice
Federated Investors Tower Vice President and Assistant
1001 Liberty Avenue Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Senior Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Anthony J. Harper Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Amy Michalisyn Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peter III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Larry Sebbens Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Donald C. Edwards Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kirk A. Montgomery Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Denis McAuley, III Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy S. Johnson Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Victor R. Siclari Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Item 28. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promulgated thereunder are maintained at one of the following
locations:
Independence One Mutual Funds 5800 Corporate Drive
(Registrant) Pittsburgh, PA 15237-7010
Federated Services Company P.O. Box 8609
(Transfer Agent, Dividend Boston, Massachusetts 02266-
Disbursing Agent and Portfolio 8609
Recordkeeper)
Federated Administrative Services Federated Investors Tower
(Administrator) 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michigan National Bank 27777 Inkster Road
(Adviser) Mail Code 10-52
Farmington Hills, MI 48333
National Australia Asset 333 Collins Street
Management Ltd. Melbourne, Victoria 3000, (Sub-Adviser to
International Australia
Equity Fund)
Independence One Capital 27777 Inkster Road
Management Corporation Mail Code 10-52
(Sub-Adviser to U.S. Farmington Hills, MI 48333
Government Securities
Fund)
Sosnoff Sheridan Corporation 440 South LaSalle Street
(Sub-Adviser to Equity Plus Fund Suite 2301
and Small Cap Fund) Chicago, IL 60605
Michigan National Bank 27777 Inkster Road
(Custodian) Mail Code 10-52
Farmington Hills, MI 48333
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, INDEPENDENCE ONE MUTUAL FUNDS,
has duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 20th day of March, 2000.
INDEPENDENCE ONE MUTUAL FUNDS
BY: /s/ C. Grant Anderson
C. Grant Anderson, Secretary
Attorney in Fact for Edward C. Gonzales
March 20, 2000
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
---- ----- ----
By: /s/ C. Grant Anderson
C. Grant Anderson Attorney In Fact March 20, 2000
SECRETARY For the Persons
Listed Below
NAME TITLE
Edward C. Gonzales* President and Treasurer
(Chief Executive Officer
and Principal Financial and
Accounting Officer)
Robert E. Baker* Trustee
Harold Berry* Trustee
Nathan Forbes* Trustee
Harry J. Nederlander* Trustee
Thomas S. Wilson* Trustee
* By Power of Attorney
Exhibit m (iv) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
CLASS A SHARES REDESIGNATED AS CLASS K SHARES - 10/1/99
EXHIBIT C
PLAN
INDEPENDENCE ONE MUTUAL FUNDS
INDEPENDENCE ONE PRIME MONEY MARKET FUND
CLASS A SHARES
This Plan is adopted by Independence One Mutual Funds with respect to
the Class of Shares of the portfolio of the Trust set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .25 of 1% of the
average aggregate net asset value of the Class A Shares of Independence
One Prime Money Market Fund held during the month.
Witness the due execution hereof this 6th day of December, 1994.
INDEPENDENCE ONE MUTUAL FUNDS
By:/S/ E.C. GONZALES
President
EXHIBIT D
PLAN
INDEPENDENCE ONE MUTUAL FUNDS
INDEPENDENCE ONE EQUITY PLUS FUND
CLASS B SHARES
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
CLASS B SHARES
This Plan is adopted by Independence One Mutual Funds with respect to
the Class of Shares of the portfolios of the Trust set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .75 of 1% of the
average aggregate net asset value of the Class B Shares of Independence
One Equity Plus Fund and Independence One U.S. Government Securities Fund
held during the month.
Witness the due execution hereof this 1st day of October, 1999.
INDEPENDENCE ONE MUTUAL FUNDS
By: /S/ JEFFREY W. STERLING
Name: Jeffrey W. Sterling
Title: Vice President
Exhibit n under Form N-1A
Exhibit 99 under Item 601/Reg. S-K
INDEPENDENCE ONE MUTUAL FUNDS
MULTIPLE CLASS PLAN
AMENDED AND RESTATED AS OF OCTOBER 1, 1999
This Multiple Class Plan ("Plan") is adopted by INDEPENDENCE ONE MUTUAL
FUNDS (the "Trust"), a Massachusetts business trust, with respect to the
classes of shares ("Classes") of the portfolios of the Trust (the
"Funds") set forth in exhibits hereto.
PURPOSE
1. This Plan is adopted pursuant to Rule 18f-3 under the Investment Company
Act of 1940, as amended (the "Rule"), in connection with the issuance by
the Trust of more than one class of shares of any or all of the Funds
("Covered Classes") in reliance on the Rule .
2. SEPARATE ARRANGEMENTS/CLASS DIFFERENCES
The Funds set forth on Exhibit A offer two or more classes of shares
which are titled Class Y Shares, Class K Shares, Class Y Shares, and
Class B Shares. The only expenses allocated to the shares as a class are
expenses that may be incurred with respect to Class K Shares and Class B
Shares of certain Funds under this Plan and the related Shareholder
Services Agreement and Rule 12b-1 Plan adopted with respect to Class K
Shares and Class B Shares.
Class Y Shares are sold without a front-end sales charge or contingent
deferred sales charge ("CDSC"), or a Rule 12b-1 fee or shareholder
services fee.
Class K Shares are sold without a front-end sales charge or CDSC, but
bear a Rule 12b-1 fee and may bear a shareholder services fee.
Class B Shares are sold with a CDSC, and bear a Rule 12b-1 fee and a
shareholder services fee.
Shareholders are entitled to one vote for each share held on the record
date for any action requiring a vote by the shareholders and a
proportionate fractional vote for each fractional share held.
Shareholders of the Trust will vote in the aggregate and not by Fund or
class except (i) as otherwise expressly required by law or when the
Trustees determine that the matter to be voted upon affects only the
interests of the shareholders of a particular Fund or class, and (ii)
only holders of Class K Shares and Class B Shares will be entitled to
vote on matters submitted to shareholder vote with respect to the Rule
12b-1 Plan and the Shareholder Services Plan applicable to such classes.
3. EXPENSE ALLOCATIONS
The expenses incurred pursuant to the Shareholder Services Plan and the
Rule 12b-1 Plan will be borne solely by the Class K Shares and the Class
B Shares of the applicable Fund, and constitute the only expenses
allocated to one class and not the other.
4. EXCHANGE FEATURES
A shareholder may exchange shares of one Fund for the appropriate class
of shares of any other Fund in the Trust.
EFFECTIVENESS
5. This Plan shall become effective with respect to each Class (i) to the
extent required by the Rule, after approval by a majority vote of: (a)
the Trust's Board of Trustees; (b) the members of the Board of the Trust
who are not interested persons of the Trust and have no direct interest
or financial interest in the operation of the Trust's Plan; and/or (ii)
upon execution of an exhibit adopting this Plan with respect to such
Class.
6. AMENDMENT
This Plan may be amended at any time, with respect to any Class, by a
majority vote of: (i) the Trust's Board of Trustees; and (ii) the
members of the Board of Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the operation
of this Plan.
INDEPENDENCE ONE MUTUAL FUNDS
EXHIBIT A
to the
MULTIPLE CLASS PLAN
INDEPENDENCE ONE EQUITY PLUS FUND
CLASS Y SHARES
CLASS B SHARES
INDEPENDENCE ONE MICHIGAN MUNICIPAL CASH FUND
CLASS Y SHARES
CLASS K SHARES
INDEPENDENCE ONE PRIME MONEY MARKET FUND
CLASS Y SHARES
CLASS K SHARES
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
CLASS Y SHARES
CLASS K SHARES
CLASS B SHARES
This Multiple Class Plan is adopted by INDEPENDENCE ONE MUTUAL FUNDS with
respect to the Classes of Shares of the portfolio of INDEPENDENCE ONE MUTUAL
FUNDS set forth above.
Witness the due execution hereof as of this 1st day of October, 1999.
INDEPENDENCE ONE MUTUAL FUNDS
By: /S/ JEFFREY W. STERLING
Name: Jeffrey W. Sterling
Title: Vice President
Exhibit e (ix) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit L
to the
Distributor's Contract
INDEPENDENCE ONE MUTUAL FUNDS
INDEPENDENCE ONE EQUITY PLUS FUND
CLASS B SHARES
INDEPENDENCE ONE U.S. GOVERNMENT SECURITIES FUND
CLASS B SHARES
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated September 26, 1991, between Independence One Mutual
Funds and Federated Securities Corp. with respect to the Class of shares set
forth above.
1. The Trust hereby appoints FSC to engage in activities principally intended
to result in the sale of shares of the above-listed Class ("Shares"). Pursuant
to this appointment, FSC is authorized to select a group of financial
institutions ("Financial Institutions") to sell Shares at the current offering
price thereof as described and set forth in the respective prospectuses of the
Trust.
2. During the term of this Agreement, the Trust will pay FSC for services
pursuant to this Agreement, a monthly fee computed at the annual rate of .75% of
the average aggregate net asset value of the Shares held during the month. For
the month in which this Agreement becomes effective or terminates, there shall
be an appropriate proration of any fee payable on the basis of the number of
days that the Agreement is in effect during the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such lower
expense limitation as FSC may, by notice to the Trust, voluntarily declare to be
effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in its
sole discretion, may pay Financial Institutions a periodic fee in respect of
Shares owned from time to time by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid shall be determined
from time to time by FSC in its sole discretion.
5. FSC will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts paid to
Financial Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated September 26, 1991 between Independence One Mutual Funds and
Federated Securities Corp., Independence One Mutual Funds executes and delivers
this Exhibit on behalf of the Independence One Equity Plus Fund and Independence
One U.S. Government Securities Fund, and with respect to the Class B Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of October, 1999.
INDEPENDENCE ONE MUTUAL FUNDS
By: /S/ JEFFREY W. STERLING
Name: Jeffrey W. Sterling
Title: Vice President
FEDERATED SECURITIES CORP.
By: /S/ DAVID M. TAYLOR
Name: David M. Taylor
Title: Executive Vice President
Exhibit h (i)(a) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AMENDMENT TO EXHIBIT 1
FA=Fund Accounting
SR=Shareholder Recordkeeping
CONTRACT SERVICES
DATE CLASS Y COMPANY PROVIDED
INDEPENDENCE ONE MUTUAL FUNDS
6/21/94 Independence One Michigan Municipal Cash Fund SR,FA
CLASS K SHARES (REDESIGNATED 10/1/99)
CLASS Y SHARES (REDESIGNATED 10/1/99)
6/21/94 Independence One Prime Money Market Fund SR, FA
CLASS K SHARES (REDESIGNATED 10/1/99)
CLASS Y SHARES (REDESIGNATED 10/1/99)
6/21/94 Independence One U.S. Government Securities Fund SR, FA
10/1/99 CLASS B SHARES
6/21/94 CLASS Y SHARES
6/21/94 CLASS K SHARES (REDESIGNATED 10/1/99)
6/21/94 Independence One U.S. Treasury Money Market Fund SR, FA
CLASS K SHARES (REDESIGNATED 10/1/99)
9/25/95 Independence One Equity Plus Fund SR, FA
9/25/95 CLASS Y SHARES (REDESIGNATED 10/1/99)
10/1/99 CLASS B SHARES
10/23/95 Independence One Fixed Income Fund SR, FA
CLASS Y SHARES (REDESIGNATED 10/1/99)
11/20/95 Independence One Michigan Municipal Bond Fund SR, FA
CLASS Y SHARES (REDESIGNATED 10/1/99)
3/4/98 Independence One International Equity Fund SR, FA
CLASS Y SHARES (REDESIGNATED 10/1/99)
3/4/98 Independence One Small Cap Fund SR, FA
CLASS Y SHARES (REDESIGNATED 10/1/99)
INDEPENDENCE ONE MUTUAL FUNDS
By: /S/ JEFFREY W. STERLING
Name: Jeffrey W. Sterling
Title: Vice President
FEDERATED SERVICES COMPANY
By: /S/ C. GRANT ANDERSON
Name: C. Grant Anderson
Title: Vice President
As revised: 10/1/99
Exhibit h (vi) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AMENDMENT #1 TO EXHIBIT 1
SHAREHOLDER SERVICES AGREEMENT
Independence One Prime Money Market Fund
Class K Shares (REDESIGNATED 10/1/99) September 19, 1995
Independence One Equity Plus Fund
Class B Shares October 1, 1999
Independence One U.S. Government Securities Fund
Class B Shares October 1, 1999
As revised: 10/1/99
