As Filed with the
Commission on April 21, 1998
Registration No. _____________
SEC File No. 811-7473
Securities and Exchange Commission
Washington, D.C.
Form N-1A
Registration Statement Under the Securities Act of 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No.
Registration Statement Under the Investment Company Act
of 1940 X
Amendment No. 1
Mosaic Focus Fund Trust
(Exact Name of Registrant as Specified in Charter)
1655 Fort Myer Drive, Arlington, Virginia 22209
Registrant's Telephone Number: (703) 528-3600
W. Richard Mason, Secretary
Mosaic Focus Fund Trust
1655 Fort Myer Drive
Suite 1000
Arlington, Virginia 22209
(Name and Address of Agent for Service)
Copies to:
John Rashke, Esquire
DeWitt Ross & Stevens, LC
8000 Excelsior Drive
Madison, Wisconsin 53717
David Leahy, Esquire
Sullivan & Worcester, LLP
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) 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.
Title of Securities Being Registered: Mosaic Focus Fund
<PAGE>
Cross-Reference Sheet
Form N1-A
Part A, Information Required in a Prospectus
Item 1 Inside cover Page
Item 2 Expense Summary
Item 3 Not applicable
Item 4 Inside cover, About Mosaic Focus Fund,
Investment Objective, Investment
Policies and Limitations, Investment
Risks
Item 5 Management of the Fund
Item 5A Not applicable
Item 6 The Fund and Its Shares, Dividends,
Performance Information, Taxes
(including Federal Tax Considerations
and State Tax Considerations), Net
Asset Value, Shareholder Account Transactions
How to Open a New Account, How to Purchase
Additional Shares, How to Redeem Shares and
rear cover page
Item 7 How to Purchase Additional Shares
Item 8 How to Redeem Shares
(Additional Charges and How to Close An Account)
Item 9 Not applicable
Part B, Items Required in a Statement of
Additional Information
Item 10 Cover page
Item 11 Table of Contents (Cover page)
Item 12 Introductory Information
Item 13 Supplemental Investment Policies,
Investment Limitations
Item 14 The Investment Advisor, Trustees and
Officers
Item 15 Organization of the Trust, Trustees and
Officers
Item 16 The Investment Advisor, Administrative
and Other Expenses, Custodians and
Special Custodians,
Item 17 Portfolio Transactions
Item 18 Organization of the Trust
Item 19 Shareholder Transactions, Redemptions,
Declaration of Dividends, Determination
of Net Asset Value
Item 20 Additional Tax Matters
Item 21 Not applicable
Item 22 Yield and Total Return Calculations
Item 23 To be incorporated by reference
and discussed in Financial Statements and Independent
Auditors' Report, Legal Matters & Inde-
pendent Auditors, Additional Information
Part C, Other Information
Items 24 through 32 follow Part B
<PAGE>
Prospectus/[Effective Date]
1655 Fort Myer Drive, Arlington, Virginia 22209-3108
Mosaic Focus Fund
Features
o No commissions or sales charges
o $1,000 minimum initial investment
o No "12b-1" fees
o Free exchanges with other Mosaic mutual funds
o Purchases and redemptions by mail or by wire
o Telephone exchanges and redemptions
This prospectus is intended to be a concise statement of information
investors should know before investing. After reading the prospectus,
it should be retained for future reference. A paper copy of the
prospectus is available to investors who received an electronic
prospectus without charge by calling or writing the Fund. The
Securities and Exchange Commission maintains a site on the Worldwide Web
that contains reports, proxy and information statements and other
information regarding the Fund at http://www.sec.gov.
A Statement of Additional Information concerning the Fund, bearing the
same date as this prospectus, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. It is
available without charge by calling or writing the Fund.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank. Shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Madison Mosaic, LLC
Investment Advisor
Table of Contents
About Mosaic Focus Fund 3
Expense Summary 3
Financial Highlights 4
Investment Objective 5
Investment Policies and Limitations 5
Investment Selection 5
Investment Risks 6
Management of the Fund 6
The Fund and Its Shares 7
Dividends 7
Performance Information 7
Taxes 7
Net Asset Value 8
Shareholder Account Transactions 8
How to Open a New Account 8
How to Purchase Additional Shares 9
How to Redeem Shares 9
Other Fees and Services 10
Custodian
Star Bank NA
Cincinnati, OH 45202
Independent Accountants
Deloitte & Touche LLP
Telephone Numbers
Shareholder Services
Washington, DC area: 703-528-6500
Toll-free Nationwide: 888-670-3600
Mosaic Tiles (24-hour automated information)
Toll-free Nationwide: 800-336-3063
Introduction to the Fund
Mosaic Focus Fund (the "Fund") is a no-load, non-diversified open-end
investment company, commonly known as a mutual fund. As an open-end
company, the Fund continuously offers its shares to investors and stands
ready to redeem shares at the current net asset value per share. The
Fund is managed by Madison Investment Advisors, Inc. of Madison,
Wisconsin, through its Madison Mosaic, LLC subsidiary (the "Advisor") of
the same address as the Fund. Shares in the Fund are offered by
means of this prospectus only.
Expense Summary
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses After Expense Reimbursements (as a
percentage of average net assets)
Management Fees 0.75%
12b-1 Fee None
Other Expenses 0.50%
Total Fund Operating Expenses 1.25%
Example 1 year 3 years 5 years 10 years
You would pay the following expenses on a $1,000
investment, assuming (1) a five percent annual return
and (2) redemption at the end of each period:
$13 $40 $69 $151
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor will bear directly and
indirectly. For a detailed discussion of the Fund's fees and expenses,
see "Management of the Fund."
The hypothetical example shown above is based on the restated expense
levels listed under the caption "Annual Fund Operating Expenses" and is
intended to provide an understanding of the level of expenses that might
be incurred in the future. The five percent return used in the example
is arbitrary and is for illustrative purposes only; it should not be
considered representative of the Trust's past or future performance, nor
should the expenses in the example be considered representative of
future expenses, which may actually be greater or less than those shown.
Additional fees and transaction charges described elsewhere in this
prospectus, if applicable, will increase the level of expenses that can
be incurred (fees for certain wire transfers, stop payments on checks,
bounced investment checks, and retirement plans are described on pages
8-11).
Because the Fund adopted its investment objectives and policies
effective January 1, 1998, no historical per share data or ratios are
provided. Prior to January 1, 1998, the Fund was known as Madison
Opportunity Fund. It operated as a diversified equity fund
concentrating on small to mid-cap stocks and was never publicly offered.
Investment Objective
The investment objective of the Fund is long-term growth of capital.
Production of current income is incidental to the Fund's objective. The
Fund's management believes that capital growth can best be achieved
through investing in high quality growth companies whose true prospects
are underappreciated by the market. The Fund seeks to achieve its
objective by investing in common stocks, convertible securities and
American Depository Receipts.
The Fund's investment objective may be changed without shareholder
approval. Shareholders will, however, receive prior written notice of
any material change. Of course, there can be no assurance that the
Fund's investment objective will be achieved.
Investment Policies and Limitations
Under normal market conditions, the Fund should be fully invested in
common stocks. However, for temporary defensive purposes, the Fund is
permitted to raise cash, invest in puts and calls, and enter into
futures and options contracts to a limited extent.
The purpose of the Fund is to make available to investors an investment
program under continuous supervision of experienced investment
management. The Advisor will focus on a relatively limited number of
securities (generally 18 or less, other than money market instruments).
The Fund will employ a focused investment strategy that has the
potential to produce higher returns than an investment strategy calling
for investment in a larger number of securities. However, the result
may be an increase in the overall volatility of the Fund's share price.
Since the Fund may invest more than 5% of its assets in a single
security, the appreciation or depreciation of such a security will have
a greater impact on the net asset value of the Fund. As a result, the
net asset value per share can be expected to fluctuate more than the net
asset value of a comparable "diversified" mutual fund.
Through ownership of shares of the Fund, as contrasted with ownership of
individual securities, investors are relieved of many details in the
management of their investments while their bookkeeping and income tax
records are greatly simplified. Ownership of shares in the Fund does
not constitute a complete financial program.
The value of the Fund's shares will fluctuate as the value of the
securities in which it invests fluctuates. The common stocks selected
will typically be traded on a national securities exchange or over-the-
counter in the NASDAQ system. Such stocks will primarily include
securities of large, known companies, but may also include smaller, less
well-known companies.
The Fund will typically hold 12 to 18 securities and will represent a
"non-diversified" portfolio as that term is understood under the
Investment Company Act of 1940. An investment in the Fund should be
considered a long-term investment. The Fund is not designed to meet
short-term financial needs. Likewise, the Fund is not intended to
provide a complete or balanced investment program.
As a "non-diversified" fund, the Fund is not limited under the
Investment Company Act of 1940 in the percentage of its assets that it
may invest in any one issuer or industry. However, the Fund does intend
to comply with diversification standards necessary to be classified as a
regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code").
The Code requires that at the close of each calendar quarter, with
respect to at least half (50%) of the value of the Fund's total assets
that (a) not more than 5% of the Fund's total assets is invested in the
securities of any one issuer, and (b) the amount of securities owned by
the Fund does not represent more than 10% of the outstanding voting
securities of an issuer. In addition, the Fund as a whole may not have
more than 25% of its total assets invested in the securities of any one
issuer. Also, the Fund will meet its Code diversification requirements
by investing in certain (1) cash and cash equivalents (including
receivables) and (2) US Government securities.
The Fund's fundamental investment policies, which may not be changed
without a shareholder vote, prevent the Fund from investing more than 15
percent of its total assets in securities which cannot be liquidated
within seven days. The Fund does not intend to borrow under normal
circumstances and will not borrow amounts exceeding five percent of total
assets. Other fundamental policies are described in the Statement of
Additional Information.
If the Advisor determines that it would be appropriate to adopt a temporary
defensive investment position by reducing exposure in the equity markets,
up to 100 percent of the Fund could be invested in short-term investments.
To the extent more than 35 percent of the Fund is so invested, it is not
invested in accordance with policies designed to achieve its stated
investment objective.
Investment Selection
Equity Securities. In order to achieve its investment objective, the
Fund will strive to be fully invested in common stocks most of the time.
A significant portion of the Fund's assets may be invested in securities
of companies with relatively large to medium-sized market
capitalization. It is expected that many of the securities in which the
Fund invests will pay interest or dividends; however, such payments by
the issuer will be incidental to the selection of securities by the
Advisor.
The Fund's investment success depends upon the Advisor's ability to
identify companies with reliable, above-average earnings growth. This
is accomplished in two separate but related ways:
First, the Advisor searches for companies that have exhibited
consistent, above-average earnings growth in the past. Since past
performance is no guarantee of future success, the Advisor's analysts
perform in-depth fundamental research on prospective investments. This
means that the Advisor scrutinizes financial statements, assesses
management's ability and analyzes industry conditions and competition to
determine the sustainability of a company's growth.
Second, the Advisor identifies companies that are transforming their
businesses into more profitable and reliable ones. Typically, the
Advisor will wait for clear signs of this process before purchasing
shares for the Fund.
Once the Advisor identifies desirable companies, it determines the price
the Fund will pay for them. Since the Fund is managed to buy only at
reasonable valuations, the Fund's purchases tend to occur when stocks
are under-appreciated or temporarily out of favor. Since the Fund
invests for the long term and the Advisor has confidence in the growth
prospects of the purchased stock, the Fund has the luxury of waiting
patiently for true value to be realized by the market.
The Fund may also utilize convertible bonds and convertible preferred
stocks. These securities are convertible into common stocks and have
equity characteristics. Convertible bonds are convertible into a
specific number of shares of common stock of the issuer either at any
time or, more commonly, at a specific future date at a pre-determined
price per share of common stock. The Fund anticipates that convertible
securities will represent less than 25% of the Fund's portfolio.
Foreign Securities. The Fund may invest in US dollar-denominated
securities of foreign issuers in the form of American Depository
Receipts that are regularly traded on recognized US exchanges or in the
US over-the-counter market. Investments in securities of foreign
issuers may involve risks which are in addition to the usual risks
inherent in domestic investments (see "Investment Risks" below).
Options and Futures Contracts. The Fund may attempt to reduce the
overall risk of its investments by using options and futures contracts.
The decision to invest in these instruments will be based on market
conditions, regulatory limits and tax considerations. There can be no
assurance that engaging in options, futures or any other defensive
strategy will be successful.
Repurchase Agreements. Repurchase agreements involve the sale of
securities to the Fund by a financial institution or securities dealer,
simultaneous with an agreement by that seller to repurchase the
securities at the same price, plus interest, at a later date. The Fund
will limit the parties with which it will engage in repurchase
agreements to those financial institutions and securities dealers that
are deemed creditworthy pursuant to guidelines adopted by the Trust's
Board of Trustees. The Advisor will follow procedures to ensure that
all repurchase agreements acquired by the Fund are always at least 100
percent collateralized as to principal and interest.
Investment Risks
The Fund's holdings will be subject to the economic, business and market
risks associated with common stock investment. As a result, an
investor's shares, when redeemed, may be worth more or less than
original cost. There can be no assurance that the Fund's shareholders
can be protected from the risk of loss inherent in common stock
investing. In addition, any small or "mid-cap" companies in which the
Fund invests (see "Investment Selection" above) will bear a higher level
of this common stock market risk.
To the extent the Fund invests in foreign securities, it will bear the
additional risks inherent in such securities. For example, in many
countries, there is less publicly available information about issuers
than is available in the reports and ratings published about companies
in the United States. Although the Fund's foreign investments will be
denominated in US dollars, foreign investing will still involve currency
risk: Foreign investments tend to become less valuable if the value of
the US dollar increases relative to the value of the currency in the
nation of the foreign issuer. Finally, some foreign companies are not
subject to uniform accounting, auditing and financial reporting
standards.
To the extent the Fund engages in a defensive strategy by investing in
options or futures contracts, if the Advisor misgauges market values or
other economic factors, the Fund may be worse off than had it not
employed the defensive strategy. While defensive strategies can reduce
the risk of loss, they can also reduce the opportunity for gain since
they offset favorable price movements. The use of defensive strategies
may result in a disadvantage to the Fund if the Fund is not able to
purchase or sell a portfolio holding at an optimal time due to the need
to cover its position or due to the inability of the Fund to liquidate
its position because of its relative illiquidity.
Since the Fund will not invest for current income, the Fund may be
unsuitable for persons who must depend on the invested funds for such
purpose.
When investing in repurchase agreements, the Fund relies on the other
party to complete the transaction on the scheduled date. Should the
other party fail to do so, the Fund would hold securities it did not
intend to own. Were it to sell such securities, the Fund might incur a
loss. In the event of insolvency or bankruptcy of the other party to a
repurchase agreement, the Fund could encounter difficulties and might
incur losses upon the exercise of its rights under the repurchase
agreement.
In accordance with its investment objectives, the Advisor is monitoring
developments as they relate to the so-called "Millennium Bug": The
computer problem that may cause errors when the calendar reaches January
1, 2000. The Millennium Bug may cause disruption in securities and
other markets that affect the national and global economy. The Fund is
taking appropriate measures to help ensure that the Millennium Bug does
not interrupt its own portfolio and shareholder accounting or the
Advisor's management operations. The Fund intends to test its computer
hardware and software throughout 1998 and has undertaken to obtain assurances
of timely Millennium Bug solutions from the many third party vendors upon
which it relies for computer-related services.
Management of the Fund
The Trustees. Under the terms of the Fund's organizational document,
its Declaration of Trust, which is governed by the laws of the
Commonwealth of Massachusetts, the Trustees are ultimately responsible
for the conduct of the Fund's affairs. They serve indefinite terms of
unlimited duration, and they appoint their own successors, provided that
at least two-thirds of the Trustees have been elected by shareholders.
The Declaration of Trust provides that a Trustee may be removed at any
special meeting of shareholders by a vote of two-thirds of the Trust's
outstanding shares.
The Advisor. Madison Mosaic, LLC is a wholly-owned subsidiary of
Madison Investment Advisors, Inc., 6411 Mineral Point Road, Madison,
Wisconsin, 53705. Madison Mosaic, LLC manages assets of approximately
$200 million in assets in the Mosaic family of mutual funds, which
includes stock, bond and money market portfolios. Madison Investment
Advisors, Inc., a registered investment advisory firm for over 24 years,
provides professional portfolio management services to a number of
clients and has approximately $3 billion under management.
The Advisor is responsible for the day-to-day administration of the
Fund's activities. Investment decisions regarding the Fund can be
influenced in various manners by a number of individuals. As a result,
no single person is primarily responsible for the Fund's day to day
operations. Instead, all decisions regarding investment selection for
the Fund are made by the Advisor's Investment Policy Committee. This
Committee is made up of several senior members of the Advisor's
investment management personnel. The Committee's decisions are
influenced by the recommendations and research provided by several of
the Advisor's equity analysts.
The Advisor is controlled by Madison Investment Advisors, Inc. The
Advisor has the same address as the Trust.
Compensation. For its services to the Fund under its investment
advisory agreement, the Advisor receives a fee, payable monthly,
calculated as three-quarters of one percent per annum of the average
daily net assets of the Fund. The Advisor may compensate certain
financial organizations for services resulting in purchases of Fund
shares.
Distributor. Artisan Investment Services, LLC, of the same address as the
Fund, acts as the Fund's distributor. The distributor is wholly owned by
Madison.
Services Agreement. Under a separate Services Agreement with the Fund,
the Advisor provides certain operational and other support services for
which it receives a fixed fee intended to be at or below the cost of
providing such services calculated as a percentage of the average daily
net assets of the Fund. As of the date of this prospectus, such fee is
0.50%. Such fee is subject to review and approval at least annually by
the Trustees (see "Expense Summary"). Such fee pays for the Fund's
expenses, including the costs of the following: shareholder services;
legal, custodian and audit fees; trade association memberships;
accounting; certain Trustees' fees and expenses; fees for registering
the Fund's shares; the preparation of prospectuses, proxy materials and
reports to shareholders; and the expense of holding shareholder
meetings.
Transfer Agent and Dividend Paying Agent. The Fund acts as its own
transfer agent and dividend paying agent.
The Fund and Its Shares
Under the terms of the Declaration of Trust, the Trustees may issue an
unlimited number of whole and fractional shares of beneficial interest
without par value for each series of shares they have authorized. All
shares issued will be fully paid and nonassessable and will have no
preemptive or conversion rights. Under Massachusetts law, the
shareholders may, under certain circumstances, be held personally liable
for the Fund's obligations; the Declaration of Trust, however, provides
indemnification out of Fund property of any shareholder held personally
liable for obligations of the Fund.
Mosaic Focus Fund shares are the only shares currently authorized by the
Trustees of Mosaic Focus Fund Trust. The shares are all of a single class,
each representing an equal proportionate share of the assets, liabilities,
income and expense of the Fund and each having the same rights as any
other share of the Fund. Each share has one vote and fractional shares
have fractional votes. Voting is not cumulative.
The Fund does not intend to hold annual shareholder meetings.
Shareholder inquiries can be made to the offices of the Fund at the
address on the cover of this prospectus.
Dividends
The Fund's net income, if any, is declared as dividends and distributed
to shareholders at least annually at the end of the year. Any net realized
capital gains also will be paid to shareholders annually as capital gains
distributions. Distributions are paid in the form of additional shares
credited to investor accounts, unless a shareholder elects in writing to
receive checks.
Performance Information
From time to time, the Fund advertises its total return. Total return
is based on historical data and is not intended to indicate future
performance. For advertising purposes, total return takes into account
changes in share price and assumes that dividends and other
distributions are reinvested when paid. In addition to average annual
total return, the Fund may quote total return over various periods and
may quote the aggregate total return for a period.
The Fund may also cite the ranking or performance of the Fund as
reported in the public media or by independent performance measurement
firms. The Fund's Annual Report contains additional performance
information. A copy of the Annual Report may be obtained without charge
by calling or writing the Fund at the telephone number and address on
the first page of this prospectus.
Taxes
Federal. For federal income tax purposes, the Fund intends to maintain
its status under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), as a regulated investment company. It does this by
distributing to shareholders 100 percent of its net income and net
capital gains, if any, by the end of its fiscal year. The Code also
requires the Fund to distribute at least 98 percent of its net income
and capital gains realized from the sale of investments by the end of
each calendar year. The capital gain distribution is determined as of
October 31 each year. Capital gains distributions, if any, are taxable
to the shareholder. For tax purposes, the Fund will send shareholders
an annual notice of dividends and other distributions paid during the
prior year.
State and Local. At the federal as well as state and local levels, dividend
income and capital gains are generally considered taxable income. Because
tax laws vary from state to state, shareholders should consult their tax
advisors concerning the impact of mutual fund ownership in their own
tax jurisdictions.
Cost Basis
Because the Fund's share price fluctuates, a redemption of shares by the
investor creates a capital gain or loss which has tax consequences. It
is the shareholder's responsibility to calculate the cost basis of
shares purchased. Investors are advised to retain all statements
received from the Fund and to maintain accurate records of their
investments.
Certification of Tax Identification Number
Shareholders who fail to provide a valid social security or tax
identification number may be subject to federal withholding at a rate of
31 percent of dividends and capital gains distributions. Any fine
assessed against the Fund as a result of an investor's failure to
provide a valid social security or tax identification number will be
charged against the investor's account.
Net Asset Value
Net asset value is calculated as of the close of the New York Stock
Exchange each day the New York Stock Exchange is open for trading. The
net asset value per share of the Fund is determined by adding the value
of all its securities and other assets, subtracting liabilities and
dividing the result by the total number of outstanding shares for the
Fund.
For purposes of calculating net asset value, securities traded on
securities exchanges are valued at their daily closing sale prices, if
available, and if not available, such securities are valued at the mean
between the bid and ask prices. Other securities for which current
market quotations are readily available are valued at the mean between
their bid and ask prices. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith according to procedures established by the
Trustees. The Fund may use an independent pricing service for
determination of securities values.
Shareholder Account Transactions
Please call a Mosaic Account Executive if you have any questions. Our
local number in the Washington, DC area is (703) 528-6500 and our toll-
free nationwide number is (888) 670-3600.
Confirmations and Statements
Daily Transaction Confirmation. All purchases and redemptions are
confirmed in writing with a transaction confirmation. Transaction
confirmations are usually mailed within a day or two after the
transaction is posted to the account.
Quarterly Statement. Quarterly statements are mailed at the end of each
calendar quarter. The statements reflect account activity for the most
recent quarter. At the end of the calendar year, the statement will
reflect account activity for the entire year.
It is strongly recommended that shareholders retain all daily
transaction confirmations until they receive their quarterly statements.
Likewise, shareholders should retain all of the quarterly statements
until they receive the year-end statement showing the activity for the
entire year.
Changes to an Account
To make any changes to an account, it is recommended that shareholders
call an Account Executive to discuss the changes to be made and inquire
about any necessary documentation. Though some changes may be made by
phone, generally, in order to make any changes to an account, Mosaic may
require a written request signed by all of the shareholders with their
signatures guaranteed.
Telephone Transactions. The options to initiate exchanges and certain
redemptions and to obtain account balance information by telephone are
available automatically to all shareholders. Mosaic will employ
reasonable security procedures to confirm that instructions communicated
by telephone are genuine; and if it does not, it may be liable for
losses due to unauthorized or fraudulent transactions. These procedures
can include, among other things, requiring one or more forms of personal
identification prior to acting upon telephone instructions, providing
written confirmations and recording all telephone transactions. Certain
transactions, including account registration changes, must be authorized
in writing.
Certificates. Certificates will not be issued to represent shares in
the Funds.
How to Open a New Account
Minimum Initial Investment
$1,000 for a regular account
$500 for an IRA account
$100 for an Education IRA Plus account
By Check
New accounts may be opened by completing an application and forwarding
it along with a check payable to Mosaic Funds to:
Mosaic Funds
1655 Fort Myer Drive, Suite 1000
Arlington, VA 22209-3108
By Wire
Please call Mosaic before money is wired to ensure proper and timely
credit.
When a new account is opened by wire, the shareholder is required to
submit a signed application promptly thereafter. Payment of redemption
proceeds is not permitted until a signed application is received in
proper form by Mosaic. Please wire money to:
Star Bank NA
Cinti/Trust
ABA # 0420-0001-3
Credit Mosaic Acct. # 48038-8883
(Shareholder name and account number)
Wire Fee. There may be a charge of $6 for processing incoming wires
of less than $1,000.
By Exchange
Shareholders may open a new account by exchange from an existing account
when the account registration and tax identification number will remain
the same. A new account application is required only when the account
registration or tax identification number will differ from that on the
application for the original account. Exchanges may only be made into
funds that are sold in the shareholder's state of residence.
How to Purchase Additional Shares
Purchase Price. The share price (net asset values) is determined every
day that the New York Stock Exchange is open. Purchases are priced at the
next share price determined after the purchase request is received in
proper form by Mosaic.
Purchases and Uncollected Funds. To protect shareholders from loss or
dilution resulting from deposit items that are returned unpaid, the
proceeds of any redemption may be delayed 10 days or more until it can
be determined that the check or other deposit item (including purchases
by Electronic Funds Transfer "EFT") used for purchase of the shares has
cleared. Such deposit items are considered "uncollected," until Mosaic
has determined that they have actually been paid by the bank on which
they were drawn. Purchases made by federal funds wire or US Treasury
check are considered collected when received and not subject to the 10
day hold. All purchases earn dividends from the day after the day of
credit to a shareholder's account, even while not collected.
By Check
Subsequent investments may be made for $50 or more. Please make check
payable to Mosaic Funds and mail it along with an investment slip or an
indication as to which fund and account it should be credited.
Mosaic Funds
PO Box 640393
Cincinnati, OH 45264-0393
By Wire
Shareholders should call Mosaic before the money is wired to ensure
proper and timely credit.
Please wire money to:
Star Bank NA
Cinti/Trust
ABA # 0420-0001-3
Credit Mosaic Acct. # 48038-8883
(Shareholder name and account number)
Wire Fee. There may be a charge of $6 for processing incoming wires
of less than $1,000.
By Automatic Investment Plan
Shareholders may elect to have an automatic investment plan whereby
Mosaic will automatically initiate a credit to their Mosaic account and
debit the bank account they designate each month. The automatic
investment is processed as an electronic funds transfer (EFT). To
establish an automatic investment plan, complete the appropriate section
of the application or call an Account Executive for information. The
minimum monthly amount for an EFT is $100. Shareholders may change the
amount or discontinue the automatic investment plan any time.
How to Redeem Shares
Redemption Price. Share prices (net asset values) are determined every
day that the New York Stock Exchange is open. Redemptions are priced at the
next share price determined after the redemption request is received in
proper form by Mosaic.
Signature Guarantees. To protect shareholder investments, Mosaic
requires signature guarantees for certain redemptions. A signature
guarantee helps Mosaic ensure the identity of the authorized
shareholder(s). Shareholders who anticipate the need to transact large
amounts of money are encouraged to establish pre-authorized bank wire
instructions on their account. Redemptions by wire to a pre-authorized
bank and account may be in any amount and do not require a signature
guarantee. Pre-authorized bank wire instructions can be established by
completing the appropriate section of a new application or by calling an
Account Executive to inquire about any necessary documents. A signature
guarantee may be required to add or change bank wire instruction on an
account. A signature guarantee is required for any redemption when (1)
the proceeds are to be greater than $50,000 (unless proceeds are being
wired to a pre-authorized bank and account), (2) the proceeds are to be
delivered to someone other than the shareholder of record, (3) the
proceeds are to be delivered to an address other than the address of
record, or (4) there has been any change to the registration or account
privilege within the last 15 days. Mosaic accepts signature guarantees
from banks with FDIC insurance, certain credit unions, trust companies,
and members of a domestic stock exchange. A guarantee from a notary
public is not an acceptable signature guarantee.
Redemptions and Uncollected Funds. To protect shareholders from loss or
dilution resulting from deposit items that are returned unpaid, the
proceeds of any redemption may be delayed 10 days or more until it can
be determined that the check or other deposit item (including EFT) used
for purchase of the shares has cleared. Such deposited items are
considered "uncollected," until Mosaic has determined that they have
actually been paid by the bank on which they were drawn. Purchases made
with cash, federal funds wire or US Treasury check are considered
collected when received and not subject to the 10 day hold.
By Telephone or By Mail
Upon request by telephone or in writing, a redemption check up to
$50,000 may be sent to the shareholder and address of record only. A
redemption request for more than $50,000 or for proceeds to be sent to
anyone or anywhere other than the shareholder and address of record,
must be made in writing, signed by all shareholders with their
signatures guaranteed. See section Signature Guarantees above.
Redemption requests in proper form received by mail and telephone are
normally processed within one business day.
Stop Payment Fee. To stop payment on a check issued by Mosaic, call our
Shareholder Service department. Normally, the Fund charges a fee of
$28, or the cost of stop payment, if greater, for stop payment
requests on a check issued by Mosaic on behalf of a shareholder.
Certain documents may be required before such a request can be
processed.
By Wire
With one business day's notice, funds can be sent by wire transfer to
the bank and account designated on the account application or by
subsequent written authorization. Share-holders who anticipate the need
to transact large amounts of money are encouraged to establish pre-
authorized bank wire instructions on their account. Redemptions by wire
to a pre-authorized bank and account may be in any amount and do not
require a signature guarantee. Pre-authorized bank wire instructions
can be established by completing the appropriate section of a new
application or by calling an Account Executive to inquire about any
necessary documents. A signature guarantee may be required to add or
change bank wire instructions on an account. Redemption by wires can be
arranged by calling the telephone numbers on the cover of this
prospectus. Requests for wire transfer must be made by 4:00 p.m.
Eastern time the day before the wire will be sent.
Wire Fee. There will be a $10 fee for redemptions by wire to domestic
banks. Wire transfers sent to a foreign bank for any amount will be
processed for a fee of $30 or the cost of the wire if greater.
By Exchange
Shareholders may redeem shares from one Mosaic account and concurrently
invest the proceeds in another Mosaic account by telephone when the
account registration and tax identification number remain the same.
There is no charge for this service.
By Systematic Withdrawal Plan
Shareholders may elect to have a systematic withdrawal plan whereby
Mosaic will automatically redeem shares in their Mosaic account and send
proceeds to a designated recipient. To establish a systematic
withdrawal plan, complete the appropriate section of the application or
call an Account Executive for information. The minimum amount for a
systematic withdrawal is $100. Shareholders may change the amount or
discontinue the systematic withdrawal plan anytime.
Electronic Funds Transfer Systematic Withdrawal. A systematic
withdrawal can be processed as an electronic funds transfer, commonly
known as EFT, to credit a bank account or financial institution.
Check Systematic Withdrawal. Or it can be processed as a check which is
mailed to anyone designated by the shareholder.
How to Close an Account
To close an account, shareholders should call an Account Executive and
request that the account be closed. When an account is closed, shares
will be redeemed at the next determined net asset value. An account may
be closed by telephone, wire transfer or by mail as explained above in
the section "How To Redeem Shares."
Other Fees and Services
Returned Investment Check Fee. Shareholders will be charged (by
redemption of shares) $10 for items deposited for investment that are
returned unpaid for any reason.
Minimum Balance. Mosaic reserves the right to involuntarily redeem
accounts with balances of less than $700. Prior to closing any such
account, the shareholder will be given 30 days written notice, during
which time the shareholder may increase the balance to avoid having the
account closed.
Other Fees. Mosaic reserves the right to impose additional charges,
upon 30 days written notice, to cover the costs of unusual transactions.
Services for which charges could be imposed include, but are not limited
to, processing items sent for special collection, international wire
transfers, research and processes for retrieval of documents or copies
of documents.
Retirement Plans
IRAs
Individual Retirement Accounts ("IRAs") may be opened with a reduced
minimum investment of $500. Even though they may be nondeductible or
partially deductible, IRA contributions up to the allowable annual
limits may be made, and the earnings on such contributions will
accumulate tax-free.
Annual IRA Fee. Mosaic currently charges an annual fee of $12 per
shareholder (not per IRA account) invested in an IRA at Mosaic. This
fee may be prepaid by the shareholder. A separate application is
required for IRA accounts.
Education IRAs
The Fund offers Education IRAs. Education IRAs may be established with
no minimum investment as long as the shareholder establishes and
maintains an "Education IRA Plus" automated investment plan of at least
$100 monthly. The "Education IRA Plus" will be invested to reach the
annual $500 Education IRA limit, with the remainder invested in another
account established by the parent or guardian of the Education IRA
beneficiary.
Education IRA Fee. Mosaic does not charge an annual fee on Education
IRA Plus accounts that have an active automatic investment plan of at least
$100 monthly or on Education IRA accounts of $5,000 or greater. All other
Education IRA accounts may be charged an annual fee of $12 per
shareholder (not per Education IRA account). This fee may be prepaid by
the shareholder.
Mosaic Funds may be invested in SEP IRAs, SIMPLEs and other retirement
plans. Further information on the retirement plans available through
Mosaic, including minimum investments, may be obtained by calling
Mosaic's shareholder service department.
<PAGE>
Statement of Additional Information
Dated [Effective Date]
For use with the prospectus of the
Mosaic Focus Fund dated [Effective Date]
Mosaic Focus Fund Trust
Mosaic Focus Fund
1655 Fort Myer Drive, 10th Floor
Arlington, VA 22209-3108
(888) 670-3600
(703) 528-6500
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the prospectus of Mosaic Focus Fund
bearing the date indicated above (the "Prospectus"). A copy of the
Prospectus may be obtained from the Fund at the address and telephone
numbers shown.
Table of Contents
Introductory Information ("About Mosaic Focus Fund") 2
Supplemental Investment Policies ("Investment Objectives" and
"Investment Policies") 2
Investment Limitations ("Investment Policies") 7
The Investment Advisor ("Management of the Fund") 8
Organization of the Fund ("The Fund and Its Shares") 9
Trustees and Officers ("Management of the Fund") 10
Administrative and Other Expenses ("Management of the Fund") 12
Portfolio Transactions ("Management of the Fund") 12
Shareholder Transactions ("Shareholder Account Transactions") 13
Share Redemptions ("How to Redeem Shares") 14
Retirement Plans ("Other Fees and Services") 15
Declaration of Dividends ("Dividends") 15
Determination of Net Asset Value ("Net Asset Value") 15
Additional Tax Matters ("Taxes") 16
Total Return Calculations ("Performance Information") 17
Custodians and Special Custodians 18
Legal Matters and Independent Auditors 18
Additional Information 18
Financial Statements and Report of Independent Auditors 19
Note: The items appearing in parentheses above are cross references to
sections in the Prospectuses which correspond to the sections of this
Statement of Additional Information.
INTRODUCTORY INFORMATION
Mosaic Focus Fund Trust (the "Fund") currently issues one series of shares:
Mosaic Focus Fund shares corresponding to a portfolio consisting primarily of
equity securities.
SUPPLEMENTAL INVESTMENT POLICIES
The investment objective of the Fund is described in the Prospectus
(see "Investment Objectives"). Reference should also be made to the
Prospectus for general information concerning the Fund's investment
policies (see "Investment Policies and Limitations").
The Fund seeks to achieve its investment objectives through non-diversified
investment principally in 12-18 equity securities.
Basic Investment Policies. The Fund intends generally to select
portfolio investments on the basis of their fundamental values rather
than on the basis of technical market factors. This means that the
Fund's investments will normally be held until there is a change in the
fundamental considerations that were the reason for their purchase.
However, the Fund will be free to sell any of its investments at any
time in response to such considerations. Any such sales may result in
realized long-term or short-term capital gains and losses.
The Fund does not intend to engage in extensive short-term
trading; thus, since it will not normally be able to take advantage of
short-term market swings, the Fund should not be viewed as a vehicle
for short-term investment.
Debt Instruments. The portion of any portfolio of the Fund that is not
invested in equity securities may be invested in debt instruments. The
"Debt Instruments" in which the Fund may invest are limited to the
following US dollar denominated investments: (1) US Government
securities; (2) obligations of banks having total assets of $750 million
or more (including assets of affiliates); (3) high grade commercial
paper; (4) other corporate and foreign government obligations of
investment grade issued and sold publicly within the United States; and
(5) repurchase agreements involving any of the foregoing securities.
"US Government securities" are obligations issued or guaranteed by
the United States Government, its agencies and instrumentalities. US
Government securities include direct obligations of the United States
issued by the US Treasury, such as Treasury bills, notes and bonds.
Also included are obligations of the various federal agencies and
instrumentalities, such as the Government National Mortgage Association,
the Federal Farm Credit System, the Federal Home Loan Mortgage
Corporation and the Federal Home Loan Banks, the Small Business
Administration and the Student Loan Marketing Association. Except for
Treasury securities, all of which are full faith and credit obligations,
US Government securities may either be agency securities backed by
the full faith and credit of the United States, such as those issued by
the Government National Mortgage Association, or only by the credit of
the particular federal agency or instrumentality which issues them, such
as those issued by the Federal Farm Credit System and the Federal Home
Loan Mortgage Corporation; some such agencies have borrowing authority
from the US Treasury, while others do not.
Bank obligations include certificates of deposit ("CDs"), bankers
acceptances ("BAs") and time deposits. CDs are generally short-term,
interest-bearing negotiable certificates issued by banks against funds
deposited with the issuing bank for a specified period of time. BAs are
time drafts drawn against a business, often an importer, and "accepted"
by a bank, which agrees unconditionally to pay the draft on its maturity
date. BAs are negotiable and trade in the secondary market. Time
deposits include money market deposit accounts. The Fund will not
invest in non-transferable time deposits having penalties for early
redemption if such time deposits mature in more than seven calendar
days, and such time deposits maturing in two business days to seven
calendar days will be limited to 15% of the Fund's total assets.
"Commercial paper" describes the unsecured promissory notes issued by
major corporations to finance short-term credit needs. Commercial paper
is issued in maturities of nine months or less and usually on a discount
basis. High grade commercial paper is rated A-1 by Standard and Poor's
Corporation ("S&P") or P-1 by Moody's Investors Service, Inc.
("Moody's") or is of equivalent quality. Other corporate and foreign
government obligations generally include notes and debentures (for
maturities not exceeding 10 years) and bonds (for longer maturities).
These obligations normally pay interest to the holder semiannually; they
may be either secured or, more commonly, unsecured. Investment grade
obligations are those rated Baa or better by Moody's or BBB- or better by
S&P or are of equivalent quality.
Specialized Investment Techniques. In order to achieve its investment
objectives, the Fund may use, when the Advisor deems appropriate,
certain specialized investment techniques. Such specialized investment
techniques principally include those identified in the Prospectus (see
"Investment Policies and Limitations" and "Investment Selection"). The
following is supplemental:
1. Covered Call Options. The Fund may write "covered call options"
against any of its portfolio securities. These options represent
contracts sold on a national options exchange or in the over-the-counter
market allowing the purchaser of the contract to buy specified
underlying securities at a specified price (the "strike price") prior to
a specified expiration date. Writing covered call options may increase
the Fund's income, because a fee (the "premium") is received by the
Fund for each option contract written, but unless the option contract
is exercised it has no other ultimate impact on the Fund. The premium
received, plus the strike price of the option, will always be greater
than the value of the underlying securities at the time the option is
written.
When an option contract is "covered" it means that the Fund, as the
writer of the option contract, holds in its portfolio the underlying
securities described in the contract or securities convertible into such
securities. Thus, if the holder of the option decides to exercise his
purchase rights, the Fund may sell at the strike price securities it
already holds in portfolio or may obtain by conversion (rather than
risking having to first buy the securities in the open market at an
undetermined price). However, an option contract would not normally be
exercised unless the market price for the underlying securities
specified were greater than the strike price. Thus, when an option is
exercised the Fund will normally be forced to sell portfolio securities
at below their current market value or otherwise will be required to buy
a corresponding call contract at a price reflecting this price
differential to offset the call contract previously written (such an
offsetting call contract purchase is called a "closing purchase
transaction").
To the extent the Fund writes covered call options it will be foregoing
any opportunity for appreciation on the underlying securities above the
strike price during the period prior to expiration of the option
contract. The Fund reserves the right to close out call option
contracts written at any time in closing purchase transactions, but
there is no assurance that the Fund will be able to effect such
transactions at any particular time or at an acceptable price. The
Fund will not sell the securities covering an option contract written
prior to its expiration date unless substitute covering securities are
purchased or unless the contract written is first offset in a closing
purchase transaction; nor will the Fund write additional option
contracts if more than 25% of the Fund's assets would then be required
to cover the options written. All of the Fund's investments will be
selected on a basis consistent with its investment policies for the
respective portfolio, notwithstanding the potential for additional
premium income from option writing.
2. When-Issued Securities. The Fund may purchase and sell securities
on a when-issued or delayed delivery basis. When-issued and delayed
delivery transactions arise when securities are bought or sold with
payment for and delivery of the securities scheduled to take place at a
future time. Frequently when newly issued securities are purchased,
payment and delivery may not take place for 15 to 45 days after the
Fund commits to the purchase. Fluctuations in the value of securities
contracted for future purchase settlement may increase changes in the
value of the respective portfolio, because such value changes must be
added to changes in the values of those securities actually held in the
portfolio during the same period. When-issued transactions represent a
form of leveraging; the Fund will be at risk as soon as the when-issued
purchase commitment is made, prior to actual delivery of the securities
purchased.
When engaging in when-issued or delayed delivery transactions, the Fund
must rely upon the buyer or seller to complete the transaction at the
scheduled time; if the other party fails to do so, then the Fund might
lose a purchase or sale opportunity that could be more advantageous than
alternative opportunities available at the time of the failure. If the
transaction is completed, intervening changes in market conditions or
the issuer's financial condition could make it less advantageous than
investment alternatives otherwise available at the time of settlement.
While the Fund will only commit to securities purchases that it intends
to complete, it reserves the right, if deemed advisable, to sell any
securities purchase contracts before settlement of the transaction; in
any such case the Fund could realize either a gain or a loss, despite
the fact that the original transaction was never completed. When fixed
price contracts are made for the purchase of when-issued securities, the
Fund will maintain in a segregated account designated investments which
are liquid or mature prior to the scheduled settlement and cash
sufficient in aggregate value to provide adequate funds for completion
of the scheduled purchase.
3. Foreign Securities. The Fund may invest in securities of foreign
issuers that are listed on a recognized domestic exchange without
restriction. Foreign investments involve certain special considerations
not typically associated with domestic investments. Foreign investments
may be denominated in foreign currencies and may require the Fund to
hold temporary foreign currency bank deposits while transactions are
completed; although the Fund might therefore benefit from favorable
currency exchange rate changes, it could also be affected adversely by
changes in exchange rates, by currency control regulations and by costs
incurred when converting between various currencies. Furthermore,
foreign issuers may not be subject to the uniform accounting, auditing
and financial reporting requirements applicable to domestic issuers, and
there may be less publicly available information about such issuers.
In general, foreign securities markets have substantially less volume
than comparable domestic markets and therefore foreign investments may
be less liquid and more volatile in price than comparable domestic
investments. Fixed commissions in foreign securities markets may result
in higher commissions than for comparable domestic transactions, and
foreign markets may be subject to less governmental supervision and
regulation than their domestic counterparts. Foreign securities
transactions are subject to documentation and delayed settlement risks
arising from difficulties in international communications. Moreover,
foreign investments may be adversely affected by diplomatic, political,
social or economic circumstances or events in other countries, including
civil unrest, expropriation or nationalization, unanticipated taxes,
economic controls, and acts of war. Individual foreign economies may
also differ from the United States economy in such measures as growth,
productivity, inflation, national resources and balance of payments
position.
4. Loans of Portfolio Securities. The Fund, in certain circumstances,
may be able to earn additional income by loaning portfolio securities to
a broker-dealer or financial institution. The Fund may make such loans
only if cash or US Government securities, equal in value to 100% of
the market value of the securities loaned, are delivered to the Fund by
the borrower and maintained in a segregated account at full market value
each business day. During the term of any securities loan, the borrower
will pay to the Fund all dividend and interest income earned on the
loaned securities; at the same time the Fund will also be able to
invest any cash portion of the collateral or otherwise will charge a fee
for making the loan, thereby increasing its overall potential return.
It is the Fund's policy that it shall have the option to terminate any
loan of portfolio securities at any time upon seven days' notice to the
borrower. In making a loan of securities, the Fund would be exposed to
the possibility that the borrower of the securities might be unable to
return them when required, which would leave the Fund with the
collateral maintained against the loan; if the collateral were of
insufficient value, the Fund could suffer a loss. The Fund may pay
fees for the placement, administration and custody of securities loans,
as it deems appropriate.
Any loans by the Fund of portfolio securities will be made in
accordance with applicable guidelines established by the Securities and
Exchange Commission or the Trustees. In determining whether to lend
securities to a particular broker, dealer or other financial
institution, the Advisor will consider the creditworthiness of the
borrowing institution. The Fund will not enter into any securities
lending agreement having a duration of greater than one year.
5. Repurchase Agreement Transactions. A repurchase agreement involves
the acquisition of securities from a financial institution, such as a
bank or securities dealer, with the right to resell the same securities
to the financial institution on a future date at a fixed price.
Repurchase agreements are a highly flexible medium of investment, in
that they may be for very short periods, including frequently maturities
of only one day. Under the Investment Company Act of 1940, repurchase
agreements are considered loans and the securities involved may be
viewed as collateral. It is the Fund's policy to limit the financial
institutions with which it engages in repurchase agreements to banks,
savings and loan associations and securities dealers meeting financial
responsibility standards prescribed in guidelines adopted by the
Trustees.
When investing in repurchase agreements, the Fund could be subject to
the risk that the other party may not complete the scheduled repurchase
and the Fund would then be left holding securities it did not expect to
retain. If those securities decline in price to a value of less than
the amount due at the scheduled time of repurchase, then the Fund could
suffer a loss of principal or interest. The Advisor will follow
procedures designed to ensure that repurchase agreements acquired by the
Fund are always at least 100% collateralized as to principal and
interest. It is the Fund's policy to require delivery of repurchase
agreement collateral to its Custodian or (in the case of book-entry
securities held by the Federal Reserve System) that such collateral is
registered in the Custodian's name or in negotiable form. In the event
of insolvency or bankruptcy of the other party to a repurchase
agreement, the Fund could encounter restrictions on the exercise of its
rights under the repurchase agreement.
To the extent the Fund requires cash to meet redemption requests and
determines that it would not be advantageous to sell portfolio
securities to meet those requests, then it may sell its portfolio
securities to another investor with a simultaneous agreement to
repurchase them. Such a transaction is commonly called a "reverse
repurchase agreement." It would have the practical effect of
constituting a loan to the Fund, the proceeds of which would be used to
meet cash requirements for redemption requests. During the period of
any reverse repurchase agreement, the Fund would recognize fluctuations
in value of the underlying securities to the same extent as if those
securities were held by the Fund outright. If the Fund engages in
reverse repurchase agreement transactions, it will maintain in a
separate account designated securities which are liquid or mature prior
to the scheduled repurchase and cash sufficient in aggregate value to
provide adequate funds for completion of the repurchase. It is the
Fund's current operating policy not to engage in reverse repurchase
agreements for any purpose, if as a result reverse repurchase agreements
in the aggregate would exceed five percent of the Fund's total assets.
6. American Depository Receipts. The Fund may invest in American
Depository Receipts ("ADRs"). These instruments are negotiable receipts
for a given number of shares of securities in a foreign corporation.
The foreign stock certificates remain in the custody of a foreign bank.
ADRs are issued by large commercial US banks and traded in US
markets or on US exchanges. The ADR represents the depository bank's
guarantee that it holds the underlying securities. The Fund may invest
in an ADR in lieu of trading in the underlying shares on a foreign
market. ADRs are subject to a degree of US regulation and are
denominated in US dollars.
7. Convertible securities. In addition to other equity securities, the
Fund may invest in "convertible securities." Securities convertible into
common stocks and securities having equity characteristics are bonds
that are convertible into a specific number of shares of the common
stock of the issuer either at any time or usually at a specific future
date at a determined price per share of common stock. Such bonds tend
to participate in a substantial portion of the price appreciation of the
underlying common stock while enjoying some protection against
depreciation due to higher interest rates afforded most bonds and
because of the anticipation of the bond's maturity. The portfolio
anticipates that convertible securities will represent less than 25% of
it's total assets. All convertible bonds must meet the same quality
ratings required of corporate bonds, as described for commercial paper.
The risks involved in investment in convertible securities are similar
to the risks of investment in the underlying common stocks.
Policy Review. If, in the judgment of a majority of the Trustees of the
Fund, unanticipated future circumstances make inadvisable the
continuation of the Fund's policy of seeking capital appreciation from
investment principally in equity securities, or continuation of the more
specific policies of the Fund, then the Trustees may change any
such policies without shareholder approval, subject to the limitations
provided elsewhere in this Statement of Additional Information (see
"Investment Limitations") and after giving 30 days' written notice to
the Fund's affected shareholders.
Except for the fundamental investment limitations placed upon the
Fund's activities, the Trustees reserve the right to review and change
the other investment policies and techniques employed by the Fund, from
time to time as they deem appropriate, in response to market conditions
and other factors. Reference should be made to "Investment Limitations"
for a description of those fundamental investment policies which may not
be changed without shareholder approval. Such fundamental policies
would permit the Fund, after notice to shareholders but without a
shareholder vote, to adopt policies permitting a wide variety of
investments, including money market instruments, all types of common and
preferred equity securities, all types of long-term debt securities,
convertible securities, and certain types of option contracts. In the
event of such a policy change, a change in the Fund's name might be
required. There can be no assurance that the Fund's present objectives
will be achieved.
INVESTMENT LIMITATIONS
The Fund has adopted as fundamental policies the following limitations
on its investment activities; these fundamental policies may not be changed
without a majority vote of the Fund's shareholders as defined in the
Investment Company Act of 1940 (see "Organization of the Fund").
1. Permissible Investments. Subject to the investment policies from
time to time adopted by the Trustees, the Fund may purchase any type of
securities under such terms as the Fund may determine; and any such
securities may be acquired pursuant to repurchase agreements with
financial institutions or securities dealers or may be purchased from
any person, under terms and arrangements determined by the Fund, for
future delivery. Any of these securities may have limited markets and
may be purchased with restrictions on transfer; however, the Fund may
not make any investment (including repurchase agreements) for which
there is no readily available market and which may not be redeemed,
terminated or otherwise converted into cash within seven days, unless
after making the investment not more than 15% of the Fund's net assets
would be so invested.
2. Restricted Investments. With respect to 50% of the Fund's net
assets, not more than five percent of the value of the total assets of
the Fund may be invested in the securities of any one issuer (other than
securities issued or guaranteed by the United States Government or any
of its agencies or instrumentalities and excluding bank deposits); nor,
with respect to 50% of the Fund's net assets, may securities be
purchased when as a result more than 10% of the voting securities of the
issuer would be held by the Fund. Except to the extent a portfolio
purchases obligations issued or guaranteed by the United States
Government or its agencies and instrumentalities, obligations which
provide income exempt from federal income taxes, and
obligations of domestic banks, their branches, and other domestic
depository institutions, the Fund will limit its investments so that
not more than 25% of the assets of each of its portfolios are invested
in any one security. For purposes of these restrictions, the issuer is
deemed to be the specific legal entity having ultimate responsibility
for performance of the obligations evidenced by the security and whose
assets and revenues principally back the security. Any security that
does not have a governmental jurisdiction or instrumentality ultimately
responsible for its repayment may not be purchased by the Fund when the
entity responsible for such repayment has been in operation for less
than three years, if such purchase would result in more than five
percent of the total assets of the respective portfolio of the Fund
being invested in such securities.
The Fund may not purchase the securities of other investment companies,
except for shares of unit investment trusts and then only if the value
of such shares of any one investment company does not exceed 5% of the
value of the total assets of the Fund and the aggregate value of all
such shares does not exceed 10% of the value of such total assets, or
except in connection with an investment company merger, consolidation,
acquisition or reorganization. The Fund may not purchase any security
for purposes of exercising management or control of the issuer, except
in connection with a merger, consolidation, acquisition or
reorganization of an investment company.
The Fund may not purchase or retain the securities of any issuer if, to
the knowledge of the Fund's management, the holdings of those of the
Fund's officers, Trustees and officers of its Advisor who beneficially
hold one-half percent or more of such securities, together exceed 5% of
such outstanding securities.
3. Borrowing and Lending. It is a fundamental policy of the Fund that
it may borrow (including engaging in reverse repurchase agreement
transactions) in amounts not exceeding 5% of the Fund's total assets
for investment purposes. The Fund may not otherwise issue senior
securities representing indebtedness and may not pledge, mortgage or
hypothecate any assets to secure bank loans, except in amounts not exceeding
15% of its net assets taken at cost.
The Fund may loan its portfolio securities in an amount not in excess
of one-third of the value of the Fund's gross assets, provided
collateral satisfactory to the Fund's Advisor is continuously
maintained in amounts not less than the value of the securities loaned.
The Fund may not lend money (except to governmental units), but is not
precluded from entering into repurchase agreements or purchasing debt
securities.
4. Other Activities. The Fund may not act as an underwriter (except
for activities in connection with the acquisition or disposition of
securities intended for or held by the Fund's), make
short sales or maintain a short position (unless the Fund owns
at least an equal amount of such securities, or securities convertible
or exchangeable into such securities, and not more than 25% of the
Fund's net assets is held as collateral for such sales). Nor may
the Fund purchase securities on margin (except for customary credit
used in transaction clearance), invest in commodities, purchase
interests in real estate, real estate limited partnerships, or invest in
oil, gas or other mineral exploration or development programs or oil,
gas or mineral leases. However, the Fund may purchase securities
secured by real estate or interests therein and may use financial
futures contracts, including contracts traded on a regulated commodity
market or exchange, to purchase or sell securities which the Fund would
be permitted to purchase or sell by other means and where the Fund
intends to take or make the required delivery. The Fund may acquire
put options in conjunction with a purchase of portfolio securities; it
may also purchase put options and write call options covered by
securities held in the respective portfolio (and purchase offsetting
call options in closing purchase transactions), provided that the put
option purchased or call option written at all times remains covered by
portfolio securities, whether directly or by conversion or exchange
rights; but it may not otherwise invest in or write puts and calls or
combinations thereof.
Except as otherwise specifically provided, the foregoing percentage
limitations need only be met when the investment is made or other
relevant action is taken. As a matter of operating policy in order to
comply with certain applicable State restrictions, but not as a
fundamental policy, the Fund will not pledge, mortgage or hypothecate
in excess of 10% of its total assets taken at market value.
Although permitted to do so by its fundamental policies, it is the
Fund's current policy not to use financial futures contracts and not to
acquire put options nor to invest in warrants (other than warrants
acquired as a part of a unit or attached to other securities at the time
of purchase) if such warrants (valued at the lower of cost or market)
would then exceed five percent of the Fund's net assets and any such
warrants not listed on the New York or American Stock Exchange would
exceed two percent of the Fund's net assets.
Notwithstanding the Fund's fundamental policies, it does not presently
intend to borrow (including engaging in reverse repurchase agreement
transactions) for investment purposes nor to borrow (including engaging
in reverse repurchase agreement transactions) for any purpose in amounts
in excess of five percent of its total assets. If the Fund
were to borrow for the purpose of making additional investments, such
borrowing and investment would constitute "leverage." Leverage would
exaggerate the impact of increases or decreases in the value of a
portfolio's total assets on its net asset value, and thus increase the
risk of holding the portfolio's shares. Furthermore, if bank borrowings
by the Fund for any purpose exceeded one-third of the value of a
portfolio's total assets (net of liabilities other than the bank
borrowings), then the Investment Company Act of 1940 would require the
portfolio, within three business days, to liquidate assets and
commensurably reduce bank borrowings until the borrowing level was
again restored to such one-third level. Funds borrowed for leverage
purposes would be subject to interest costs which might not be recovered
by interest, dividends or appreciation from the respective securities
purchases. The Fund might also be required to maintain minimum bank
balances in connection with such borrowings or to pay line-of-credit
commitment fees or other fees to continue such borrowings; either of
these requirements would increase the cost of the borrowing.
If the Fund alters any of the foregoing current operating policies
(relating to financial futures contracts, options, warrants or
borrowing), it will notify shareholders of the policy revision at least
30 days prior to its implementation and describe the new investment
techniques to be employed. In the implementation of its investment
policies the Fund will not consider securities to be readily
marketable unless they have readily available market quotations.
THE INVESTMENT ADVISOR
Madison Mosaic, LLC, 1655 Fort Myer Drive, Arlington, Virginia 22209-
3108, is the investment advisor to the Fund and is called the "Advisor"
throughout this Statement of Additional Information and the Prospectus.
The Advisor is responsible for the investment management of the Fund and
is authorized to execute the Fund's portfolio transactions, to select
the methods and firms with which such transactions are executed, to
oversee the Fund's operations, and otherwise to administer the affairs
of the Fund as it deems advisable. In the execution of these
responsibilities, the Advisor is subject to the investment policies and
limitations of the Fund described in the Prospectus and this Statement
of Additional Information, to the terms of the Declaration of Fund and
the Fund's By-Laws, and to written directions given from time to time by
the Trustees.
The Advisor is a Wisconsin limited liability company, wholly owned by
Madison Investment Advisors, Inc. ("Madison"), 6411 Mineral Point Road,
Madison, Wisconsin. Madison was founded in 1973 and is an independent,
registered investment advisor which has numerous advisory clients.
The investment advisory agreement between the Fund, on behalf of the
portfolios, and the Advisor is subject to annual review and approval by
the Trustees, including a majority of those Trustees who are not
"interested persons," as defined in the Investment Company Act of 1940.
The investment advisory agreement was approved by the initial shareholders
of the Fund for an initial two year term beginning in 1998.
The investment advisory agreement may be terminated at any time, without
penalty, by the Trustees or, with respect to any series or class of the
Fund's shares, by the vote of a majority of the outstanding voting
securities of that series or class (see "Organization of the Fund"), or
by the Advisor, upon sixty days' written notice to the other party. The
investment advisory agreement may not be assigned by the Advisor, and
will automatically terminate upon any assignment.
Background of the Advisor. The Advisor was formed in 1996 by Madison
for the purpose of providing investment management services to the
Mosaic family of mutual funds, including the Fund. The Advisor also
serves as the investment advisor to Mosaic Equity Trust, Mosaic
Government Money Market, Mosaic Income Trust and Mosaic Tax-Free Trust.
Management. Frank E. Burgess is President, Treasurer and Director of
Madison and Vice President of the Advisor. Mr. Burgess owns the
controlling interest in Madison, which, in turn, controls the Advisor.
Mr. Burgess is also a Trustee and Vice President of the Fund. Mr.
Burgess holds the same positions with Mosaic Government Money Market,
Mosaic Income, Mosaic Equity and Mosaic Tax-Free Trusts. Katherine L.
Frank is President and Treasurer of the Advisor and Vice President of
Madison. Ms. Frank holds the same positions with Mosaic Government
Money Market, Mosaic Income, Mosaic Equity and Mosaic Tax-Free Trusts.
Advisory Fee and Expense Limitations. For its services under the
investment advisory agreement, the Advisor receives a fee, payable
monthly, calculated as 3/4 percent per annum of the average daily net
assets of the Fund during the month. Such fees do not decrease as net
assets increase. The Advisor may waive or reduce such fees during any
period; the Advisor may also reduce such fees on a permanent basis,
without any requirement for consent by the Fund or its shareholders,
under such terms as it may determine, by written notice thereof to the
Fund.
In addition, the Advisor has agreed, in any event, to be responsible for
the fees and expenses of the Trustees and officers of the Fund who are
affiliated with the Advisor, the rent expenses of the Fund's principal
executive office premises, and its various promotional expenses
(including the distribution of Prospectuses to potential shareholders).
Other than investment management and related expenses, and the foregoing
items, the Advisor is not obligated to provide or pay for any other
services to the Fund, although it has discretion to elect to do so.
The investment advisory agreement permits the Advisor to make payments
out of its fee to other persons. Because the Fund has entered into a new
investment advisory contract with the Advisor, no historical payment
information is available.
ORGANIZATION OF THE FUND
The Fund's Declaration of Trust, dated January 1, 1998, has been
filed with the Secretary of State of the Commonwealth of Massachusetts.
The Prospectus contains general information concerning the Fund's form of
organization and its shares (see "The Fund and Its Shares"), including the
series of shares currently authorized.
Series and Classes of Shares. The Trustees may authorize at any time
the creation of additional series of shares (the proceeds of which would
be invested in separate, independently managed portfolios) and
additional classes of shares within any series (which would be used to
distinguish among the rights of different categories of shareholders, as
might be required by future regulations, methods of share distribution
or other unforeseen circumstances) with such preferences, privileges,
limitations, and voting and dividend rights as the Trustees may
determine. All consideration received by the Fund for shares of any
additional series or class, and all assets in which such consideration
is invested, would belong to that series or class (but classes may
represent proportionate undivided interests in a series), and would be
subject to the liabilities related thereto. The Investment Company Act
of 1940 would require the Fund to submit for the approval of the
shareholders of any such additional series or class any adoption of an
investment advisory contract or any changes in the Fund's fundamental
investment policies related to the series or class.
The Trustees may divide or combine the shares of any series into a
greater or lesser number of shares without thereby changing the
proportionate interests in the series. Any assets, income and expenses
of the Fund not readily identifiable as belonging to a particular
series are allocated by or under the direction of the Trustees in such a
manner as they deem fair and equitable. Upon any liquidation of the
Fund or of a series of its shares, the shareholders are entitled to
share pro-rata in the liquidation proceeds available for distribution.
Shareholders of each series have an interest only in the assets
allocated to that series.
Voting Rights. The voting rights of shareholders are not cumulative, so
that holders of more than 50 percent of the shares voting can, if they
choose, elect all Trustees being selected, while the holders of the
remaining shares would be unable to elect any Trustees.
Shareholder votes relating to the election of Trustees, approval of the
Fund's selection of independent auditors and any contract with a
principal underwriter, as well as any other matter in which the
interests of all shareholders are substantially identical, will be voted
upon without regard to series or classes of shares. Matters that do not
affect any interest of a series or class of shares will not be voted
upon by the unaffected shareholders. Certain other matters in which the
interests of more than one series or class of shares are affected, but
where such interests are not substantially identical, will be voted upon
separately by each series or class affected and will require a majority
vote of each such series or class to be approved by it. When a matter
is voted upon separately by more than one series or class of shares, it
may be approved with respect to a series or class even if it fails to
receive a majority vote of any other series or class or fails to receive
a majority vote of all shares entitled to vote on the matter.
Because there is no requirement for annual elections of Trustees, the
Fund does not anticipate having regular annual shareholder meetings
after the initial meeting; shareholder meetings will be called as
necessary to consider questions requiring votes by the shareholders.
The selection of the Fund's independent auditors will be submitted to a
vote of ratification at any annual meetings held by the Fund. Any
change in the Declaration of Trust, in the Investment Advisory Agreement
(except for reductions of the Advisor's fee) or in the fundamental
investment policies of the Fund must be approved by a majority of the
affected shareholders before it can become effective. For this purpose,
a "majority" of the shares of the Fund means either the vote, at an
annual or special meeting of the shareholders, of 67 percent or more of
the shares present at such meeting if the holders of more than 50
percent of the outstanding shares of the Fund are present or
represented by proxy or the vote of 50 percent of the outstanding shares
of the Fund, whichever is less. Voting groups will be comprised of
separate series and classes of shares or of all of the Fund's shares,
as appropriate to the matter being voted upon.
The Declaration of Trust provides that two-thirds of the holders of
record of the Fund's shares may remove a Trustee from office either by
declarations in writing filed with the Fund's Custodian or by votes
cast in person or by proxy at a meeting called for the purpose. The
Trustees are required to promptly call a meeting of shareholders for the
purpose of voting on removal of a Trustee if requested to do so in
writing by the record holders of at least 10% of the Fund's outstanding
shares. Ten or more persons who have been shareholders for at least six
months and who hold shares with a total value of at least $25,000 (or 1%
of the Fund's net assets, if less) may require the Trustees to assist a
shareholder solicitation to call such a meeting by providing either a
shareholder mailing list or an estimate of the number of shareholders
and approximate cost of the shareholder mailing, in which latter case,
unless the Securities and Exchange Commission determines otherwise, the
shareholders desiring the solicitation may require the Trustees to
undertake the mailing if those shareholders provide the materials to be
mailed and assume the cost of the mailing.
Shareholder Liability. Under Massachusetts law, the shareholders of an
entity such as the Fund may, under certain circumstances, be held
personally liable for its obligations. The Declaration of Trust
contains an express disclaimer of shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation or instrument, entered into or
executed by the Fund or the Trustees. The Declaration of Trust
provides for indemnification out of the Fund property of any
shareholder held personally liable for the obligations of the Fund.
The Declaration of Trust also provides that the Fund shall, upon
request, assume the defense of any claim made against any shareholder
for any act or obligation of the Fund and satisfy any judgment thereof.
Thus the risk of a shareholder incurring financial loss on account of
status as a shareholder is limited to circumstances in which the Fund
itself would be unable to meet its obligations.
Liability of Trustees and Others. The Declaration of Trust provides
that the officers and Trustees of the Fund will not be liable for any
neglect, wrongdoing, errors of judgment, or mistakes of fact or law,
except that they shall not be protected from liability arising out of
willful misfeasance, bad faith, gross negligence, or reckless disregard
of their duties to the Fund. Similar protection is provided to the
Advisor under the terms of the investment advisory agreement and the
services agreement. In addition, protection from personal liability for
the obligations of the Fund itself, similar to that provided to
shareholders, is provided to all Trustees, officers, employees and
agents of the Fund.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund and their principal
occupations during the past five years are shown below:
Frank E. Burgess*
6411 Mineral Point Road, Madison, WI 53705
Trustee and Vice President
President and Director of Madison Investment Advisors, Inc., the entity
which controls the Advisor. Prior to forming Madison in 1973, he was
Assistant Vice President and Trust Officer of M&I Bank of Madison,
Wisconsin. Mr. Burgess received his BS from Iowa State University and
his law degree from the University of Wisconsin. He is a member of the
State Bar of Wisconsin. b. 8/4/42.
Thomas S. Kleppe***
7100 Darby Road, Bethesda, MD 20817
Trustee
Private Investor; formerly Visiting Professor at the University of
Wyoming, Secretary of the US Department of the Interior,
Administrator of the US Small Business Administration, US
Congressman from North Dakota, Vice President and Director of Dain,
Kalman & Quail, investment bankers, and President of Gold Seal Co.,
manufacturers of household cleaning products. Attended Valley City
State College of North Dakota. b. 7/1/19.
James R. Imhoff, Jr.***
429 Gammon Place, Madison, WI 53719
Trustee
Chairman and CEO of First Weber Group, Inc. of Madison, WI, a
residential real estate company; Chairman of the Wisconsin Real Estate
Board of the Department of Regulation and Licensing; Director to the
University of Wisconsin School of Business, Center for Urban Land
Economics Research; Director of the Park Bank, Wisconsin; formerly
President of the Wisconsin Realtors Association and the Greater Madison
Board of Realtors and Director of the National Association of Realtors.
An alumnus of the Marquette University School of Business. b. 5/20/44.
Lorence D. Wheeler***
4905 W. 60th Avenue, Arvada, CO 80003
Trustee
President of Credit Union Benefits Services, Inc., a provider of
retirement plans and related services for credit union employees
nationwide. Previously a shareholder of the law firm of Bell, Metzner &
Gierart, SC. Mr. Wheeler received his law degree from the University
of Wisconsin. b. 1/31/38.
*Trustee deemed to be an "interested person" of the Fund as the term is
defined in the Investment Company Act of 1940.
*** Member of the Audit Committee of the Fund. The Audit Committee is
responsible for reviewing the results of each audit of the Fund by its
independent auditors and for recommending the selection of independent
auditors for the coming year.
Katherine L. Frank
6411 Mineral Point Road, Madison, WI 53705
President
President of Mosaic Funds, Vice President of Madison Investment
Advisors, Inc. A graduate of Macalester College, St. Paul,
Minnesota.
Julia M. Nelson
1655 Fort Myer Drive, Arlington, VA 22209-3108
Vice President
Vice President of Mosaic Funds.
Jay R. Sekelsky
6411 Mineral Point Road, Madison, WI 53705
Vice President
Vice President of Mosaic Funds and of Madison Investment
Advisors, Inc. Formerly Vice President of Wellington Management Group
of Boston, MA. Mr. Sekelsky holds a BBA in Accounting and an MBA in
Finance from the University of Wisconsin.
Christopher C. Berberet
6411 Mineral Point Road, Madison, WI 53705
Vice President
Vice President of Mosaic Funds and of Madison Investment
Advisors, Inc. Formerly the Director of Fixed Income Management for the
ELCA Board of Pensions, Minneapolis, MN. A graduate of the University
of Wisconsin.
W. Richard Mason
1655 Ft. Myer Drive, Arlington, VA 22209
Secretary
Secretary of Mosaic Funds, Artisan Investment Services, Inc.,
Presidential Savings Bank, FSB and Presidential Service Corporation.
Formerly Assistant General Counsel for the Investment Company Institute.
Mr. Mason holds a BS in Foreign Service from Georgetown University and
received his law degree from The George Washington University. He is a
member of the District of Columbia and Texas bars.
Only those persons named in the table of Trustees and officers who are
not interested persons of the Fund are eligible to be compensated by
the Fund. The compensation of each non-interested Trustee who may be
compensated by the Fund has been fixed at $1,000 per year, to be pro-
rated according to the number of regularly scheduled meetings each year.
Four Trustees' meetings are currently scheduled to take place each year.
In addition to such compensation, those Trustees who may be compensated
by the Fund shall be reimbursed for any out-of-pocket expenses incurred
by them in connection with the affairs of the Fund. The Trustees are
expected to receive annual compensation from the Fund and from the
other investment companies managed by the Advisor (see "the Investment
Advisor") totaling $16,000.
During the first twelve months of the Fund, the Trustees are expected
to be compensated as follows:
Aggregate Total Compensation from
Compensation Fund and Mosaic Complex
from Fund Paid to Trustees (a)
Frank E. Burgess $0 $0
Thomas S. Kleppe $1,000 $16,000
James R. Imhoff, Jr. $1,000 $16,000
Lorence D. Wheeler $1,000 $16,000
(a) The complex is comprised of 5 trusts with a total of 15 funds and/or
series.
Under the Declaration of Trust, the Trustees are entitled to be
indemnified by the Fund to the fullest extent permitted by law against
all liabilities and expenses reasonably incurred by them in connection
with any claim, suit or judgment or other liability or obligation of any
kind in which they become involved by virtue of their service as
Trustees of the Fund, except liabilities incurred by reason of their
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
On the effective date of this Statement of Additional Information, the
Trustees and officers of the Fund and Madison directly or indirectly
owned 100 percent of the outstanding shares in the Fund.
ADMINISTRATIVE AND OTHER EXPENSES
Except for certain expenses assumed by the Advisor (see "The Investment
Advisor"), the Fund is responsible for payment from its assets of all
of its expenses. These expenses can include any of the business or
other expenses of organizing, maintaining and operating the Fund.
Certain expense items which may represent significant costs to the Fund
include the payment of the Advisor's fee; the expense of shareholder
accounting, customer services, and calculation of net asset value; the
fees of the Custodian, of the Fund's independent accountants, and of
legal counsel to the Fund; the expense of registering the Fund and its
shares, of printing and distributing prospectuses and periodic financial
reports to current shareholders, and of trade association membership;
and the expense of preparing shareholder reports, proxy materials and of
holding shareholder meetings of the Fund. The Fund is also
responsible for any extraordinary or non-recurring expenses it may
incur.
Services Agreement. The Fund does not have any officers or employees
who are paid directly by the Fund. The Fund has entered into a
services agreement with the Advisor for the provision of operational and
other services required by the Fund. Such services may include the
functions of shareholder servicing agent and transfer agent, bookkeeping
and portfolio accounting services, the handling of telephone inquiries,
cash withdrawals and other customer service functions including
monitoring wire transfers, and providing to the Fund appropriate
supplies, equipment and ancillary services necessary to the conduct of
its affairs. The Fund is registered with the Securities and Exchange
Commission as the transfer agent for its shares and acts as its own
dividend-paying agent; while transfer agent personnel and facilities are
included among those provided to the Fund under the services agreement,
the Fund itself is solely responsible for its transfer agent and
dividend payment functions and for the supervision of those functions by
its officers. The Fund maintains books and records of shareholder
accounts and provides confirmations of transactions and quarterly
account statements.
All such services provided to the Fund by the Advisor are rendered at a
flat percentage fee calculated as a percentage of average daily net
assets, reviewed and approved at least annually by the Trustees. Such
fee is expected to approximate or be below the cost of providing such
services. The term "cost" includes both direct expenditures and the
related overhead costs, such as depreciation, employee supervision, rent
and the like; reimbursements to the Advisor pursuant to the Services
Agreement are in addition to and independent of payments made pursuant
to the Investment Advisory Agreement. The Advisor provides such
services to Mosaic Income, Mosaic Equity, Mosaic Tax-Free and Mosaic
Government Money Market Trusts. The costs covered by the Services
Agreement will also include certain direct expenses (including custody,
brokerage, blue sky, legal and audit).
Distribution Agreement. Artisan Investment Services, LLC acts as the
Fund's distributor pursuant to a distribution agreement, dated the same
date as this Statement of Additional Information, without compensation
under such agreement. This agreement has an initial term of two years
and may thereafter continue in effect only if approved annually by the
Trustees, including a majority of those who are not "interested
persons," as defined in the Investment Company Act of 1940; the
agreement provides for distribution of the Fund's shares
without a sales charge to the investor. The distributor may act as the
Fund's agent for any sales of its shares. The Fund will also sell its
shares directly to any person. The distributor makes the Fund's shares
continuously available to the general public in those states where it
has qualified to do so, but has assumed no obligation to purchase any of
the Fund's shares. The distributor is wholly owned by Madison.
PORTFOLIO TRANSACTIONS
Decisions as to the purchase and sale of securities for the Fund, and
decisions as to the execution of these transactions, including selection
of market, broker or dealer and the negotiation of commissions are,
where applicable, to be made by the Advisor, subject to review by the
officers and Trustees of the Fund.
In general, in the purchase and sale of portfolio securities the Fund
will seek to obtain prompt and reliable execution of orders at the most
favorable prices or yields. In determining the best price and
execution, the Advisor may take into account a dealer's operational and
financial capabilities, the type of transaction involved, the dealer's
general relationship with the Advisor, and any statistical, research or
other services provided by the dealer to the Advisor, including payment
for the use by the Advisor of electronic research services. Research
and statistical information regarding securities may be used by the
Advisor for the benefit of all members of the Mosaic family of mutual
funds and by other clients of Madison. To the extent such non-price
factors are taken into account the execution price paid may be
increased, but only in reasonable relation to the benefit of such non-
price factors to the Fund as determined in good faith by the Advisor.
Brokers or dealers who execute portfolio transactions for the Fund may
also sell its shares; however, any such sales will not be either a
qualifying or disqualifying factor in the selection of brokers or
dealers.
The Fund reserves the right to purchase portfolio securities through an
affiliated broker, when deemed in the Fund's best interest by the
Advisor, provided that: (1) the transaction is in the ordinary course of
the broker's business; (2) the transaction does not involve a purchase
from another broker or dealer; (3) compensation to the broker in
connection with the transaction is not in excess of one percent of the
cost of the securities purchased; and (4) the terms to the Fund for
purchasing the securities, including the cost of any commissions, are
not less favorable to the Fund than terms concurrently available from
other sources. Any compensation paid in connection with such a purchase
will be in addition to fees payable to the Advisor under the investment
advisory agreement. The Fund does not anticipate that any such
purchases through affiliates will represent a significant portion of its
total activity.
The Fund does not expect to engage in a significant amount of short-
term trading, but securities may be purchased and sold in anticipation
of market fluctuations, as well as for other reasons. The Fund
anticipates that annual portfolio turnover for each of its portfolios
generally will not exceed 100%, but the actual turnover rate will not be
a limiting factor if the Fund deems it desirable to conduct purchases
and sales of portfolio securities. Reference should be made to the Fund's
financial statements for actual rates of portfolio turnover.
SHAREHOLDER TRANSACTIONS
The Prospectus describes the basic procedures for investing in the
Fund. The following information concerning other investment procedures is
presented to supplement the information contained in the Prospectus.
Shareholder Service Policies. The Fund's policies concerning
shareholder services are subject to change from time to time.
Minimum Initial Investment and Balance. The Fund reserves the right to
change its minimum initial investment requirement or the minimum account
size below which an account is subject to a monthly service charge, or
involuntary closing by the Fund. The Fund has a $50 minimum amount for
subsequent investments. It may change this amount, if it so chooses, by 30
days written notice to its shareholders.
Special Service Charges. The Fund further reserves the right, after 30
days written notification to shareholders, to impose special charges for
services provided to individual shareholders that are not regularly
afforded to shareholders generally. Such service charges may include
but are not limited to special custodian bank processing charges such as
fees for stop payment orders and returned checks. The Fund's standard
service charges are also subject to adjustment from time to time.
Share certificates will not be issued.
Subaccounting Services. The Fund offers subaccounting services to
institutions. The Trustees reserve the right to determine from time to
time such guidelines as they deem appropriate to govern the level of
subaccounting service that can be provided to individual institutions in
differing circumstances. Normally, the Fund's minimum initial
investment to open an account will not apply to subaccounts; however,
the Fund reserves the right to impose the same minimum initial
investment requirement that would apply to regular accounts, if it deems
that the cost of carrying a particular subaccount or group of
subaccounts is otherwise likely to be excessive. The Fund may provide
and charge for subaccounting services which it determines exceed those
services which can be provided without charge. The availability and
cost of such additional services will be determined in each case by
negotiation between the Fund and the parties requesting the additional
services. The Fund is not presently aware of any such services for
which a charge will be imposed.
Crediting of Investments. The Fund reserves the right to reject any
investment in the Fund for any reason and may at any time suspend all
new investment in the Fund. The Fund may also, in its discretion or
at the instance of the Advisor, decline to give recognition as an
investment to funds wired for credit to any account, until such funds
are actually received by the Fund. Under present federal regulatory
guidelines, the Advisor may be responsible for any losses resulting from
changes in the Fund's net asset values which are incurred by the Fund
as a result of failure to receive funds from an investor to whom
recognition for investment was given in advance of receipt of payment.
If shares are purchased to be paid for by wire and the wire is not
received by the Fund or if shares are purchased by a check which, after
deposit, is returned unpaid or proves uncollectible, then the share
purchase may be canceled immediately. The shareholder that gave notice
of the intended wire or submitted the check will be held fully
responsible for any losses so incurred by the Fund, the Advisor or the
distributor.
Funds Received by Wire. Wires are normally converted into shares in the
Fund at the net asset value next determined.
Checks. Checks drawn on foreign banks will not be considered received
until the Fund has actual receipt of payment in US dollars after
submission of the check for collection; collection of such checks
through the international banking system may require 30 days or more.
Purchase Orders From Brokers. An order to purchase shares which is
received by the Fund from a securities broker will be considered
received in proper form for the net asset value per share determined as
of the close of the New York Stock Exchange on the day of the order,
provided the broker received the order from its customer prior to that
time. Shareholders who invest in the Fund through a broker may be
charged a commission for the handling of the transaction, if the broker
so elects. A shareholder may deal directly with the Fund without a
fee.
SHARE REDEMPTIONS
The value of shares redeemed will be determined according to the share
net asset value next calculated after the request has been received in
proper form. (See "Determination of Net Asset Value.") Thus, any such
request received in proper form prior to the close of the New York Stock
Exchange (normally 4 p.m. Washington, DC time) on a business day will
reflect the net asset value calculated at that time; later withdrawal
requests will be processed to reflect the share net asset value figure
calculated on the next day the calculation is made. The Fund
calculates net asset values each day the New York Stock Exchange is open
for trading.
Net asset value determinations will apply as of the day the redemption
order is submitted in proper form. A redemption request may not be
deemed to be in proper form unless a signed account application has been
submitted to the Fund by the shareholder or such an application is
submitted with the redemption request. Shareholders should be aware
that it is possible, should the share net asset value of the respective
portfolio fall as a result of normal market value changes, that amounts
available for withdrawal from an account could be less than the amount
of the original investment.
The Fund will use its best efforts in normal circumstances to handle
redemptions within the times previously given. However, it may, for any
reason, suspend the right of redemption or postpone payment for any
shares in the Fund for any period up to seven days. The Fund's sole
responsibility with regard to redemptions shall be to process, within
the aforementioned time period, redemption requests in proper form.
Neither the Fund, its affiliates, nor the Custodian can accept
responsibility for any act or event which has the effect of delaying or
preventing timely transfers of payment to or from shareholders. By law,
payment for shares in the Fund may be suspended or delayed for more than
seven days only during any period when the New York Stock Exchange is
closed, other than customary weekend and holiday closings; when trading
on such Exchange is restricted, as determined by the Securities and
Exchange Commission; or during any period when the Securities and
Exchange Commission has by order permitted such suspension.
When an account is closed, the Fund reserves the right to make payment
by check of any final dividends declared to the date of the redemption
to close the account, but not yet paid, on the same day such dividends
are paid to other shareholders, rather than at the time the account is
closed.
Inter-Fund Exchanges. Shares redeemed from one shareholder account to another
by exchange will earn their final day's dividend on the day of exchange.
The Fund reserves the right, when it deems such action necessary to
protect the interests of its shareholders, to refuse to honor withdrawal
requests made by individuals purporting to act with the authority of
another person or on behalf of a corporation or other legal entity or
whose identity has not been established to the Fund's satisfaction.
Each such individual must provide a corporate resolution or other
appropriate evidence of his authority or identity satisfactory to the
Fund. The Fund reserves the right to refuse any third party
redemptions.
If, in the opinion of the Trustees, extraordinary conditions exist which
make cash payments undesirable, payments for any shares redeemed may be
made in whole or in part in securities and other property of the Fund;
except, however, that the Fund has elected, pursuant to rules of the
Securities and Exchange Commission, to permit any shareholder of record
to make redemptions wholly in cash to the extent the shareholder's
redemptions in any 90-day period do not exceed the lesser of one percent
of the aggregate net assets of the Fund or $250,000. Any property of
the Fund distributed to shareholders will be valued at its net asset
value. In disposing of any such property received from the Fund, an
investor might incur commission costs or other transaction costs; there
is no assurance that an investor attempting to dispose of any such
property would actually receive the full net asset value for it. Except
as described herein, however, the Fund intends to pay for all share
redemptions in cash.
It is the shareholder's obligation to inform the Fund of address
changes. The Fund will exercise reasonable care to ascertain the
correct address of lost shareholders. The Fund will conduct two
database searches and use at least one information database service.
The search will be conducted at no cost to the shareholder. The Fund
will not, however, perform such searches if the shareholder's account is
less than $25, if the shareholder is not a natural person or the Fund
has received documentation that the shareholder is deceased. If a lost
shareholder cannot be located after such procedures, such shareholder's
account may be escheated to the state of the shareholder's last
residence. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
RETIREMENT PLANS
General information on retirement plans offered by the Fund is provided
in the Prospectuses (see "Retirement Plans"). Additional information
concerning these retirement plans is provided below.
IRAs. The minimum initial contribution for an IRA plan with the Fund
is $500. Spousal IRAs are accepted by creating two accounts, one for
each spouse. For IRAs opened in connection with a payroll deduction or
SEP plan, the Fund may waive the initial investment minimum on a case-
by-case basis.
The Fund's annual account maintenance fee is deducted from the account
at the end of each year or at the time of the account's closing unless
prepaid by the shareholder.
Other Retirement Plans or Retirement Plan Accounts. The Fund does not
intend to impose any monthly minimum balance charge with respect to
retirement plan accounts. Mosaic Funds offers prototype Education IRA,
Keogh, SEP IRA, SIMPLE, 401(k) and 403(b) retirement plans. The Fund
may waive the initial investment minimum for prototype or other
retirement plan accounts on a case-by-case basis.
DECLARATION OF DIVIDENDS
Substantially all of the Fund's accumulated net investment income will
be declared as dividends and distributed to shareholders at least once a year
at the end of the Fund's fiscal year. The amount of the
Fund's net investment income will reflect the Fund's dividend income,
any premiums earned for writing call options, any interest income (plus
any discount earned less premium amortized), less expenses accrued with
respect to each portfolio for the period. In the event Mosaic Focus
Fund Trust establishes more than one series of shares, then all items of
income and expense which apply solely to one of the Fund's portfolios
will be wholly allocated to that portfolio; such items which are not
clearly applicable to one portfolio will be allocated between portfolios
pro-rata on the basis of their relative net assets or upon such other
basis as the Trustees determine is equitable.
Net capital gains, if any, will be declared as a capital gain
distribution on or before December 31.
Any declaration of dividends with respect to a portfolio is dependent
upon the level of income and capital gains earned by the portfolio
during the fiscal year. No historical rate of dividend payments will be
indicative of future dividends.
Notice of dividends will be mailed to each shareholder when the
dividends are paid; for tax purposes each shareholder will also receive
an annual summary of dividends paid by the Fund and the extent to which
they constitute capital gain distributions (see "Additional Tax
Matters").
DETERMINATION OF NET ASSET VALUE
The net asset value of each portfolio of the Fund, and of the
respective shares, is calculated once each day the New York Stock
Exchange is open for trading. The net asset value of the Fund is not
calculated on New Year's Day, the observance of Martin Luther King,
Jr.'s Birthday, President's Day, Good Friday, the observance of Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and on
other days the New York Stock Exchange is closed for trading. The net
asset value calculation is made as of the close of the New York Stock
Exchange, as described in the Prospectus.
Net asset value per share of the Fund is determined by adding the
value of all its securities and other assets, subtracting its
liabilities and dividing the result by the total number of outstanding
shares that represent an interest in the Fund. These calculations
are performed by the Fund pursuant to the Services Agreement (see
"Administrative and Other Expenses"). The Fund does not charge a
"sales load," and accordingly its shares are both offered and redeemed
at net asset value.
Securities traded on a securities exchange are valued at their closing
sales price on the principal market on which such securities are traded,
if available, and if not available, such securities are valued at the
mean between the bid and ask prices. Other securities for which current
market quotations are readily available are valued at the mean between
their bid and ask prices; securities for which current market quotations
are not readily available are valued at their fair value as determined
in good faith by the Trustees. The Trustees may authorize reliance upon
an independent pricing service for the determination of securities
values. An independent pricing service may price securities with
reference to market transactions in comparable securities and to
historical relationships among the prices of comparable securities; such
prices may also reflect an allowance for the impact upon prices of the
larger transactions typical of trading by institutions. The Fund's
shares will be priced by rounding their value to the nearest one-tenth
of one cent.
Valuation of Covered Call Options. When call options are written, the
premium received is reflected on the Fund's books as a cash asset
offset by a deferred credit liability, so the premium has no impact on
net asset value at that time. The deferred credit amount is then marked
to the market value of the outstanding option contract daily. If the
option contract is exercised, the Fund reflects a sale of the
appropriate securities (which may be either the underlying portfolio
securities or corresponding securities purchased in the open market to
deliver against the option contract) at a price equal to the option
strike price plus the option premium received, and the deferred credit
liability is then extinguished. If the option expires without being
exercised (or if it is offset by a closing purchase transaction), then
the Fund recognizes the deferred credit as a gain (reduced by the cost
of any closing purchase transaction).
ADDITIONAL TAX MATTERS
Shareholders are urged to consult their tax advisors regarding the
application of foreign, federal, state and local taxes to an investment
in the Fund. The following is a general and abbreviated summary of the
applicable statutes and regulations currently in effect. These rules
are subject to legislative and administrative change which may be
prospective or retroactive.
Federal Income Tax. To qualify as a "regulated investment company" and
avoid Fund-level federal income tax under the Internal Revenue Code
(the "Code"), the Fund must, among other things, distribute
100% of its net income and net capital gains in the fiscal year in which
it is earned. The Code also requires the distribution of at least 98%
of net income for the calendar year and capital gains determined as of
October 31 each year before the calendar year end in order to avoid a 4%
excise tax. The Fund intends to distribute all taxable income to
the extent it is realized and avoid imposition of federal income excise
taxes.
To qualify as a regulated investment company under the Code, the Fund
must derive at least 90% of its gross income from dividends,
interest, gains from the sale or disposition of securities, and certain
other types of income. Should the Fund fail to qualify as a "regulated
investment company" under the Code, the Fund would be taxed as a
corporation with no allowable deduction for the distribution of
dividends.
Shareholders of the Fund, however, will be subject to federal
income tax on any ordinary net income and net capital gains realized by
the Fund and distributed to shareholders as regular or capital
gains dividends, whether distributed in cash or in the form of
additional shares. Generally, dividends declared by the Fund during
October, November or December of any calendar year and paid to
shareholders prior to February 1 of the following year will be treated
for tax purposes as received in the year the dividend was declared.
Since normally at least 65% of the Fund's assets will be invested in equity
securities, some of which may
pay eligible dividends, a substantial portion of the regular dividends
paid by such portfolios is expected to be eligible for the dividends
received deduction for corporate shareholders (70% of dividends
received).
Foreign securities held by the Fund may be subject to withholding or
taxation by foreign governments on their interest or dividends. Such
withholding or taxation may be reduced or eliminated by tax conventions
between certain countries and the US
Shareholders who fail to comply with the interest and dividends "backup"
withholding provisions of the Code (by filing Form W-9 or its
equivalent, when required) or who have been determined by the Internal
Revenue Service to have failed to properly report dividend or interest
income, may be subject to a 31% withholding requirement on transactions
with the Fund.
For tax purposes, the Fund will send shareholders an annual notice of
dividends paid during the prior year. Investors are advised to retain
all statements received from the Fund to maintain accurate records of
their investment. Shareholders of each portfolio of the Fund will be
subject to federal income tax on the net capital gains, if any, realized
by each portfolio and distributed to shareholders as capital gains
dividends. Shareholders should carefully consider the tax implications
of buying the Fund's shares just prior to declaration of a regular or
capital gains dividend. Prior to the declaration, the value of the
distribution will be reflected in net asset value per share and thus
will be paid for by the shareholder when the shares are purchased; when
the dividend is declared the amount to be distributed will be deducted
from net asset value, lowering the value of the shareholder's investment
by the same amount, but the shareholder nevertheless will be taxed on
the amount of the dividend without any offsetting deduction for the drop
in share value until the shares are ultimately redeemed. A loss on the
sale of shares held for six months or less will be treated as a long-
term capital loss to the extent of any capital gains dividend received.
The Fund reserves the right to involuntarily redeem any of its shares
if, in its judgment, ownership of the Fund's shares has or may become
so concentrated as to make the Fund a personal holding company under
the Code.
State and Local Taxes. Dividends paid by the Fund are generally
expected to be subject to any state or local taxes on income.
Shareholders should consult their tax advisors about the status of
distributions from the Fund in their own tax jurisdictions.
TOTAL RETURN CALCULATIONS
In order to provide a basis for comparisons of the Fund's portfolios
with similar funds, with comparable market indices, and with investments
such as savings accounts, savings certificates, taxable and tax-free
bonds, common stocks, money market funds and money market instruments,
the Fund calculates total return for each of its portfolios.
Total Return. Average annual total return is calculated by finding the
compounded annual rate of return over a given period that would be
required to equate an assumed initial investment in the portfolio to the
ending redeemable value the investment would have had at the end of the
period, taking into account the effect of the changes in the portfolio's
share price during the period and any recurring fees charged to
shareholder accounts, and assuming the reinvestment of all dividends and
other distributions at the applicable share price when they were paid.
Non-annualized aggregate total returns may also be calculated by
computing the simple percentage change in value that equates an assumed
initial investment in the portfolio with its redeemable value at the end
of a given period, determined in the same manner as for average annual
total return calculations.
Performance Comparisons. From time to time, in advertisements or in
reports to shareholders and others, the Fund may compare the
performance of its portfolios to that of recognized market indices or
may cite the ranking or performance of its portfolios as reported in
recognized national periodicals, financial newsletters, reference
publications, radio and television news broadcasts, or by independent
performance measurement firms.
The Fund may also compare the performance of its portfolios to that of
other funds managed by the same Advisor. It may compare its performance
to that of other types of investments, substantiated by representative
indices and statistics for those investments.
Market indices which may be used include those compiled by major
securities firms, such as Salomon Brothers, Shearson Lehman Hutton, the
First Boston Corporation, and Merrill Lynch; other indices compiled by
securities rating or valuation services, such as Ryan Financial
Corporation and Standard and Poor's Corporation may also be used.
Periodicals which report market averages and indices, performance
information, and/or rankings may include: The Wall Street Journal,
Investors Daily, The New York Times, The Washington Post, Barron's,
Financial World Magazine, Forbes Magazine, Money Magazine, Kiplinger's
Personal Finance, and the Bank Rate Monitor. Independent performance
measurement firms include Lipper Analytical Services, Inc., Frank
Russell Company, SCI, Morningstar and CDA Investment Technologies.
In addition, a variety of newsletters and reference publications provide
information on the performance of mutual funds, such as the Donoghue's
Money Fund Report, No-Load Fund Investor, Wiesenberger Investment
Companies Service, the Mutual Fund Source Book, the Mutual Fund
Directory, the Switch Fund Advisory, Mutual Fund Investing, the Mutual
Fund Observer, Morningstar, and the Bond Fund Survey. Financial news is
broadcast by the Financial News Network, Cable News Network, Public
Broadcasting System, and the major television networks as well as by
numerous independent radio and television stations.
The Fund may also disclose the contents of each of its portfolios as
frequently as daily in advertisements and elsewhere.
It should be noted that the investment results of the Fund
will tend to fluctuate over time, so historical total returns should not
be considered representations of what an investment may earn in any
future period. Actual distributions to shareholders will tend to
reflect changes in portfolio income, and will also depend upon the level
of the Fund's expenses, realized or unrealized investment gains and
losses, and the relative results of the Fund's investment policies.
Thus, at any point in time future total returns may be either higher or
lower than past results, and there is no assurance that any historical
performance record will continue.
CUSTODIANS AND SPECIAL CUSTODIANS
Star Bank NA, 425 Walnut Street, Cincinnati, OH 45202, is Custodian
for the cash and securities of the Fund. The Custodian maintains
custody of the Fund's cash and securities, handles its securities
settlements and performs transaction processing for cash receipts and
disbursements in connection with the purchase and sale of the Fund's
shares.
The Fund may appoint as Special Custodians, from time to time, certain
banks, trust companies, and firms which are members of the New York
Stock Exchange and trade for their own account in the types of
securities purchased by the Fund. Such Special Custodians will be used
by the Fund only for the purpose of providing custody and safekeeping
services of relatively short duration for designated types of securities
which, in the opinion of the Trustees or of the Advisor would most
suitably be held by such Special Custodians rather than by the
Custodian. In the event any such Special Custodian is used, it shall
serve the Fund only in accordance with a written agreement with the
Fund meeting the requirements of the Securities and Exchange Commission
for custodians and approved and reviewed at least annually by the
Trustees, and, if a securities dealer, only if it delivers to the
Custodian its receipt for the safekeeping of each lot of securities
involved prior to payment by the Fund for such securities.
The Fund may also maintain deposit accounts for the handling of cash
balances of relatively short duration with various banks, as the
Trustees or officers of the Fund deem appropriate, to the extent
permitted by the Investment Company Act of 1940.
LEGAL MATTERS AND INDEPENDENT AUDITORS
DeWitt Ross & Stevens, SC, 8000 Excelsior Drive, Madison, Wisconsin,
53708, acts as legal counsel to the Fund. Sullivan & Worcester LLP,
1025 Connecticut Avenue, NW, Washington, DC, 20036, acts as review
counsel to the Fund's independent Trustees.
Deloitte & Touche LLP, 117 Campus Drive, Princeton, NJ 08540 serves as
independent auditors to the Fund.
From time to time the Fund may be or become involved in litigation in
the ordinary conduct of its business. Material items of litigation
having consequences of possible or unspecified damages, if any, are
disclosed in the notes to the Fund's financial statements (see
"Financial Statements and Report of Independent Auditors)."
ADDITIONAL INFORMATION
The Fund issues semi-annual and annual reports to its shareholders and
may issue other reports, such as quarterly reports, as it deems
appropriate; the annual reports are audited by the Fund's independent
auditors.
Statements contained in this Statement of Additional Information and in
the Prospectus as to the contents of contracts and other documents are
not necessarily complete. Investors should refer to the documents
themselves for definitive information as to their detailed provisions.
The Fund will supply copies of its Declaration of Trust and By-Laws to
interested persons upon request.
The Fund and shares in the Fund have been registered with the
Securities and Exchange Commission in Washington, DC, by the filing of a
registration statement. The registration statement contains certain
information not included in the Prospectus or not included in this
Statement of Additional Information and is available for public
inspection and copying at the offices of such Commission.
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS
Audited Financial Statements of the Fund, together with the report of
the Fund's independent auditors for the fiscal year ended December 31,
1998, will appear in the Annual Reports to shareholders for the Fund for
the year ended December 31, 1998. Such Annual Report, when prepared,
shall be incorporated herein by reference and filed with the SEC and
shall be furnished to investors with this Statement of Additional
Information. Additional copies of such reports will be available upon
request at no charge by writing or calling the Fund at the address and
telephone number shown on the cover page above.
<PAGE>
Part C
Mosaic Focus Fund
Cross Reference Sheet (Continued)
Pursuant to Rule 495(a)
24(a) Financial Statements
Included in Part A: Not applicable
Included in Part B: Not applicable
24(b) Exhibits
Exhibit No. Description of Exhibit
1 Declaration of Trust (Filed Herewith)
2 By-Laws (Filed Herewith)
3 Not Applicable
4 Not Applicable
5 Investment Advisory Agreement (Filed Herewith)
6 Distribution Agreement (Filed Herewith)
7 Not Applicable
8 Custodian Agreement with Fee Schedule (Filed Herewith)
9 Services Agreement (Filed Herewith)
10 Consent of Counsel (Filed Herewith)
11 Not Applicable
12 Not Applicable
13 Not Applicable
14 Not Applicable
15 Not Applicable
16 Not Applicable
17 Not Applicable
18 Not Applicable
25. Persons Controlled by or Under Common Control with Registrant.
All initial investors in the Registrant are, directly or indirectly, officers
and employees of Madison Investment Advisors, Inc., the parent of the
Registrant's advisor.
26. Number of Holders of Securities.
The number of holders of record of securities of the
Registrant as of the date of filing is as follows:
Title of Class Number of Holders of Record
Shares of Beneficial Interest 14
27. Indemnification
Not applicable
28. Business and Other Connections of Investment Advisor
Name Position with Other Business
Advisor
Frank E. Burgess Director President and Director of
Madison Investment Advisors,
Inc., 6411 Mineral Point
Road, Madison, WI 53705
Katherine L. Frank President Vice President of Madison
Investment Advisors, Inc.
6411 Mineral Point
Road, Madison, WI 53705
Jay R. Sekelsky Vice President Vice President of Madison
Investment Advisors, Inc.
6411 Mineral Point
Road, Madison, WI 53705
Chris Berberet Vice President Vice President of Madison
Investment Advisors, Inc.
6411 Mineral Point
Road, Madison, WI 53705
W. Richard Mason Secretary Secretary of Presidential
Savings Bank, FSB and
Presidential Service
Corporation, 4600 East-West
Highway, Bethesda, MD
20814; Secretary of GIT
Investment Services, Inc.
of the same
address as the Trust.
Julia M. Nelson Vice President Principal of GIT Investment
Services, Inc.
29. Principal Underwriters
(a) Artisan Investment Services, LLC, a wholly owned subsidiary of
Madison Investment Advisors, Inc., shall serve as distributor of the
Trust, succeeding to the duties of GIT Investment Services, Inc., the
distributor Mosaic Government Money Market Trust, Mosaic Tax-Free Trust,
Mosaic Equity Trust and Mosaic Income Trust.
(b)
Name and Principal Position and Offices Position and Offices
Business Address with Underwriters with Registrant
W. Richard Mason Principal Secretary
1655 Ft. Myer Dr.
Arlington, VA 22209
Julia M. Nelson Principal Vice President
1655 Ft. Myer Dr.
Arlington, VA 22209
Frank E. Burgess Beneficial Owner Trustee and Vice President
6411 Mineral Point
Madison, WI 53705
(c) Not Applicable
30. Location of Accounts and Records
The books, records and accounts of the Registrant will be
maintained at 1655 Ft. Myer Drive, Arlington, VA 22209, at
which address are located the offices of the Registrant and
of Bankers Finance Investment Management Corp. Additional
records and documents relating to the affairs of the
Registrant are maintained by the Star Bank, N.A. of
Cincinnati, OH, the Registrant's Custodian, at the
Custodian's offices located at 425 Walnut Street,
Cincinnati, OH 45202. Pursuant to the Custodian Agreement
(see Article IX, Section 12), such materials will remain the
property of the Registrant and will be available for
inspection by the Registrant's officers and other duly
authorized persons. Certain records may be maintained at
the offices of the Advisor's parent, Madison Investment
Advisors, Inc., 6411 Mineral Point Road, Madison, WI 53705.
31. Management Services
Discussed in Parts A and B
32. Undertakings
(a) Not Applicable
(b) Not Applicable
(c) The Registrant shall furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest
Annual Report to shareholders upon such person's request and
without charge.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has
duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the County of
Arlington, Commonwealth of Virginia, on the 21 day of April,
1998.
Mosaic Focus Fund
By: (signature)
Katherine L. Frank
President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to the Registration Statement
has been signed below by the following persons in the
capacities and on the above date indicated.
(signature) Trustee
Frank E. Burgess
(signature) Trustee
Lorence Wheeler
(signature) Trustee
Thomas S. Kleppe
(signature) Trustee
James Imhoff
Declaration of Trust
Mosaic Focus Fund Trust
Article I. Name and Definitions................................ 4
1. Name......................................................... 4
2. Definitions
(a) 1940 Act................................. 4
(b) Commission............................... 4
(c) Affiliated Person, Assignment,
Interested Person,
Principal Underwriter,
Majority Shareholder Vote............ 4
(d) Trust..................................... 4
(e) Accumulated Net Income................... 4
(f) Trustees.................................. 4
(g) Shares.................................... 4
(h) Shareholder............................... 5
(i) Business Day.............................. 5
Article II Purpose of Trust................................... 5
Article III Beneficial Interest................................ 5
1. Shares of Beneficial Interest.......................... 5
2. Ownership of Shares.................................... 6
3. Investment in the Trust................................ 6
4. No Preemptive Rights................................... 6
5. Provisions Relating to Series of Shares................ 6
Article IV The Trustees....................................... 7
1. Management of the Trust................................ 7
2. Election of Trustees................................... 7
3. Term of Office of Trustees............................. 7
4. Termination Services and Appointment of Trustees....... 8
5. Temporary Absence of Trustees.......................... 9
6. Number of Trustees..................................... 9
7. Effect of Death, Resignation, Etc., of a Trustee....... 9
8. Ownership of the Trust................................. 9
Article V Powers of the Trustees............................... 9
1. Powers................................................. 9
2. Principal Transactions.................................12
3. Trustees and Officers as Shareholders..................12
4. Parties to Contracts...................................12
Article VI Trustees' Expenses and Compensation..................13
1. Trustee Reimbursement..................................13
2. Trustee Compensation...................................13
Article VII Investment Adviser, Administrative Services,
Principal Underwriter and Transfer Agent........................14
1. Investment Adviser.....................................14
2. Administrative Services................................14
3. Principal Underwriter..................................14
4. Transfer Agent.........................................15
5. Provisions and Amendments..............................15
Article VIII Shareholders' Voting Powers and Meetings...........15
1. Voting Powers..............................................15
2. Meetings...................................................15
3. Quorum and Required Vote...................................15
4. Proxies....................................................16
5. Additional Provisions......................................16
Article IX Custodians...........................................16
1. Appointment of Custodian and Duties........................16
2. Central Certificate System.................................17
3. Special Custodians.........................................17
4. Special Depositories.......................................17
Article X Distributions and Redemptions.........................18
1. Distributions..............................................18
2. Redemptions and Repurchases................................18
3. Determination of Accumulated Net Income....................19
4. Net Asset Value of Shares..................................19
5. Suspension of the Right of Redemption......................20
6. Trust's Right to Redeem Shares.............................20
Article XI Limitation of Liability and Indemnification..........21
1. Limitation of Personal Liability and Indemnification
of Shareholders..........................................21
2. Limitation of Personal Liability of Trustees, Officers,
Employees or Agents of the Trust.........................21
3. Express Exculpatory Clauses and Instruments................21
4. Mandatory Indemnification..................................22
Article XII Miscellaneous.......................................23
1. Trust is not a Partnership.................................23
2. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety..................................................23
3. Establishment of Record Dates..............................23
4. Termination of Trust.......................................23
5. Offices of the Trust, Filing of Copies, References,
Headings................................................24
6. Applicable Law.............................................24
7. Amendments.................................................25
8. Conflicts with Law or Regulations..........................25
9. Use of Name................................................25
10. Resident Agent.............................................25
11. Name and Address of Trustees...............................25
12. Principal Place of Business of Trust.......................26
Mosaic Focus Fund Trust
Declaration of Trust
This Declaration of Trust is made January 1, 1998, by Frank E. Burgess,
James Imhoff, Lorence Wheeler and Thomas Kleppe, as Trustees, to be
effective upon filing and acceptance with the Secretary of the
Commonwealth of Massachusetts.
Whereas the Trustees desire to establish a trust fund for the investment
and reinvestment of funds contributed thereto;
Now, therefore, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed under
this Declaration of Trust in trust as herein set forth
below.
ARTICLE I
NAME AND DEFINITIONS
Section 1. Name. This Trust shall be known as "Mosaic Focus Fund
Trust." Should the Trustees determine that the use of such name is not
advisable or otherwise cease using such name, then they may hold the
property of the Trust and conduct its business under another name of
their choosing, and shall undertake to change the name of the Trust
accordingly.
Section 2. Definitions. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time;
(b ) The "Commission" refers to the Commission described in the 1940
Act and to any succeeding governmental authority;
(c ) The terms "affiliated person," "assignment," "interested person,"
and "principal underwriter" shall have the meanings given them in the
1940 Act. A "Majority Shareholder Vote" shall have the same meaning as
"the vote of a majority of the outstanding voting securities," as used
in the 1940 Act, and shall apply to either the 50% or 67% requirement
described therein, Whichever may be applicable;
(d) The "Trust" refers to Mosaic Focus Fund Trust;
(e) "Accumulated Net Income" means the accumulated
net income of the Trust determined in the manner provided or authorized
in Article X, Section 3;
(f) The "Trustees" refers to the individual trustees in their capacity
as trustees of the Trust hereunder and their successor or successors for
the time in office as such Trustees;
(g) "Shares" means the equal proportionate units of interest into
which the beneficial interest in the Trust shall be divided from time to
time and includes fractions of shares as well as whole Shares;
(h) "Shareholder" means a record owner of Shares of the Trust; and
(i) A "business day" means a day when the New York Stock Exchange is
open for trading and the Trustees have not determined that the Trust
shall be closed for business in observance of a holiday observed
generally by banks in New York City, Washington, D. C. , or the State of
Virginia, or by the offices of the Federal Government in Washington, DC.
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors a continuous source of
managed investments primarily in securities.
ARTICLE III
BENEFICIAL INTEREST
Section 1. Shares of Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into transferable Shares,
without par value, each of which shall represent an equal proportionate
interest in the Trust with each other Share outstanding, none having
priority or preference over another, except to the extent modified by
the Trustees under the provisions of this section. The number of Shares
which may be issued is unlimited. The Trustees may from time to time
divide or combine the outstanding Shares into a greater or lesser number
without thereby changing the proportionate beneficial interest in the
Trust. Contributions to the Trust may be accepted for, and Shares
shall be redeemed as, whole Shares and/or fractions. Shares may be
represented by certificates or by suitable entries in the books of the
Trust.
From time to time as they deem appropriate, the Trustees may create
additional Classes and/or Series of Shares in addition to the single
Series and Class of Shares created under this instrument, which shall be
deemed the original Series of Shares and may be designated by any other
name the Trustees determine.
References in this Declaration of Trust to Shares shall apply to each such
Series of Shares and (to the extent not inconsistent with the rights and
restrictions of a Class) to each Class of Shares.
Any additional Series of Shares created hereunder shall represent the
beneficial interest in the assets (and related liabilities) allocated by
the Trustees to such Series of Shares and acquired by the Trust only
after creation of the respective Series of Shares and only on the
account of such Series. Upon creation of each Series of Shares, the
Trustees may designate it appropriately and determine the investment
policies with respect to the assets allocated to such Series of Shares,
redemption rights, dividend policies, conversion rights, liquidation
rights, voting rights, and such other rights and restrictions as the
Trustees deem appropriate, to the extent not inconsistent with the
provisions of this Declaration of Trust.
The Trustees may divide any Series (including the original Series) into
more than one Class of Shares. Upon any creation of an additional
Class of Shares, the Trustees may designate it appropriately and
determine its rights and restrictions (including redemption rights,
dividend rights, conversion rights, liquidation rights, voting rights,
and such other rights and restrictions as the Trustees deem
appropriate).
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded in the books of the Trust or a transfer agent. The Trustees
may make such rules as they consider appropriate for the transfer of
shares and similar matters. The record books of the Trust or any
transfer agent, as the case may be, shall be conclusive as to who are
the holders of Shares and as to the number of Shares held from time to
time by each.
Section 3. Investment in the Trust. The Trustees may accept
investments in the Trust from such persons and on such terms as they may
from time to time authorize and may cease offering Shares to the public
at any time. After the date of the initial contribution of capital to
the Trust, the number of Shares determined by the Trustees to represent
the initial contribution shall be considered as outstanding and the
amount received by the Trustees on account of the contribution shall be
treated as an asset of the Trust. Subsequent to such initial
contribution of capital, Shares (including Shares which may have been
redeemed or repurchased by the Trust) may be issued or sold at a price
which will net the Trust, before paying any taxes in connection with
such issue or sale, not less than the net asset value (as defined in
Article X, Section 4) thereof; provided, however, that the Trustees may
in their discretion impose a sales charge upon investments in the Trust.
Section 4. No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or
other securities issued by the Trust or the Trustees.
Section 5. Provisions Relating to Series of Shares.
Whenever no Shares of a Series are outstanding, then the Trustees may
abolish such Series (or any Class of Shares of a Series for which there
are no outstanding Shares). Whenever more than one Series or Class
of Shares is outstanding, then the following provisions shall apply:
(a) Assets Belonging to Each Series. All consideration received by
the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, and proceeds thereof, and any funds
derived from any reinvestment of such proceeds, shall irrevocably belong
to that Series for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of the Trust. In the
event there are assets, income, earnings, and proceeds thereof which are
not readily identifiable as belonging to a particular Series, then the
Trustees shall allocate such items to the various Series then existing,
in such manner and on such basis as they, in their sole discretion, deem
fair and equitable. The amount of each such item allocated to
a particular Series by the Trustees shall then belong to that Series,
and each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
(b) Liabilities Belonging to Each Series. The assets belonging to
each particular series shall be charged with the liabilities, expenses,
costs and reserves of the Trust attributable to that Series; and any
general liabilities, expenses, costs and reserves of the Trust which are
not readily identifiable as attributable to a particular Series shall be
allocated by the Trustees to the various Series then existing, in such
manner and on such basis as they, in their sole discretion, deem fair
and equitable. Each such allocation shall be conclusive and binding
upon the Shareholders of all Series for all purposes.
(c) Series Shares, Dividends, and Liquidation. Each Share of a Class within a
Series shall have the same rights and pro-rata beneficial interest in the
assets and earnings of the Series as any other Share of the same Class, but
the rights and interests of the Classes within a Series may differ as the
Trustees provide. Any dividends paid on the Shares within a Series shall only
be payable from and to the extent of the assets (net of liabilities) belonging
to that Series. In the event of liquidation of a Series, only the assets
(less provision for liabilities) of that Series shall be distributed to
holders of the Shares of that Series.
(d) Voting by Series. Except as provided in this section or as
limited by the rights of any Class, each Share of the Trust may vote
with and in the same manner as any other Share on matters submitted to a
vote of the Shareholders, without differentiation among votes from the
separate Series and/or Classes; provided, however, that (i) as to any
matter with respect to which a separate vote of any Series or Class is
required by the 1940 Act or would be required under Massachusetts
Business Corporation Law if the Trust were a Massachusetts business
corporation, such requirements as to the separate vote by the Series or
Class shall apply in lieu of the voting described immediately above;
(ii) in the event that the separate vote requirements referred to in (i)
above apply with respect to one or more Series or Classes, then, subject
to (iii) below, the Shares of all other Series and Classes shall vote
without differentiation among their votes; and (iii) as to any matter
which does not affect the interest of a particular Series or Class, only
the holders of Shares of the one or more affected Series or Classes
shall be entitled to vote.
ARTICLE IV
THE TRUSTEES
Section 1. Management of the Trust. The business and affairs of
the Trust shall be managed by the Trustees, and they shall have all
powers necessary and desirable to carry out that responsibility. The
Trustees first named above (or their successors appointed hereunder)
shall serve until the election of Trustees at the first meeting of
Shareholders of the Trust.
Section 2. Election of Trustees. During the year following the end of
the Trust's first fiscal year subsequent to its initial public offering
of Shares, the Shareholders shall elect, at a meeting called by the
initial Trustees of the Trust, the Trustees who will serve for such
regular terms as may be provided in the By-Laws of the Trust.
The Shareholders of the Trust shall thereafter elect, at Shareholder
meetings called for the purpose in the manner provided herein, Trustees
to succeed those Trustees whose terms expired since the last such
meeting. If re-elected, a Trustee may succeed himself.
Section 3. Term of Office of Trustees. The Trustees shall hold off ice
during the lifetime of this Trust and until any expiration of the term
of office for which each was elected; except that: (a) a Trustee may
resign his trust by written instrument signed by him and delivered to
the other Trustees, which shall take effect upon such delivery or upon
such later date as is specified therein; (b) a Trustee may be removed at
any time by written instrument signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such
removal shall become effective; (c) a Trustee who requests in writing to
be retired or who has become mentally or physically incapacitated may be
retired by written instrument signed by a majority of the other
Trustees, specifying the date of and reason for his retirement; and (d)
a Trustee may be removed either by filing with the Trust's Custodian
written declarations by two-thirds of the outstanding Shares after
solicitation of such declarations by a Shareholder in the same manner as
proxies are solicited, or by a vote of two-thirds of the outstanding
Shares cast in person or by proxy at a special meeting of Shareholders
called for the purpose.
The Trustees shall promptly call a meeting of Shareholders for the
purpose of voting on the removal of a Trustee, if requested to do so in
writing by the record holders of at least 10% of the Trust's outstanding
Shares. Ten or more persons who have been Shareholders for at least six
months and who hold Shares with an aggregate net asset value of at least
$25,000 or, if less, with a net asset value of 1% of the Trust's
aggregate net assets, may apply to the Trustees in writing for the
purpose of communicating with other Shareholders to solicit their
signatures requesting such a Shareholder meeting to remove a Trustee;
provided, that a copy of the proposed form of communication to
Shareholders and accompanying signature request is submitted by such
Shareholders with such application to the Trustees. Within five (5)
business days of the receipt of such an application the Trustees shall
either: (a) provide the applicants access to a list of the names and
addresses of all Shareholders as shown on the books of the Trust, or (b)
inform the applicants as to the approximate number of Shareholders of
record and the approximate cost of mailing to them the proposed form of
communication and signature request. If the Trustees act pursuant to
the course described in clause (b) immediately above, the applicants may
thereafter request in writing that the Trustees mail the proposed
communication and signature request to Shareholders, provided such
request is accompanied by delivery to the Trustees of all materials to
be so mailed and payment to the Trust of the amount reasonably estimated
by the Trustees as the cost of the mailing.
Upon receipt of any such request, delivery and payment, the Trustees
shall either mail such materials with reasonable promptness to all
Shareholders of record at their addresses as shown on the books of the
Trust or within five (5) business days thereafter mail to the applicants
and file with the Commission copies of the tendered materials and a
written statement, signed by at least a majority of the Trustees, to the
effect that in the opinion of such Trustees such materials contain
untrue statements of fact, omit to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law, together with a statement by such Trustees of the basis
of their opinion as stated therein and any other related information
they deem appropriate. If, subsequent to the submission of such
statement and full consideration thereof by the Commission, the
Commission declines to issue an order sustaining the Trustee's
objections or otherwise preventing mailing of the tendered materials,
then the Trustees shall mail such materials to Shareholders as
aforesaid.
Section 4. Termination of Services and Appointment of Trustees. In case
of the death, resignation, retirement, removal or mental or physical
incapacity of any of the Trustees, or in case a vacancy shall by reason
of an increase in number, or for any other reason, exist, the remaining
Trustees shall fill such vacancy by appointing for the remaining term of
the predecessor Trustee such other person as they in their discretion
shall see fit. Such appointment shall be effected by the signing of
a written instrument by the majority of the Trustees in office. Within
three months of such appointment, the Trustees shall cause notice of
such appointment to be mailed to each Shareholder at his address as
recorded on the books of the Trust. An appointment of a Trustee may be
made by the Trustees then in office and notice thereof mailed to
Shareholders as aforesaid in anticipation of a vacancy to occur by
reason of retirement, resignation or increase in number of Trustees
effective only at or after the effective date of said retirement,
resignation or increase in the number of Trustees. As soon as any
Trustee so appointed shall have accepted this Trust, the Trust estate
shall vest in the new Trustee or Trustees, together with the continuing
Trustees, without any further act or conveyance, and he shall be deemed
a Trustee hereunder. Any appointment authorized by this Section 4 is
subject to the provisions of Section 16 (a) of the 1940 Act.
Section 5. Temporary Absence of Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six
months at any one time to any other Trustee or Trustees, provided that
in no case shall less than two of the Trustees personally exercise their
power hereunder except as herein otherwise expressly provided.
Section 6. Number of Trustees. The number of Trustees serving
hereunder at any time shall be determined by the Trustees themselves,
but shall not be less than three (3) nor more than fifteen (15).
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled or while any Trustee is absent from the Commonwealth
of Massachusetts or, if not a domiciliary of Massachusetts, is absent
from his state of domicile, or is physically or mentally incapacitated,
the other Trustees shall have all the powers hereunder and the
certificates signed by a majority of the other Trustees of such vacancy,
absence or incapacity, shall be conclusive, provided, however, that no
vacancy which reduces the number of Trustees below three (3) shall
remain unfilled for a period longer than six calendar months.
Section 7. Effect of Death, Resignation, Etc., of a Trustee.
The death, resignation, retirement, removal, or mental or
physical incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created
pursuant to the terms of this Declaration of Trust.
Section 8. Ownership of the Trust. The assets of the Trust shall be
held separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or by any
successor Trustee. All of the assets of the Trust shall at all times be
considered as vested in the Trustees. No Shareholder shall be deemed to
have a severable ownership in any individual asset of the Trust or any
right of partition or possession thereof, but each Shareholder shall
have a proportionate undivided beneficial interest in the Trust.
ARTICLE V
POWERS OF THE TRUSTEES
Section 1. Powers. The Trustees in all instances shall act
as principals , and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and authority to do
any and all acts and to make and execute any and all contracts and
instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not
be bound or limited by present or future laws or customs in regard to
investment by trustees or fiduciaries, but shall have full authority and
power to make any and all investments which they, in their uncontrolled
discretion, shall deem proper to accomplish the purpose of this Trust.
Without limiting the foregoing, the Trustees shall have the following
specific powers and authority, subject to any applicable limitation in
the Declaration of Trust or in the By-Laws of the Trust:
(a ) To buy, and invest funds of the Trust in, securities including,
but not limited to, common stocks, preferred stocks, bonds, debentures,
warrants and rights to purchase securities, certificates of beneficial
interest, money market instruments, notes or other evidences of
indebtedness issued by corporations, trusts, associations, or banking
institutions, domestic or foreign, or issued or guaranteed by the United
States of America or any agency or instrumentality thereof, by the
government of any foreign country, by any State of the United States, or
by any political subdivision or agency or instrumentality of any State
or foreign country, or in "when-issued" or "delayed-delivery" contracts
for any such securities, or in any repurchase agreement (agreements
under which the seller agrees at the time of sale to repurchase the
security at an agreed time and price); or retain Trust assets in cash,
and from time to time change the investments constituting the assets of
the Trust;
(b) To adopt By-Laws not inconsistent with the Declaration of Trust and
to amend and repeal them to the extent that they do not reserve that
right to the Shareholders;
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(d) To appoint or otherwise engage one or more banks or trust
companies or member firms of any national securities exchange registered
under the Securities Exchange Act of 1934 as custodian of any assets of
the Trust, subject to any conditions set forth in this Declaration of
Trust or in the By-Laws;
(e) To appoint or otherwise engage custodial agents, transfer agents,
dividend distributing agents, Shareholder servicing agents, investment
advisers, sub-investment advisers, principal underwriters,
administrative service agents, and such other agents as the Trustees may
from time to time appoint or otherwise engage;
(f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for
or by the Trust itself or both;
(g) To set record dates in the manner hereinafter provided for;
(h) To delegate such authority as they consider Desirable to a
committee or committees composed of Trustees, including without
limitation, an Executive Committee, or to any officers of the Trust and
to any agent, custodian or underwriter;
(i) To sell or exchange any or all of the assets of the Trust, subject
to the provisions of Article XII, Section 4 (b) hereof;
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such powers and
discretion with relation to securities or property as the Trustees shall
deem proper;
(k) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(l) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form; or
either in its own name or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the
usual practice of Massachusetts trust companies or investment companies;
(m) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust;
(n) To engage in and to prosecute, compound, compromise, abandon, or
adjust, by arbitration, or otherwise, any actions, suits, proceedings,
disputes, claims, demands, and things relating to the Trust; and out of
the assets of the Trust to pay, or to satisfy, any debts, claims or
expenses incurred in connection therewith, including those of
litigation, upon any evidence that the Trustees may deem sufficient
(such powers shall include without limitation any actions, suits,
proceedings, disputes, claims, demands and things relating to the Trust
wherein any of the Trustees may be named individually and the subject
matter of which arises by reason of business for or on behalf of the
Trust);
(o) To make distribution of income and of capital gains to
Shareholders in the manner hereinafter provided for;
(p) To borrow money and enter into reverse repurchase agreements
(agreements in which the Trust sells assets concurrently with agreeing
to repurchase such assets at a later date at a specific price) for the
purposes of the Trust, if in the opinion of the Trustees such
transactions may be advantageously made to increase the earning power of
the Trust, but only up to twenty-five percent of the gross assets of the
Trust taken at market value as determined by the Trustees at the time
the transactions are entered into. The Trustees may also borrow
if such borrowings are made temporarily for extraordinary or emergency
purposes or to permit redemptions of Shares without selling portfolio
securities, but only to an amount that the aggregate of all borrowings
and reverse Repurchase agreements of the Trust shall not exceed one-
third of the gross assets of the Trust taken at market value as
determined by the Trustees at the time the transactions are entered
into. Any borrowings hereunder may be made with or without collateral
security and the Trustees may, in their discretion, pledge, mortgage,
charge or hypothecate or otherwise encumber the gross assets of the
Trust as security for any loans or reverse repurchase agreements,
subject to the limitations provided herein;
(q) To lend portfolio securities of the Trust, provided that such
loans are made according to the guidelines of the Commission and
pursuant to policies established by the Trustees and provided that such
loans are fully secured by the maintenance of collateral satisfactory to
the Trustees at all times at least equal to the market value of the
securities loaned;
(r) To invest in securities having legal or contractual restrictions
on their resale or for which no readily available market exists;
(s) From time to time to issue and sell the Shares of the Trust either
for cash or for property whenever and in such amounts as the Trustees
may deem desirable, but subject to the limitations set forth in Section
3 of Article III;
(t) To purchase insurance of any kind, including, without limitation,
insurance on behalf of any person who is or was a Trustee, officer,
employee or agent of the Trust, or is or was serving at the request of
the Trust as a Trustee, Director, officer, agent or employee of another
corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any
such capacity or arising out of his status as such;
(u) To purchase, hold or sell commodities or contracts for the
purchase or sale of commodities, including contracts for the purchase or
sale of financial assets or contracts denominated in terms of a
financial index, which are traded on a commodities exchange or
otherwise; and
(v) To use any of the assets of the Trust to finance activities
primarily intended to result in the sale or distribution of its Shares.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees
or upon their order.
Section 2. Principal Transactions. The Trustees shall not on
behalf of the Trust buy any securities (other than Shares of the Trust)
from or sell any securities (other than Shares of the Trust) to, or lend
any assets of the Trust to, any Trustee or officer or employee of the
Trust or any firm of which such Trustee or officer is a member acting as
principal unless permitted by the 1940 Act, but the Trust may employ any
such other party or any such person or firm or company in which any such
person is an interested person in any capacity not prohibited by the
1940 Act.
Section 3. Trustees and Officers as Shareholders. Any Trustee, officer
or other agent of the Trust may acquire, own and dispose of shares of
the Trust to the same extent as if he were not a Trustee, officer or
agent; and the Trustees may issue and sell or cause to be issued or sold
Shares of the Trust to and buy such Shares from any such person or any
firm or company in which he is an interested person subject only to the
general limitations herein contained as to the sale and purchase of such
Shares; and all subject to any restrictions which may be contained in
the By-Laws.
Section 4. Parties to Contracts. The Trustees may enter into
any contract of the character described in Section 1, 2, 3, or 4 of
Article VII or in Article IX hereof or any other capacity not prohibited
by the 1940 Act with any corporation, firm, trust, or association,
although one or more of the Shareholders, Trustees, officers, employees
or agents of the Trust or their affiliates may be an officer, director,
trustee, shareholder or interested person of such other party to the
contract, and no such contract shall be invalidated or rendered voidable
by reason of the existence of any such relationship, nor shall any
person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of
said contract or accountable for any profit realized directly or
indirectly therefrom, in the absence of actual fraud. The same
person (including a firm, corporation, trust or association) may be the
other party to contracts entered into pursuant to Sections 1, 2, 3, and
4 of Article VII or Article IX or in any other capacity deemed legal
under the 1940 Act, and any individual person may be financially
interested or otherwise an interested person of persons who are parties
to any or all of the contracts mentioned in this Section 4.
ARTICLE VI
TRUSTEES' EXPENSES AND COMPENSATION
Section 1. Trustee Reimbursement. The Trustees shall be
reimbursed from the Trust estate for all of their expenses and
disbursements not otherwise reimbursed, including, without limitation,
expenses of organizing the Trust and continuing its existence; fees and
expenses of Trustees and officers of the Trust; fees for investment
advisory services, administrative services and principal underwriting
services provided for in Article VII, Sections 1, 2 and 3; fees and
expenses for preparing and printing its Registration Statements under
the Securities Act of 1933 and the Investment Company Act of 1940 and
any amendments thereto; expenses of registering and qualifying the Trust
and its shares under Federal and state laws and regulations; expenses of
preparing, printing and distributing prospectuses and any amendments
thereof sent to Shareholders, underwriters, broker-dealers and to
investors who may be considering the purchase of shares; expenses of
registering, licensing or other authorization of the Trust as a broker-
dealer and of its officers as agents and salesmen under Federal and
state laws and regulations; interest expenses, taxes, fees and
commissions of every kind; expenses of issue (including cost of share
certificates), repurchase and redemption of shares, including expenses
attributable to a program of periodic issue; charges and expenses of
custodians, transfer agents, dividend disbursing agents, shareholder
servicing agents and registrars; printing and mailing costs; auditing,
accounting and legal expenses; reports to Shareholders and governmental
officers and commissions; expenses of meetings of Shareholders and proxy
solicitations therefor; insurance expenses; association membership dues;
expenses incurred in connection with the financing of activities
intended primarily to result in the sale or distribution of the Trust's
shares; and such nonrecurring items as may arise, including all losses
and liabilities by them incurred in administering the Trust, including
expenses incurred in connection with litigation, proceedings and claims
and the obligations of the Trust under Article XI hereof to indemnify
its Trustees, officers, employees, Shareholders and agents; and for the
payment of such expenses, disbursements, losses and liabilities, the
Trustees shall have a lien on the Trust estate prior to any rights or
interests of the Shareholders thereto. This section shall not
preclude the Trust from directly paying any of the aforementioned fees
and expenses.
Section 2. Trustee Compensation. The Trustees shall be
entitled to compensation from the Trust f6-r their respective services
as Trustees, to be determined from time to time by vote of the Trustees,
and the Trustees shall also determine the compensation of all officers,
consultants and agents whom they may elect or appoint. The Trust may
pay any Trustee or any corporation, firm, trust or association of which
a Trustee is an interested person for services rendered to the Trust in
any capacity not prohibited by the 1940 Act, and such payments shall not
be deemed compensation for services as a Trustee under the first
sentence of this Section 2 of Article VI.
ARTICLE VII
INVESTMENT ADVISER, ADMINISTRATIVE SERVICES,
PRINCIPAL UNDERWRITER AND TRANSFER AGENT
Section 1. Investment Adviser. Subject to a Majority Shareholder Vote as
required by Section 15 of the 1940 Act, the Trustees may in their discretion
from time to time enter into an investment advisory contract whereby the other
party to such contract shall undertake to furnish the Trustees investment
advisory services upon such terms and conditions and for such compensation as
the Trustees may in their discretion determine. Subject to a Majority
Shareholder Vote, the investment adviser may enter into a sub-investment
advisory contract to receive investment advice, statistical and factual
information from the sub-investment adviser upon such terms and conditions
and for such compensation as the Trustees may in their discretion agree to.
Notwithstanding any provisions of this Declaration of Trust, the
Trustees may authorize the investment adviser or sub-investment adviser
or any person furnishing administrative personnel and services as set
forth in Article VII, Section 2 (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect
purchases, sales or exchanges of portfolio securities of the Trust on
behalf of the Trustees or may authorize any officer or Trustee to effect
such purchases, sales, or exchanges pursuant to recommendations of the
investment adviser (and all without further action by the Trustees).
Any such purchases, sales and exchanges shall be deemed to have been
authorized by the Trustees. The Trustees may also authorize the
investment adviser to determine what firms shall be employed to effect
transactions in securities for the account of the Trust and to determine
what firms shall participate in any such transactions or shall share in
commissions or fees charged in connection with such transactions.
Section 2. Administrative Services. The Trustees may in their discretion
from time to time contract for administrative personnel and services whereby
the other party shall agree to provide the Trustees administrative personnel
and services to operate the Trust on a daily basis, on such terms and
conditions as the Trustees may in their discretion determine. Such services
may be provided by one or more entities.
Section 3. Principal Underwriter. The Trustees may in their discretion from
time to time enter into an exclusive or non-exclusive contract or contracts
providing for the sale of the Shares of the Trust to net the Trust not less
than the amount provided in Article III, Section 3 hereof, whereby the Trust
may either agree to sell its Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article VII;
and such contract may also provide for the repurchase or sale of Shares of the
Trust by such other party as principal or as agent of the Trust and may
provide that the other party may maintain a market for Shares of the
Trust.
Section 4. Transfer Agent. The Trustees may in their discretion from time to
time, enter into transfer agency and shareholder services contracts whereby
the other party shall undertake to furnish the Trustees transfer agency and
shareholder services. The contracts shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Declaration of Trust or of the By-Laws. Such services
may be provided by one or more entities.
Section 5. Provisions and Amendments. Any contract entered into pursuant to
Sections 1 or 3 of this Article VII shall be consistent
with and subject to the requirements of Section 15 of the 1940 Act
(including any amendments thereof or other applicable Acts of Congress
hereafter enacted) with respect to its continuance in effect, its
termination, and the method of authorization and approval of such
contract, or renewal thereof.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote:
(i) for the election of Trustees as provided in Article IV, Section 2;
(ii) for the removal of Trustees as provided in Article IV, Section
3(d); (iii) with respect to any investment adviser or sub-investment
adviser as provided in Article VII, Section 1; (iv) with respect to the
amendment of this Declaration of Trust as provided in Article XII,
Section 7; (v) to the same extent as the Shareholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or
claim should be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders; and (vi) with respect to
such additional matters relating to the Trust as may be required by law,
by this Declaration of Trust, or the By-Laws of the Trust or any
regulation of the Trust by the Commission or any State, or as the
Trustees may consider desirable. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote.
There shall be no cumulative voting in the election of Trustees. If the
Trust issues more than one Series or Class of Shares, the Shareholders
of each Series and Class shall vote separately to the extent provided in
Article III, Section 5; in the election of Trustees all Shareholders
shall vote without differentiation among votes from the separate Series
and Classes of Shares. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Declaration of Trust or any By-Laws of the Trust
to be taken by Shareholders.
Section 2. Meetings. Shareholder meetings shall be held as specified in
Section 2 of Article IV and in the By-Laws at the principal office of the
Trust or at such other place as the Trustees may designate. Special meetings
of the Shareholders may be called by the Trustees or by officers of the Trust
given such authority in the By-Laws, and shall be called by the Trustees at a
place designated by them upon the written request of Shareholders owning at
least one-tenth of the outstanding Shares entitled to vote. Shareholders
shall be entitled to at least fifteen days' notice of any meeting.
Section 3. Quorum and Required Vote. Except as otherwise provided by law, to
constitute a quorum for the transaction of any business at any meeting of
Shareholders there must be present, in person or by proxy, holders of one-
fourth of the total number of Shares of the Trust then outstanding and
entitled to vote at such meeting. If a quorum, as above defined, shall not be
present for the purpose of any vote that may properly come before the meeting,
the Shareholders present in person or by proxy and entitled to vote at such
meeting on such matter holding a majority of the Shares present entitled to
vote on such matter may by vote adjourn the meeting from time to time to be
held at the same place without further notice than by announcement to be given
at the meeting, until a quorum, as above defined , entitled to vote on such
matter shall be present, whereupon any such matter may be voted upon at the
meeting as though held when originally convened. Subject to any applicable
requirement of law or of this Declaration of Trust or the By-Laws, a plurality
of the votes cast shall elect a Trustee and all other matters shall be decided
by a majority of the votes cast entitled to vote thereon.
Section 4. Proxies. Any vote by a Shareholder of the Trust may be made
in person or by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Trustees or
their designate prior to the time the vote is taken. Pursuant to a resolution
of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more officers of the
Trust. Only Shareholders of record shall be entitled to vote. A proxy
purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise, and the
burden or proving invalidity shall rest on the challenger.
Section 5. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE IX
CUSTODIANS
Section 1. Appointment of Custodian and Duties. The Trustees shall appoint or
otherwise engage a bank or trust company having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least two
million dollars ($2,000,000) as its Custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as
may be contained in the By-Laws of the Trust:
(1) To receive and hold securities owned by the Trust and deliver the
same upon written order;
(2) To receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustee may
direct;
(3) To disburse such funds upon orders or vouchers;
(4) To keep the books and accounts of the Trust and furnish clerical
and accounting services; and
(5 ) To compute , if authorized to do so by the Trustees, the
Accumulated Net Income of the Trust and the net asset value of the
Shares in accordance with the provisions hereof; all upon such basis of
compensation as may be agreed upon between the Trustees and the
Custodian. If so directed by a Majority Shareholder Vote, the
Custodian shall deliver and pay over the property of the Trust held by
it as specified in such vote.
The Trustees may also authorize the Custodian to employ one or ore sub-
custodians from time to time to perform such of the acts and services of
the Custodian and upon such terms and conditions, as may be agreed upon
between the Custodian and such sub-custodian and approved by the
Trustees, provided that in every case such sub-custodian shall be a bank
or trust company organized under the laws of the United States or one of
the States thereof and having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of at least
two million dollars ($2,000,000) or a member firm of a national
securities exchange registered under the Securities Exchange Act of
1934.
Section 2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees
may direct the Custodian to deposit all or any part of the securities
owned by the Trust in a system for the central handling of securities
established by a national securities exchange or a national securities
association registered with the Commission under the Securities Exchange
Act of 1934, or such other person as may be permitted by the Commission
or otherwise in accordance with the 1940 Act as from time to time
amended, pursuant to which system all securities of any particular class
s or series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits
shall be subject to withdrawal only upon the order of the Custodian at
the direction of the Trustees.
Section 3. Special Custodians. The Trustees may appoint or
otherwise engage any institution which would be permitted to act as
a sub-custodian hereunder to act as a Special Custodian of the Trust.
Any Special Custodian shall have custody only of securities owned by the
Trust and shall not hold any of its cash. Special Custodians shall be
appointed pursuant to a written agreement approved and thereafter at
least annually ratified by the Trustees, and any such written agreement
shall also require that the Special Custodian shall deliver to the
Custodian its receipt, evidencing that it holds the specific securities
in question on behalf of the Trust in its safekeeping, before any
payment can be made for such securities by the Trust. Special
Custodians shall be used by the Trust only for purposes of safekeeping
specialized kinds of securities for periods of limited duration in cases
where, in the opinion of the Trustees, officers of the Trust, its
investment adviser or other authorized agent, such safekeeping services
would be more appropriate or convenient to the Trust than the
safekeeping of such securities with the Custodian.
Section 4. Special Depositories. The Trustees may by resolution
appoint as Special Depositories any commercial banks insured by the
Federal Deposit Insurance Corporation having aggregate capital, surplus
and undivided profits (as shown in their respective last published
reports) of at least two million dollars ($2,000,000). The Trust may
maintain with a Special Depository only demand deposit accounts and
shall not permit the aggregate balances in such accounts to exceed the
amount of any fidelity bond covering any officer of the Trust authorized by
the Trustees to have signature authority over such demand deposit accounts.
ARTICLE X - DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions.
(a) The Trustees may from time to time declare and pay dividends, and
the amount of such dividends and the payment of them shall be wholly in
the discretion of the Trustees.
(b) The Trustees may, on each day Accumulated Net Income of the Trust
(as defined in Section 3 of this Article X) is determined, declare such
Accumulated Net Income as a dividend to Shareholders of record at such
time as the Trustees shall designate, payable in additional full and
fractional Shares or in cash. The Trustees may, if they deem it
advisable, declare a negative dividend on any day when the Accumulated
Net Income of the Trust is negative and deduct such amount from the
previously accumulated dividends of each Shareholder or from such
Shareholder's interest in the Trust.
(c) The Trustees may distribute in respect of any fiscal year as
ordinary dividends and as capital gains distributions, respectively,
amounts sufficient to enable the Trust as a regulated investment company
to avoid any liability for federal income taxes in respect of that year.
(d) The decision of the Trustees as to what, in accordance with good
accounting practice, is income and what is principal shall be final, and
except as specifically provided herein the decision of the Trustees as
to what expenses and charges of the Trust shall be charged against
principal and what against the income shall be final. In the event more
than one Series or Class of Shares is outstanding, the Trustees shall
separately allocate income and expense to each such Series and Class as
they, in their discretion, deem fair and equitable, and their decisions
as to such allocations shall be conclusive and binding upon all
Shareholders. Any income not distributed in any year may be invested
from time to time in the same manner as the principal funds of the
Trust.
(e) The Trustees shall have power, to the fullest extent permitted by
the laws of Massachusetts, at any time, or from time to time, to declare
and cause to be paid dividends, which dividends, at the election of the
Trustees, may be accrued, automatically reinvested in additional Shares
(or fractions thereof) of the Trust or paid 'in cash or in additional
Shares, all upon such terms and conditions as the Trustees may
prescribe.
(f) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a dividend consisting of
shares of the Trust.
Section 2. Redemptions and Repurchases.
(a) In case any Shareholder of record of the Trust at any time
desires or authorizes the disposition of Shares recorded in his name, he
or his authorized agent may deposit a written request (or such other
form of request as the Trustees may from time to time authorize)
requesting that the Trust purchase his Shares, together with such other
instruments or authorizations to effect the transfer as the Trustees may
from time to time require, at the principal office of the Trust, or at
the office of the Custodian if authorized by the Trustees, and the Trust
shall purchase his said Shares, but only at the net asset value of such
Shares (as defined in Section 4 of this Article X) determined by or on
behalf of the Trustees next after said request is received in the form
and manner prescribed by the Trustees. Payment for such Shares shall be
made by the Trust to the Shareholder of record under procedures
determined from time to time by the Trustees.
(b) The Trust may purchase Shares of the Trust by agreement with the
owner thereof (1) at a price not exceeding the net asset value per share
determined next after the purchase or contract of purchase is made or
(2) at a price not exceeding the net asset value per Share determined at
some later time.
(c) Shares purchased by the Trust either pursuant to paragraph
(a) or paragraph (b) of this Section 2 shall be deemed treasury Shares
and may be resold by the Trust, unless the Trustees determine to
extinguish such shares.
(d) If the Trustees determine that economic conditions would make it
seriously detrimental to the best interests of the remaining
Shareholders of the Trust to make payment wholly or partly in cash, the
Trust may pay the redemption price in whole or in part by a distribution
in kind of securities and other assets from the portfolio or portfolios
of the Trust, in lieu of cash, in conformity with applicable rules of
the Securities and Exchange Commission, taking such securities and other
assets at the same value employed in determining net asset value, and
selecting the securities in such manner as the Trustees may deem fair
and equitable.
Section 3. Determination of Accumulated Net Income. The Accumulated Net
Income of the Trust shall be determined by or on behalf of the Trustees daily
or more frequently at the discretion of the Trustees, on each business day at
such time as the Trustees shall in their discretion determine. Such
determination shall be made in accordance with generally accepted accounting
principles and practices and the accounting policies established by the
Trustees, and may include realized and/or unrealized gains from the sale or
other disposition of securities or other property of the Trust. The power and
duty to determine Accumulated Net Income may be delegated by the Trustees from
time to time to one or more of the Trustees or officers of the Trust, to
the other party to any contract entered into pursuant to Section 1 or 2
of Article VII, or to the Custodian or to a transfer agent.
Section 4. Net Asset Value of Shares. The net asset value of
each Share of the Trust outstanding shall be determined at least once on
each business day by or on behalf of the Trustees. The power and duty
to determine net asset value may be delegated by the Trustees from time
to time to one or more of the Trustees or officers of the Trust, to the
other party to any contract entered into pursuant to Section 1 or 2 of
Article I, or to the Custodian or to a transfer agent.
The net asset value of each Share of the Trust as of any particular time
shall be the quotient (adjusted to the number of significant digits
determined by the Trustees) obtained by dividing the value, as of such
time, of the net assets of the respective portfolio of the Trust ( ie., the
value of the assets of the Trust , less its liabilities exclusive
of capital and surplus, applicable to such Shares) by the total number
of such Shares outstanding (exclusive of treasury Shares) at such time
in accordance with the requirements of the 1940 Act and applicable
provisions of the By-Laws of the Trust in conformity with generally
accepted accounting practices and principles.
The Trustees may declare a suspension of the determination of net asset
value for the whole or any part of any period (a) during which the New
York Stock Exchange 'is closed other than customary weekend and holiday
closings, (b) during which trading on the New York Stock Exchange is
restricted, (c) during which an emergency exists as a result of which
disposal by the Trust of securities owned by it is not reasonably
practicable, or it is not reasonably practicable for the -Trust fairly
to determine the value of its net assets, or (d) during such other
periods as the Commission may by order permit for the protection of
security holders of the Trust; provided that applicable rules and
regulations of the Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist. Such suspension shall take effect at
such times as the Trustees shall specify but not later than the close of
business on a business day next following the declaration, and
thereafter there shall be no determination of net asset value until the
Trustees shall declare the suspension at an end, except that the
suspension shall terminate in any event on the first day on which said
stock exchange shall have reopened or the period specified in (b) or (c)
shall have expired (as to which, in the absence of an official ruling by
the Commission, the determination of the Trustees shall be conclusive).
Section 5. Suspension of the Right of Redemption. The Trustees may
declare a suspension of the right of redemption or postpone the date
of payment for the whole or any part of any period (i) during which the
New York Stock Exchange is closed other than customary weekend and
holiday closings, (ii) during which trading on the New York Stock
Exchange is restricted, (iii) during which an emergency exists as a
result of which disposal by the Trust of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust
fairly to determine the value of its net assets, or (iv) during any
other period when the Commission may by order permit for the protection
of security holders of the Trust suspension of the right of redemption
or postponement of the date of payment on redemption; provided that
applicable rules and regulations of the Commission shall govern as to
whether the conditions prescribed in (ii) or (iii) exist. Such
suspension shall take effect at such time as the Trustees shall specify
but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be
no right of redemption or payment until the Trustees shall declare the
suspension at an end, except that the suspension shall terminate in any
event on the first day on which said stock exchange shall have reopened
or the period specified in (ii) or (iii) shall have expired (as to
which, in the absence of an official ruling by the Commission, the
determination of the Trustees shall be conclusive).
Section 6. Trust's Right to Redeem Shares. The Trust shall have the right
to cause the redemption of Shares in any Shareholder's account for their then
current net asset value (which will be promptly paid to the Shareholder in
cash) if at any time the total investment in the Shareholder's account with
the Trust does not have a minimum dollar value determined from time to time by
he Trustees in their sole discretion. Shares of the Trust are also
redeemable at the option of the Trust if, in the opinion of the Trustees,
ownership of Trust Shares has or may become concentrated to an extent which
would cause the Trust to be a personal holding company within the meaning of
the federal Internal Revenue Code (and thereby disqualified under Sub-chapter
M of said Code); in such circumstances the Trust may compel the redemption of
Shares, reject any order for the purchase of Shares or refuse to give
effect to the transfer of Shares.
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Personal Liability and Indemnification of
Shareholders. The Trustees, officers, employees or agents of the Trust
shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment
whatsoever, other than such as the Shareholder may at any time agree to
pay by way of subscription to any Shares or otherwise.
No Shareholder or former Shareholder of the Trust shall be liable solely
by reason of his being or having been a Shareholder for any debt, claim,
action, demand, suit, proceeding, judgment, decree, liability or
obligation of any kind, against, or with respect to the Trust arising
out of any action taken or omitted for or on behalf of the Trust, and
the Trust shall be solely liable therefor and resort shall be had
solely to the Trust property for the payment or performance thereof.
Each Shareholder or former Shareholder of the Trust (or their heirs,
executors, administrators or other legal representatives or, in case of
a corporate entity, its corporate or general successor) shall be
entitled to indemnity and reimbursement out of the Trust property to the
full extent of such liability and the costs of any litigation or other
proceedings in which such liability shall have been determined,
including, without limitation, the fees and disbursements of counsel if,
contrary to the provisions hereof, such Shareholder or former
Shareholder of the Trust shall be held to personal liability.
The Trust shall, upon request by the Shareholder or former Shareholder,
assume the defense of any claim made against any Shareholder for any act
or obligation of the Trust and satisfy any judgment thereon.
Section 2. Limitation of Personal Liability of Trustees, Officers,
Employees or Agents of the Trust. No Trustee, officer, employee )r
agent of the Trust shall have the power to bind any other Trustee,
officer, employee or agent of the Trust personally. The Trustees,
officers, employees or agents of the Trust incurring any debts,
liabilities or obligations, or in taking or omitting any other actions
for or in connection with the Trust are, and each shall be deemed to be,
acting as Trustee, officer, employee or agent of the Trust and not in
his own individual capacity.
Provided they have acted under the belief that their actions are in the
best interest of the Trust, the Trustees and officers shall not be
responsible for or liable in any event for neglect or wrongdoing by them
or any officer, agent, employee, investment adviser or principal
underwriter of the Trust or of any entity providing administrative
services for the Trust, but nothing herein contained shall protect any
Trustee or officer against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Section 3. Express Exculpatory Clauses and Instruments. The
Trustees shall Use every reasonable means to assure that all persons
having dealings with the Trust shall be informed that the property of
the Shareholders and the Trustees, officers, employees and agents of the
Trust shall not be subject to claims against or obligations of the Trust
to any extent whatsoever. The Trustees shall cause to be inserted in
any written agreement, undertaking or obligation made or issued on
behalf of the Trust (including certificates for Shares of the Trust) an
appropriate reference to this Declaration, providing that neither the
Shareholders, the Trustees, the officers, the employees nor any agent of
the Trust shall be liable thereunder, and that the other parties to such
instrument shall look solely to the Trust property for the payment of
any claim thereunder or for the performance thereof; but the omission of
such provisions from any such instrument shall not render any
Shareholder, Trustee, officer, employee or agent liable, nor shall any
Trustee, or any officer, agent or employee of the Trust be liable to
anyone for such omission. If, notwithstanding this provision, any
Shareholder, Trustee, officer, employee or agent shall be held liable to any
other person by reason of the omission of such provision from any such
agreement, undertaking or obligation, the Shareholder, Trustee, officer,
employee or agent shall be entitled to indemnity and reimbursement out of the
Trust property, as provided in this Article XI.
Section 4. Mandatory Indemnification.
(a) Subject only to the provisions hereof , every person who is or has
been a Trustee, officer, employee or agent of the Trust and every person
who serves at the Trust's request as director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall be indemnified by the Trust to the fullest extent
permitted by law against all liabilities and against all expenses
reasonably incurred or paid by him in connection with any debt, claim,
action, demand, suit, proceeding, judgment, decree, liability or
obligation of any kind in which he becomes involved as a party or
otherwise or is threatened by virtue of his being or having been a
Trustee, officer, employee or agent of the Trust or of another
corporation, partnership, joint venture, trust or other enterprise at
the request of the Trust, and against amounts paid or incurred by him in
the compromise or settlement thereof.
(b) The words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal,
administrative, legislative, investigative or other, including appeals),
actual or threatened, and the words "liabilities" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
(c) No indemnification shall be provided hereunder against any
liabilities to the Trust or its Shareholders adjudicated to have been
incurred by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of a
person's office.
(d) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee, officer, employee or
agent may now or hereafter be entitled, shall continue as to a person
who has ceased to be such Trustee, officer, employee, or agent and shall
inure to the benefit of the heirs, executors and administrators of such
a person; provided, however, that no person may satisfy any right of
indemnity or reimbursement granted herein except out of the property of
the Trust, and no other person shall be personally liable to provide
indemnity or reimbursement hereunder (except an insurer or surety or
person otherwise bound by contract).
(e ) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 4 may be paid by the Trust
prior to final disposition thereof upon receipt of a written undertaking
by or on behalf of the Trustee, officer, employee or agent to reimburse
to the Trust if it is ultimately determined under this Section 4 that he
is not entitled to indemnification.
ARTICLE XII
MISCELLANEOUS
Section 1. Trust is not a Partnership. It is hereby expressly
declared that a trust and not a partnership is created hereby.
Section 2. Trustees' Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions
hereunder in good faith and with reasonable care under the circumstances
then prevailing, shall be binding upon everyone interested. Subject to
the provisions of Article XI, the Trustees shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and
operation of this Declaration of Trust, and subject to the provisions of
Article XI, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any surety
if a bond is required.
Section 3. Establishment of Record Dates. The Trustees may
close the Share transfer books of the Trust for a period not exceeding
sixty (60) days preceding the date of any meeting of Shareholders, or
the date for the payment of any dividend or the making of any
distribution to Shareholders, or the date for the allotment of rights,
or the date when any change or conversion or exchange of Shares shall go
into effect; or in lieu of closing the Share transfer books as
aforesaid, the Trustees may f ix in advance a date, not exceeding sixty
(60) days preceding the date of any meeting of Shareholders, or the date
for the payment of any dividend or the making of any distribution to
Shareholders, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect, or
the last day on which the consent or dissent of Shareholders may be
effectively expressed for any purpose, as a record date for the
determination of the Shareholders entitled to notice of, and, to vote
at, any such meeting and any adjournment thereof, or entitled to receive
payment of any such dividend or distribution, or to any such allotment
or rights, or to exercise the rights in respect of any such change,
conversion or exchange of shares, or to exercise the right to give such
consent or dissent, and in such case such Shareholder and only such
Shareholder as shall be Shareholders of record on the date so fixed
shall be entitled to such notice of, and to vote at, such meeting, or to
receive payment of such dividend or distribution, or to receive such
allotment or rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust
after any such date fixed as aforesaid.
Section 4. Termination of Trust.
(a) This Trust shall continue without limitation of time but subject
to the provisions of paragraphs (b) , (c) and (d) of this Section 4.
(b) The Trustees, with the approval of a Majority Shareholder Vote,
may by unanimous action, merge, consolidate, or sell and convey the
assets of the Trust including its good will to another trust or
corporation organized under the laws of any state of the United States,
which is a diversified or non-diversified open-end management investment
company as defined in the 1940 Act, for an adequate consideration which
may include the assumption of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust and which may include shares
of beneficial interest or stock of such trust or corporation. Upon making
provision for the payment of all such liabilities, by such assumption or
otherwise, the Trustees shall distribute the net proceeds of the transaction
ratably among the holders of the Shares of the Trust then outstanding.
(c) Subject to a Majority Shareholder Vote, the Trustees may at any
time sell and convert into money all the assets of the Trust. Upon
making provision for the payment of all outstanding obligations, taxes
and other liabilities, accrued or contingent, of the Trust, the Trustees
shall distribute the remaining assets of the Trust ratably among the
holders of the outstanding Shares.
(d) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in paragraphs (b) and (c), the Trust
shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and
interest of all parties shall be canceled and discharged.
Section 5. Offices of the Trust, Filing of Copies, References,
Headings. The Trust shall maintain, a usual place of business in
Massachusetts, which, initially, shall be one Post Office Square,
Boston, Massachusetts, and shall continue to maintain an office at such
address unless changed by the Trustees, or by their representative, to
another location in Massachusetts. The Trust may maintain other
offices as the Trustees may from time to time determine. The original
or a copy of this instrument and of each declaration of trust
supplemental hereto shall be kept at the office of the Trust where it
may be inspected by any Shareholder. A copy of this instrument and
of each supplemental declaration of trust shall be filed by the Trustees
with the Massachusetts Secretary of State, as well as any other governmental
office where such filing may from time to time be required. Anyone dealing
with the Trust may rely on a certificate by an officer of the Trust as to
whether or not any such supplemental declaration of trust has been made and as
to any matters in connection with the Trust hereunder, and with the same
effect as if it were the original, may rely on a copy certified by an office
of the Trust to be a copy of this instrument or of any such supplemental
declaration of trust. In this instrument or in any such supplemental
declaration of trust, references to this instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this
instrument as amended or affected by any such supplemental declaration of
trust. Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this instrument, rather than the headings,
shall control. This instrument may be executed in any number of counterparts
each of which shall be deemed an original.
Section 6. Applicable Law. The Trust set forth in this
instrument is created under and is to be governed by and construed and
administered according to the laws of the Commonwealth of Massachusetts.
The Trust shall be of the type commonly called a Massachusetts business
trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
Section 7. Amendments. Prior to the initial issuance of Shares pursuant
to the second sentence of Section 3 of Article III, a majority of the
Trustees then in office may amend or otherwise supplement this
instrument by making a Declaration of Trust supplemental hereto, which
thereafter shall form a part hereof. Subsequent to such initial
issuance of Shares, if authorized by a majority of the Trustees then in
office and by a Majority Shareholder Vote, or by any larger vote which
may be required by applicable law or this Declaration of Trust in any
particular case, the Trustees shall amend or otherwise supplement this
instrument, by making a declaration of trust supplemental hereto, which
thereafter shall form a part hereof. Any such supplemental
declaration of trust shall be signed by at least a majority of the
Trustees then in office. Copies of the supplemental declaration of
trust shall be filed as specified in Section 5 of this Article XII.
Section 8. Conflicts with Law or Regulations
(a) The provisions of this Declaration of Trust are severable, and if
the Trustees determine, with the advice of counsel, that any such
provision is in unresolvable conflict with the 1940 Act, with the
provisions of the Internal Revenue Code relating to the tax exemption or
other matters concerning regulated investment companies, or with other
applicable laws or regulations, the conflicting provision shall be
deemed never to have constituted a part of this Declaration of Trust;
provided, however, that such determination shall not affect any of the
remaining provisions hereof nor render invalid or improper any action
taken or omitted prior to such determination.
(b) If any provision of this Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not attach to such provision in any other
jurisdiction or any other provision hereof in any jurisdiction.
Section 9. Use of Name. The Trustees of the Trust acknowledge that,
in consideration of its assumption of certain expenses of formation of
the Trust, Madison Mosaic has reserved for itself the rights to the name
"Mosaic Focus Fund" (or any similar name), that the Trust's rights to use the
"Mosaic" portion of its name are non-exclusive, and that use by the Trust of
such name shall continue only with the continuing consent of Madison Mosaic,
LLC and Madison Investment Advisors, Inc., which consent may be withdrawn at
any time, effective immediately or at a specified time, upon written notice
thereof to the Trust.
Section 10. Resident Agent. The resident agent of the Trust is David Leahy,
Esq., Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts
02109.
Section 11. Name and Address of Trustees. The names and addresses of the
Trust's initial Trustees are as follows:
Frank E. Burgess Lorence D. Wheeler
6411 Mineral Point Road 4905 W. 60th Avenue
Madison, Wisconsin 53705 Arvada, Colorado 80003
Thomas S. Kleppe James R. Imhoff, Jr.
7100 Darby Road 429 Gammon Place
Bethesda, Maryland 20817 Madison, Wisconsin 53719
Section 12. Principal Place of Business of Trust. The Trust's principal
place of business shall be 1655 Ft. Myer Drive, Suite 1000, Arlington,
Virginia 22209.
IN WITNESS WHEREOF, the undersigned have executed this instrument effective on
this date first written above.
(signature) (signature)
______________________________ ____________________________
Frank Burgess James Imhoff
(signature) (signature)
______________________________ ____________________________
Thomas Kleppe Lorence Wheeler
MOSAIC FOCUS FUND TRUST
BY-LAWS
ARTICLE I
SHAREHOLDER MEETINGS
Section 1. Annual Meetings. The Trustees shall call an annual
meeting of the Shareholders of the Trust at least once, after the initial
public offering of the Trust's shares of beneficial interest, to elect the
Trustees to serve until the next annual meeting of
Shareholders, if any, and to transact such other business as
may be brought before the meeting. Thereafter, the Trustees shall
review at least annually after the close of each fiscal year whether
there is sufficient business to be brought before an annual meeting of
Shareholders, in their judgment, to justify an annual meeting for that
year. In the event the Trustees determine to hold such a meeting,
they shall by resolution call an annual meeting for the fiscal year then
ended.
Section 2. Special Meetings. A special meeting of the Shareholders
shall be called by the Secretary whenever ordered by the Trustees, the
Chairman, the President, or requested in writing by the holders of
at least one-tenth of the outstanding shares entitled to vote. If the
Secretary, when so ordered or requested, refuses or neglects for more
than two days to call such special meeting, the Trustees, Chairman,
President or the Shareholders so requesting may, in the name of the
Secretary, call the meeting by giving notice thereof in the manner
required when notice is given by the Secretary.
Section 3. Notices. Except as above provided, notices of all
meetings of the Shareholders shall be given by the Secretary by
delivering or mailing, postage prepaid, to each Shareholder entitled to
vote at said meeting, a written or printed notification of such meeting,
at least fifteen days before the meeting, to such address as may be
registered with the Trust by the Shareholder. No notice need be
given to a Shareholder who has failed to inform the Trust of his current
address or if a written waiver of notice is executed before or after the
meeting by the Shareholder or his authorized representative and filed
with the records of the meeting. Any adjourned meeting may be held
as adjourned without further notice.
Section 4. Place of Meeting. Meetings of the Shareholders of the
Trust shall be held in Arlington, Virginia, at the principal offices of
the Trust, or another place designated by the Trustees, or at such place
within or without the Commonwealth of Massachusetts as may be fixed
from time to time by resolution of the Trustees.
Section 5. Chairman. The Chairman, if any, shall act as chairman
at all meetings of the Shareholders; in his absence, the President
shall act as chairman; and in the absence of the Chairman and
the President, the Trustee or Trustees present at each meeting may elect
a temporary chairman for the meeting, who may be one of themselves.
Section 6. Proxies; Voting. Shareholders may vote either in person or
by duly executed proxy. No proxy shall be valid after eleven (11)
months from the date of its execution, unless a longer period is
expressly stated in such proxy. Any proxy shall be deemed valid unless
challenged before its exercise and proven otherwise. Any share held
jointly may be voted by any joint owner, but may not be voted at all if
the joint owners notify the meeting that they disagree as to how the
vote shall be cast.
Section 7. Closing of Transfer Books and Fixing Record Dates. For
the purpose of determining the Shareholders who are entitled to notice
of or to vote or act at any meeting, including any adjournment thereof,
or who are entitled to participate in any dividends, or for any other
proper purpose, the Trustees may from time to time close the transfer
books or fix a record date. If the Trustees do not prior to any
meeting of Shareholders so fix a record date or close the transfer
books, then the date of mailing notice of the meeting or the date upon
which the dividend resolution is adopted, as the case may be, shall be
the record date. No record date for a meeting of Shareholders shall be
more than sixty (60) days preceding the date of the meeting.
Section 8. Inspectors of Election. In advance of any meeting
of Shareholders, the Trustees may appoint Inspectors of Election to act
at the meeting or any adjournment thereof. If Inspectors of Election
are not so appointed, the chairman, if any, of any meeting of
shareholders may, and on the request of any Shareholder or his proxy
shall, appoint Inspectors of Election of the meeting. The number of
Inspectors shall be either one or three. If appointed at the meeting on
the request of one or more Shareholders or proxies, a majority of shares
present (in person or by proxy) shall determine whether one or three
Inspectors are to be appointed, but failure to allow such determination
by the Shareholders shall not affect the validity of the appointment of
Inspectors of Election. In case any person appointed as Inspector
fails to appear or fails or refuses to act, the vacancy may be filled by
appointment made by the Trustees in advance of the convening of the
meeting or at the meeting by the person acting as chairman. The
Inspectors of Election shall determine the number of shares outstanding,
the shares represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, shall receive votes,
ballots or consents, shall hear and determine all challenges and
questions in any way arising in connection with the right to vote, shall
count and tabulate all votes or consents, determine the results, and do
such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. If there are three Inspectors of
Election, the decision, act or certificate of a majority is effective in
all respects as the decision, act or certificate of all. on request of
the chairman, if any, of the meeting, or of any Shareholder or of his
proxy, the Inspectors of Election shall make a report in writing of any
challenge or question or matter determined by them and shall execute a
certificate of any facts found by them.
Section 9. Action by Consent. Any action required or permitted to be
taken at any meeting of Shareholders may be taken without a meeting, if
a consent in writing, setting forth such action, is signed by all the
Shareholders entitled to vote on the subject matter thereof, and such
consent is filed with the records of the Trust.
ARTICLE II
TRUSTEES
Section 1. The Trustees. The Trust shall have four (4) Trustees, unless
such number be changed by amendment of the By-Laws or by resolution of
the Trustees. The Trustees shall be responsible for the management of
the Trust; they may retain such authority to direct the business affairs
of the Trust as they deem advisable, but they may delegate any of the
various functions involved in the management of the Trust to its
officers and/or agents as they deem fit. The term of office of each
Trustee shall expire upon the election of a successor Trustee at any
annual meeting of Shareholders of the Trust subsequent to the
commencement of the Trustee's term of office. All persons to serve as
Trustees of the Trust shall be elected at each annual meeting of
Shareholders held by the Trust.
Section 2. Meetings of Trustees. The Trustees shall hold at least
one meeting annually or the transaction of such business as may come
before the meeting. Regular meetings of the Trustees may be held without
call or notice at such place or places and times as the Trustees may
provide from time to time by resolution.
Section 3. Special Meetings. Special meetings of the Trustees
shall be held upon the call of the Chairman, if any, the President, the
Secretary or any two Trustees, at such time, on such day, and at such
place, as shall be designated in the notice of the meeting.
Section 4. Notice. Notice of a meeting shall be given by mail or by
telegram (which Term shall include a cablegram or mailgram) or delivered
personally. If notice is given by mail, it shall be mailed not later
than 48 hours preceding the meeting and if given by telegram or
personally, such telegram shall be sent or delivery made not later than
48 hours preceding the meeting. Notice by telephone shall constitute
personal delivery for these purposes. Notice of a meeting of Trustees
may be waived before or after any meeting by signed written waiver.
Neither the business to be transacted at, nor the purpose of, any
meeting of the Trustees need be stated in the notice or waiver of notice
of such meeting, and no notice need be given of action proposed to be
taken by unanimous written consent. The attendance of a Trustee
at a meeting shall constitute a waiver of notice of such meeting except
where a Trustee attends a meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
Section 5. Chairman; Records. The Chairman, if any, shall act as
chairman at all meetings of the Trustees; in his absence the President
(if a Trustee) shall act as chairman; and, in the absence of the
Chairman and the President, the Trustees present shall elect one of
their number to act as temporary chairman. The results of all actions
taken at a meeting of the Trustees, or by unanimous written consent
of the Trustees, shall be recorded by the Secretary, or by an Assistant
Secretary in the absence of the Secretary or at his direction.
Section 6. Quorum and Vote. A majority of the Trustees shall
constitute a quorum for the transaction of business. The act of a
majority of the Trustees present at any meeting at which a quorum is
present shall be the act of the Trustees unless a greater proportion is
required by the Declaration of Trust or these By-Laws or applicable law.
In the absence of a quorum, a majority of the Trustees present may
adjourn the meeting from time to time until a quorum shall be present.
Notice of any adjourned meeting need not be given.
Section 7. Place of Meeting. Meetings of the Trustees shall be held at
the principal place of business of the Trust in Arlington, Virginia, or
at such place within or without the Commonwealth of Massachusetts
as fixed from time to time by resolution of the Trustees, or as the
person or persons requesting said meeting to be called may designate, or
as designated in the notice of the meeting, but any meeting may
adjourn to any other place.
Section 8. Telephonic Meetings. Subject to compliance with
Sections 15 and 32 of the Investment Company Act of 1940, if it is
impractical for the Trustees to meet in person, the Trustees may meet by
means of a telephone conference circuit to which all Trustees who
constitute the meeting are connected, which meeting shall be deemed a
valid meeting of the Trustees to the same degree as if it were held in
person. Such a telephonic meeting shall be deemed to have been held at
a place designated by the Trustees at the meeting, or if there be no
such designation, at the principal place of business of the Trust
in Arlington, Virginia. To the extent permitted by the Investment
Company Act, the Trustees may meet by any other electronic means
practical and one or more Trustees may participate in a meeting
electronically while others participate in person.
Section 9. Special Action. When all the Trustees shall be present at
any meeting, however called, or whenever held, or shall assent to the
holding of the meeting without notice, or after the meeting shall sign
a written assent thereto on the record of such meeting, the acts of such
meeting shall be valid as if such meeting had been regularly held. When
by a motion duly made, seconded and adopted the Trustees approve the
minutes of a prior Trustees' meeting, the acts of such meeting as
recorded in the minutes shall be deemed valid whether or not the meeting
was regularly held.
Section 10. Action by Consent. Any action by the Trustees may be
taken without a meeting in which a written consent thereto is signed by
all the Trustees and filed with the records of the Trustees' meetings.
Such consent shall be treated as a vote of the Trustees for all
purposes.
Section 11. Compensation of Trustees. The Trustees may receive a
stated salary for their services as Trustees, and by resolution of
Trustees a fixed fee and expense of attendance may also be allowed for
attendance at each meeting. Nothing herein contained shall be construed
to preclude any Trustee from serving the Trust in any other capacity, as
an officer, agent or otherwise, and receiving compensation therefor.
ARTICLE III
OFFICERS
Section 1. Officers of the Trust. The officers of the Trust shall
consist of a President, a Secretary, a Treasurer and such other officers
or assistant officers, including Vice-Presidents or a Chairman, as may
be elected by the Trustees. Any two or more of the offices may be held
by the same person, except that the same person may not be both
President and Secretary. The Trustees may designate any Vice-President
as an Executive Vice-President, or as a Senior Vice Presidents, and may
designate the order in which the Vice-Presidents may act. The Chairman,
or if none, the President or at least one Vice President shall be a
Trustee, but no other officer of the Trust need be a Trustee.
Section 2. Election and Tenure. At the initial organization meeting
and thereafter when they deem appropriate, the Trustees shall elect the
Chairman, if any, President, Secretary, Treasurer and such other
officers as the Trustees shall deem necessary or appropriate in order to
carry out the business of the Trust. Such officers shall hold office
until their successors have been duly elected and qualified. The
Trustees may fill any vacancy in office or add any additional officers
at any time.
Section 3. Removal of officers. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees.
This provision shall not prevent the making of a contract of employment
for a definite term with any officer and shall have no effect upon any
cause of action which any officer may have as a result of removal in
breach of a contract of employment. Any officer may resign at any time
by notice in writing signed by such officer and delivered or mailed to
the Chairman, if any, President, or Secretary, and such resignation
shall take effect immediately upon receipt by the Chairman, if any,
President, or Secretary, or at a later date according to the terms of
such notice in writing.
Section 4. Bonds and Surety. Any officer may be required by the
Trustees to be bonded for the faithful performance of his duties in such
amount and with such sureties as the Trustees may determine.
Section 5. Chairman, President, and Vice-Presidents. The Chairman,
if any, if present, preside at all meetings of the Shareholders and of
the Trustees and shall exercise and perform such other powers and duties
as may be from time to time assigned to him by the Trustees. Subject to
such supervisory powers, as may be given by the Trustees to the
Chairman, if any, the President shall be the chief executive officer of
the Trust, unless the Trustees have by resolution designated the
Chairman as chief executive officer, and, subject to the control of the
Trustees, the President shall have general supervision, direction and
control of the business of the Trust and of its employees and shall
exercise such general powers of management as are usually vested in the
office of President of a corporation. In the absence of the Chairman,
if any, the President shall preside at all meetings of the Shareholders
and, if he is a Trustee, of the Trustees. Subject to the direction of
the Trustees, the Chairman, if any, and the President shall each have
power in the name and on behalf of the Trust to execute any and all loan
documents, contracts, agreements, deeds, mortgages, and other
instruments in writing, and to employ and discharge employees and agents
of the Trust. Unless otherwise directed by the Trustees, the Chairman,
if any, and the President shall each have full authority and power, on
behalf of all of the Trustees, to attend and to act and to vote, on
behalf of the Trust at any meetings of business organizations in which
the Trust holds an interest, or to confer such powers upon any other
persons, by executing any proxies duly authorizing such persons. The
Chairman, if any, and the President shall have such further authorities
and duties as the Trustees shall from time to time determine.
In the absence or disability of the President, the Vice-Presidents in
order of their rank as provided in these By-Laws or as fixed by the
Trustees, or otherwise the Vice-President designated by the Trustees,
shall perform all of the duties of the President, and when so acting
shall have all the powers of and be subject to all of the restrictions
upon the President. Subject to the direction of the Trustees, of the
Chairman, if any, and of the President, each Vice-President shall have
the power in the name and on behalf of the Trust to execute any and all
loan documents, contracts, agreements, deeds, mortgages and other
instruments in writing, and, in addition, shall have such other duties
and powers as shall he designated from time to time by the Trustees or
by the Chairman, if any, or by the President. Officers of the Trust
shall have rank or precedence in the following declining order: the
Chairman, the President, Executive Vice Presidents, Senior Vice
Presidents, Vice Presidents, Secretary, Treasurer and Assistant Vice
Presidents; unless otherwise directed by the Trustees, or by a higher
ranking officer, officers of the same rank shall have precedence in
order of their seniority with the Trust or with any of its affiliates.
Section 6. Secretary. The Secretary shall keep the minutes of all
meetings of, and record all votes of, Shareholders, Trustees and the
Executive Committee, if any. He shall be custodian of the seal of the
Trust, if any, and he (and any other person so authorized by the
Trustees) shall affix the seal or, if permitted, a facsimile thereof, to
any instrument executed by the Trust and shall attest the seal and the
signature or signatures of the officer or officers executing such
instrument on behalf of the Trust. The Secretary shall have such other
authorities and duties as the Trustees may from time to time determine.
Any Assistant Secretary shall have full authority to perform the
functions of the Secretary in his absence or as he may direct.
Section 7. Treasurer. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, funds,
securities, notes receivable and other valuable assets of the
Trust, and shall have and exercise under supervision of the Trustees and
of the President all powers and duties normally incident to his office.
He may endorse for deposit or collection all notes, checks and other
instruments payable to the Trust or to its order. He shall deposit all
funds of the Trust in such depositories as the Trustees shall designate.
He shall be responsible for such disbursement of the funds of the Trust
as may be ordered by the Trustees or the President. He shall keep
accurate account of the books of the Trust's transactions which shall be
tile property of the Trust, and which, together with all other property
of the Trust in his possession, shall be subject at all times to the
inspection and control of the Trustees. Unless the Trustees shall
otherwise determine, the Treasurer shall be the principal accounting
officer of the Trust and shall also be the principal financial officer
of the Trust. He shall have such other duties and authorities as the
Trustees shall from time to time determine.
Section 8. Minor Positions. Unless otherwise provided by the
Trustees, the President shall have authority to designate persons as
Assistant Treasurers and as Account Officers of the Trust; these
persons, despite their titles, shall not be deemed officers of the
Trust. Such persons shall be authorized to represent the Trust to
members of the public in connection with the sale of its securities, and
subject to the direction of the Trustees and officers of the Trust; but
neither they nor any Assistant Secretary shall have any other authority,
except as otherwise directed or provided herein, over the affairs of the
Trust or any of its officers and employees.
Section 9. Other Officers and Duties. The Trustees may elect such
other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business
of the Trust. Assistant officers, except as otherwise provided herein
or by the Trustees, shall act generally in the absence of the officer
whom they assist and shall assist that officer in the duties of his
office. Each officer, employee and agent of the Trust shall have such
other duties and authority as may be conferred upon him by the Trustees
or delegated to him by the President.
Section 10. Salaries. The salaries of the officers shall be fixed from
time to time by the Trustees. No officer shall be prevented from receiving
such salary by reason of the fact that he is also a Trustee.
ARTICLE IV
POWERS AND DUTIES OF THE
EXECUTIVE AND OTHER COMMITTEES
Section 1. Executive, Nominating and Other Committees. The Trustees
may elect from their own number an Executive Committee to consist of not
less than three members, which number shall include either the Chairman
or, if a Trustee, the President. The Executive Committee shall be
elected by a resolution passed by a vote of at least a majority of the
Trustees then in office. Each of the Trustees who is not an "interested
person" as that term is defined in the Investment Company Act of 1940
shall be a member of the Nominating Committee of the Trust. The
selection and nomination of those future Trustees who are not
"interested persons" shall be committed to the discretion of the
Nominating Committee. The Trustees may also elect from their own number
other committees from time to time, the number composing such committees
and the powers conferred upon the same to be determined by vote of
the Trustees.
Section 2. Vacancies in Executive Committee. Vacancies occurring in the
Executive Committee shall be filled by the Trustees by a resolution
passed by the vote of at least a majority of the Trustee then in office.
Section 3. Executive Committee to Report to Trustees. All action by the
Executive Committee shall be reported to the Trustees at their meeting
next succeeding such action.
Section 4. Procedure of Executive Committee. The Executive Committee
shall fix its own rules of procedure not inconsistent with these By-Laws
or with any directions of the Trustees. It shall meet at such times and
places and upon such notice as shall be provided by such rules or by
resolution of the Trustees. The presence of a majority shall constitute
a quorum for the transaction of business, and in every case an
affirmative vote of a majority of all the members of the Committee
present shall be necessary for the taking of any action.
Section 5. Powers of Executive Committee. During the intervals between
the meetings of the Trustees, the Executive Committee, except as limited
by the By-Laws of the Trust or by specific directions of the Trustees,
shall possess and may exercise all the powers of the Trustees in the
management and direction of the business and conduct of the affairs of
the Trust in such manner as the Executive Committee shall deem for the
best interests of the Trust, and shall have power to authorize the seal
of the Trust to be affixed to all instruments and documents requiring
the same. Notwithstanding the foregoing, the Executive Committee shall
not have the power to elect Trustees, increase or decrease the number of
Trustees, elect or remove any officer, declare dividends, issue shares,
take action required by law to be taken at a meeting of all of the
Trustees, or to recommend to Shareholders any action requiring
Shareholder approval.
Section 6. Compensation. The members of any duly appointed committee
of the Trustees shall receive such additional compensation and/or fees,
if any, as from time to time may be fixed by the Trustees.
Section 7. Informal Action by Executive Committee or Other Committee.
Any action required or permitted to be taken at any meeting of the
Executive Committee or any other duly appointed committee may be taken
without a meeting if a consent in writing setting forth such action is
signed by all members of such committee and such consent is filed with
the records of the Trust.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 1. Beneficial Interest. The beneficial interest in the Trust
shall at all times be divided into an unlimited number of shares without
par value. The shares of beneficial interest shall have one vote per
share at any meeting of the Shareholders and a fractional vote for each
fraction of a share. The net asset value of each share shall be
determined according to regular procedures adopted by the Trustees.
Section 2. Series and Classes of Shares. The Trust shall have at
least one series of its shares of beneficial interest of a single class,
which, unless provided otherwise by the Trustees, shall be called the
Original Series of shares. By resolution the Trustees may create any
number of additional series of shares, which, unless provided otherwise
by the Trustees, shall all be of the same class, each having the same
rights as any other share within the same series. By resolution the
Trustees may create any number of separate classes of shares within any
series, each having such rights and privileges with respect to that
series as the Trustees provide. By resolution the Trustees may
designate the name of any series or class of the Trust's shares.
Each series of shares shall represent the beneficial interest in a
separate, independently managed portfolios of securities, within which
all proceeds of the sale of the series of shares shall be managed.
Section 3. Book Entry Shares. No certificates will be issued to
represent shares in the Trust. The Trust shall maintain adequate
records to determine the holdings of each Shareholder of record, and
such records shall be deemed the equivalent of a certificate
representing the shares for all purposes.
Section 4. Certificates. In the event the Trustees subsequently
authorize the issuance of share certificates, then all such certificates
for shares shall be signed by the Chairman, President or any Vice-
President and by the Treasurer or Secretary or any Assistant Secretary
and sealed with the seal of the Trust. The signatures may be either
manual or facsimile signatures and the seal may be either facsimile or
any other form of seal. Certificates for shares for which the Trust has
appointed an independent transfer agent and registrar shall not be valid
unless countersigned by such transfer agent and registered by such
registrar. In case any officer who has signed any certificate ceases to
be an officer of the Trust before the certificate is issued, the
certificate may nevertheless be issued by the Trust with the same effect
as if the officer had not ceased to be such officer as of the date of
its issuance. Share certificates shall be in such form not inconsistent
with law or the Declaration of Trust or these By-Laws as may be
determined by the Trustees.
Section 5. Transfer of Shares. The shares of the Trust shall be
transferable, so as to affect the rights of the Trust, only by transfer
recorded on the books of the Trust, in person or by attorney.
Section 6. Equitable Interest not Recognized. The Trust shall be
entitled to treat the holder of record of any share or shares as the
absolute owner thereof and shall not be bound to recognize any equitable
or other claim or interest in such share or shares on the part of any
other person except as may be otherwise expressly provided by law.
Section 7. Lost, Destroyed or Mutilated Certificates. In case any
certificate for shares is lost, mutilate or destroyed, the Trustees may
issue a new certificate in place thereof upon indemnity to the Trust
against loss and upon such other terms and conditions as the Trustees
may deem advisable.
Section 8. Transfer Agent and Registrar; Regulations. The Trustees
shall have power and authority to make all such rules and regulations as
they may deem expedient concerning the issuance, transfer and
registration of certificates for shares and may appoint a transfer agent
and/or registrar of certificates for shares, and may require all such
share certificates to bear the signature of such transfer agent and/or
of such registrar.
ARTICLE VI
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be
open to the inspection of the Shareholders; and no Shareholder shall
have any right of inspecting an account or book or document of the
Trust, except as conferred by laws or authorized by the Trustees or
by resolution of the Shareholders.
ARTICLE VII
AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
Section 1. Agreement, Etc. The Trustees or the Executive Committee
may authorize any officer or officers, or agent or agents of the Trust
to enter into any agreement or execute and deliver any instrument in the
name of and on behalf of the Trust, and such authority may he general or
confined to specific instances; and, unless so authorized by the
Trustees or by the Executive Committee or by these By-Laws, no officer,
agent or employees shall have any power or authority to bind the Trust
by any agreement or engagement or to pledge its credit or to render it
liable pecuniarily for any purpose or to any amount.
Section 2. Checks, Drafts, Etc. All checks, drafts, or orders
for the payment of money, notes and other evidences of indebtedness
shall be signed by such officer or officers, employee or employees, or
agent or agents, as shall from time to time be designated by the
Trustees or the Executive Committee, or as may be specified in or
pursuant to the agreement between the Trust and any bank or trust
company appointed as custodian or depository pursuant to the provisions
of the Declaration of Trust.
Section 3. Endorsements, Assignments and Transfer of Securities.
All endorsements, assignments and instruments of transfer of securities
standing in the name of the Trust or its nominee or directions for
the transfer of securities belonging to the Trust shall be made by such
officer or officers, employee or employees, or agent or agents as may be
authorized by the Trustees or the Executive Committee.
Section 4. Evidence of Authority. Anyone dealing with the Trust shall
be fully justified in relying on a copy of a resolution of the Trustees
or of any committee thereof empowered to act in the circumstances,
which is certified as true by the Secretary or an Assistant Secretary
under the seal of the Trust.
ARTICLE XVIII
SEAL
The seal of the Trust shall be circular in form, bearing the
inscription: Mosaic Focus Fund - 1998 - Massachusetts
ARTICLE IX
FISCAL YEAR
The fiscal year of the Trust shall be the period of twelve calendar
months ending with the last day of a calendar quarter which is
designated as the end of the fiscal year by resolution of the Trustees.
ARTICLE X
AMENDMENTS
These By-Laws may be amended by a majority vote of all of the Trustees.
ARTICLE XI
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given under the
provisions of any statute of the Commonwealth of Massachusetts, or under
the provisions of the Declaration of Trust or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to said
notice whether before or after the time stated therein, shall be deemed
equivalent thereto. Notice shall be deemed to have been given if
telegraphed, cabled, or sent by wireless or mailgram when it has been
delivered to a representative of any telegraph, cable, wireless or
electronic mail company with' instructions that it be telegraphed,
cabled or sent by wireless or mailgram. Any notice shall be deemed to
be given if mailed at the time when the same shall be deposited in the
mail.
ARTICLE XII
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including
financial statements which shall at least annually be certified by
independent certified public accountants selected pursuant to Section 32
of the Investment Company Act of 1940.
ARTICLE XIV
BOOKS AND RECORDS
The books and records of the Trust, including the share transfer ledger
or ledgers, may be kept in or outside the Commonwealth of Massachusetts
at such office or agency of the Trust as may be from time to time
determined by the Trustees.
INVESTMENT ADVISORY AGREEMENT
This Agreement is made by and between Bankers Finance Advisors, LLC
(also known as MADISON MOSAIC), a Wisconsin limited liability company
which is a wholly owned subsidiary of Madison Investment Advisors, Inc.,
having its principal place of business in Arlington, Virginia (the
foregoing entities referred to collectively as the "Advisor"), and
MOSAIC FOCUS FUND TRUST, a Massachusetts business trust created pursuant
to a Declaration of Trust filed with the Commonwealth of Massachusetts
(the "Trust").
The parties hereto, intending so to be legally bound, agree with each
other as follows:
1. Appointment and Acceptance. The Trust hereby appoints the Advisor
to manage the investment of its assets and to administer its affairs;
and the Advisor hereby accepts such appointment. The Advisor shall
employ its best efforts to supervise the investment management of the
Trust.
2. Discretion of the Advisor. In the performance of its duties
hereunder the Advisor shall have full authority to act as it deems
advisable, except that it shall be bound by the terms of the Declaration
of Trust and By-Laws of the Trust, and by any written direction given by
the Trustees of the Trust not inconsistent with this Agreement; and it
shall be guided by the investment policies of the Trust from time to
time duly in effect. Subject only to the foregoing, the Advisor shall
have full authority to purchase and sell securities for the Trust; the
Advisor may determine the persons with whom such securities transactions
are to be made and the terms thereof.
3. Other Activities of the Advisor. The Advisor and any of its
affiliates shall be free to engage in any other lawful activity,
including the rendering to others of services similar to those rendered
to the Trust hereunder; and the Advisor or any interested person thereof
shall be free to invest in the Trust as a shareholder, to become an
officer or Trustee of the Trust if properly elected, or to enter into
any other relationship with the Trust approved by the Trustees and in
accordance with law.
The Advisor agrees that it will not deal with itself or with any
affiliated person or promoter or principal underwriter of the Trust (or
any affiliated person of the foregoing) acting as a principal, in
effecting securities transactions for the account of the Trust. It is
further agreed that in effecting any such transaction with such a person
acting as a broker or agent, compensation to such person shall be
permitted, provided that the transaction is in the ordinary course of
such person's business and the amount of such compensation does not
exceed one percent of the purchase or sale price of the securities
involved.
If the Advisor or any affiliate thereof provides any other goods or
services which otherwise would be paid for by the Trust pursuant to this
Agreement, then the Trust shall pay the Advisor or such affiliate the
cost reasonably allocated by the Advisor or affiliate to such goods or
services.
4. Investment by Advisor. The Advisor shall not take, and shall not
permit any of its shareholders, officers, directors or employees to take
long or short positions in the shares of the Trust, except for the
purchase of shares of the Trust for investment purposes at the same
price as that available to the public at the time of purchase, or in
connection with the original capitalization of the Trust. In connection
with purchases or sales of portfolio securities for the account of the
Trust neither the Advisor nor any officer, director or employee of the
Advisor shall act as a principal or receive any commission therefor.
5. Expenses of the Trust. The Trust shall pay all of its expenses not
expressly assumed by the Advisor herein. Without limitation, the
expenses of the Trust, assumed by the Trust hereby, shall include the
following:
a. Expenses related to the continued existence of the Trust.
b. Fees and expenses of the Trustees (except those affiliated
with the Advisor), the officers and the administrative employees of the
Trust.
c. Fees paid to the Advisor hereunder.
d. Fees and expenses of preparing, printing and distributing
official filings, reports, prospectuses and documents required pursuant
to applicable state and Federal securities law and expenses of reports
to shareholders.
e. Fees and expenses of custodians, transfer agents, dividend
disbursing agents, shareholder servicing agents, registrars, and similar
agents.
f. Expenses related to the issuance, registration, repurchase,
exchange and redemption of shares and certificates representing shares.
g. Auditing, accounting, legal, insurance, portfolio
administration, association membership, printing, postage, and other
administrative expenses.
h. Expenses relating to qualification or licensing of the Trust,
shares in the Trust, or officers, employees and agents of the Trust
under applicable state and Federal securities law.
i. Expenses related to shareholder meetings and proxy
solicitations and materials.
j. Interest expense, taxes and franchise fees, and all brokerage
commissions and other costs related to purchase and sales of portfolio
securities.
In addition, the Trust shall assume all losses and liabilities
incurred in the administration to the Trust and of its investment
portfolio; and it shall pay such non-recurring expenses as may arise
through litigation, administrative proceedings, claims against the
Trust, the indemnification of Trustees, officers, employees,
shareholders and agents, or otherwise.
6. Compensation to the Advisor. For its services hereunder, the
Trust shall pay to the Adviser a management fee equal to three-quarters
(3/4) percent per annum of the average daily net assets of each
investment portfolio. Such fee shall be payable quarterly as of the
last day of the month and shall be the sum of the daily fees calculated
as one-three hundred sixty-fifth (1/365), except in leap years one-three
hundred sixty-sixth (1/366), of the annual fee based upon each
portfolio's net assets calculated for the day.
With respect to any portfolio of the Trust subsequently authorized
by the Trustees, the management fee provided herein may be revised
upward or downward by mutual agreement between the parties at the time
the additional portfolio is authorized, provided such revision is
approved by the Trustees, including the vote of a majority of those
Trustees who are not interested persons of the Trust, cast in person at
a meeting called for that purpose. The Advisor shall have the right to
waive any portion of its management fee during any period, and it may
permanently reduce the amount of the fee under such terms as it may
determine by written notice thereof to the Trust. The Advisor shall
have the right to share its management fee with others or make payments
out of its management fee to others, as it solely determines.
7. Limitation of Expenses of the Trust. In addition to
investment management expenses related to the Trust, the Advisor shall
pay the fees and expenses of any Trustees and officers of the Trust
affiliated with the Advisor, all promotional expenses of the Trust to
the extent not paid for by the Trust pursuant to a Plan of Distribution,
the rent expense of the Trust's principal executive office premises, and
the expenses of formation of the Trust.
The Advisor shall further reimburse the Trust for all of its
expenses, excluding securities transaction commissions and expenses,
taxes, interest, share distribution expenses, and extra-ordinary and
non-recurring expenses, which exceed during any fiscal year the
applicable expense limitation in any State or other jurisdiction in
which the Trust, during the fiscal year, becomes subject to regulation
by qualification or sale of its shares. Any such required reimbursement
shall be made within a reasonable period following the close of the
fiscal year to which it relates; and the Advisor may elect to pay all or
a portion of any such reimbursement it anticipates will be required at
any time or from time to time during the fiscal year to which the
reimbursement relates.
8. Limitation of Advisor's Liability. The Advisor shall not be
liable for any loss incurred in connection with its duties hereunder,
nor for any action taken, suffered or omitted and believed by it to be
advisable or within the scope of its authority or discretion, except for
acts or omissions involving willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties assumed by it under this
Agreement.
9. Limitation of Trust's Liability. The Advisor acknowledges
that it has received notice of and accepts the limitations upon the
Trust's liability set forth in its Declaration of Trust. The Advisor
agrees that the Trust's obligations hereunder in any case shall be
limited to the Trust and to its assets and that the Advisor shall not
seek satisfaction of any such obligation from the shareholders of the
Trust nor from any Trustee, officer, employee or agent of the Trust.
10. Term of Agreement. This Agreement shall continue in effect
for two years from the date of its execution; and it shall continue in
force thereafter (but subject to the termination provisions below),
provided that it is specifically approved at least annually by the
Trustees of the Trust or by a majority vote of the outstanding
securities of each series and class of the Trust's shares with respect
to which it is to continue in effect, and in either case by the vote of
a majority of the Trustees who are not interested persons of the Trust,
cast in person at a meeting called for that purpose.
11. Termination by Notice. Notwithstanding any provision of this
Agreement, it may be terminated at any time, without penalty, by the
Trustees of the Trust or, with respect to any series or class of the
Trust's shares, by the vote of a majority of the outstanding voting
securities of such series or class, or by the Advisor, upon sixty days
written notice to the other party.
12. Termination Upon Assignment. This Agreement may not be
assigned by the Adviser and shall automatically terminate immediately
upon any assignment. Nothing herein shall prevent the Advisor from
employing any other persons or agents, including Madison Investment
Advisors, Inc., at its own expense, to assist it in the performance of
its duties hereunder.
13. Name of the Trust. In consideration of its formation of the
Trust and the related expenses, the Advisor has retained the rights to
the name "Mosaic Focus Fund" (and any similar name), which rights the
Trust hereby acknowledges. The Trust, however, shall have the exclusive
right to the use of the name "Mosaic Focus Fund" (although its rights to
the "Mosaic" portion of such name shall be non-exclusive) so long as
this contract shall remain in force, except that the Advisor may
withdraw such rights from the Trust at any time, effective immediately
or at a time specified, upon written notice to the Trust. In the event
of such notice, the Trust agrees that it will cause the question of
continuation of this Agreement to be put to a vote of the shareholders
of the Trust as soon as practicable after such notice has been given.
14. Use of Terms. The terms "affiliated person", "interested
person", "assignment", "broker", and "majority of the outstanding voting
securities" as used herein, shall have the same meanings as in the
Investment Company Act of 1940 and any applicable regulations
thereunder.
15. Control of Advisor. Madison Mosaic is controlled by Madison
Investment Advisors, Inc. a registered investment advisor located in
Madison, Wisconsin. As such, it is expected that Madison Mosaic and
Madison Investment Advisors, Inc. will work closely together in the
management of the portfolios including but not limited to portfolio
management, research, securities trading, and other investment
management responsibilities.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed on their behalf by their respective officers duly authorized and
their respective seals to be affixed hereto, this 21 day of April,
1998.
MADISON MOSAIC
By: (signature)
Frank E. Burgess
Madison Investment Advisors, Inc., Member
MOSAIC FOCUS FUND TRUST
Frank E. Burgess
By (signature)
Trustee
Lorence Wheeler
By (signature)
Trustee
Thomas Kleppe
By (signature)
Trustee
James Imhoff
By (signature)
Trustee
Revised custody agreement for Mosaic Funds dated April, 1998
Agreement made as of the 14 day of April, 1998 between Mosaic Equity
Trust, Mosaic Income Trust, Mosaic Government Money Market Trust, Mosaic
Focus Fund Trust and Mosaic Tax-Free Trust (the "Trusts"), business
trusts organized under the laws of Massachusetts and having their office
at 1655 Fort Myer Drive, Arlington, Virginia 22209, acting for and on
behalf of all mutual fund portfolios as are currently authorized and
issued by the Trusts or may be authorized and issued by any of the
Trusts subsequent to the date of this Agreement (the "Funds"), which are
operated and maintained by their respective Trusts for the benefit of
the holders of shares of the Funds, and Star Bank, N.A. (the
"Custodian"), a national banking association having its principal office
and place of business at Star Bank Center, 425 Walnut Street,
Cincinnati, Ohio 45202, which Agreement provides for the furnishing of
custodian services to the Funds.
W I T N E S S E T H : that for and in consideration of the mutual
promises hereinafter set forth the Trusts, on behalf of the Funds, and
the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Authorized Person" shall be deemed to include the Chairman,
President, Secretary, Treasurer, and the Executive Vice President, or
any other person, whether or not any such person is an officer or
employee of the Trusts, duly authorized by the Board of Trustees of the
Trusts to give Oral Instructions and Written Instructions on behalf of
the Funds and listed in the Certificate annexed hereto as Appendix A or
such other Certificate as may be received by the Custodian from time to
time, subject in each case to any limitations on the authority of such
person as set forth in Appendix A or any such Certificate. Authorized
Persons shall also include the President, Executive Vice President,
Secretary and such other officers employed by Bankers Finance Advisors,
L.L.C. (the "Adviser") as are designated in writing by the Adviser
pursuant to the terms of the services agreements between the Trusts and
the Adviser regarding day-to-day management of the Funds.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-
entry system for United States and federal agency securities, its
successor or successors and its nominee or nominees, provided the
Custodian has received a certified copy of a resolution of Board of
Trustees of the Trusts specifically approving deposits in the Book-Entry
System.
3. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian which is signed on behalf of the Funds by an
Officer of the Trusts and is actually received by the Custodian.
4. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission,
its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person or clearing
agency authorized to act as a depository under the Investment Company
Act of 1940, its successor or successors and its nominee or nominees,
provided that the Custodian has received a certified copy of a
resolution of the Board of Trustees of the Trusts specifically approving
such other person or clearing agency as a depository.
5. "Dividend and Transfer Agent" shall mean the dividend and transfer
agent active, from time to time, in such capacity pursuant to a written
agreement with the Funds, changes in which the Trusts shall immediately
report to the Custodian in writing.
6. "Foreign Equity Securities" include equity securities with issuers
whose principal activities are outside of the United States and includes
common stocks, convertible debt securities, preferred stocks, warrants,
and American Depositories Receipts.
7. "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to principal and/or
interest by the government of the United States or agencies or
instrumentalities thereof, commercial paper, obligations (including
certificates of deposit, bankers' acceptances, repurchase and reverse
repurchase agreements with respect to the same) and bank time deposits
of domestic banks that are members of Federal Deposit Insurance Trust,
and short-term corporate obligations where the purchase and sale of such
securities normally require settlement in federal funds or their
equivalent on the same day as such purchase or sale.
8. "Officers" shall be deemed to include the Chairman, the President,
the Secretary, the Treasurer, and Executive Vice President of the Trusts
listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time.
9. "Oral Instructions" shall mean oral instructions actually received
by the Custodian from an Authorized Person (or from a person which the
Custodian reasonably believes in good faith to be an Authorized Person)
and confirmed by Written Instructions from Authorized Persons in such
manner so that such Written Instructions are received by the Custodian
on the next business day.
10. "Prospectus" or "Prospectuses" shall mean the Funds' currently
effective prospectuses and statements of additional information, as
filed with and declared effective by the Securities and Exchange
Commission.
11. "Security or Securities" shall mean Foreign Equity Securities,
Money Market Securities, common or preferred stocks, options, bonds,
debentures, corporate debt securities, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe for
the same, or evidencing or representing any other rights or interest
therein, or any property or assets.
12. "Written Instructions" shall mean communication actually received
by the Custodian from one Authorized Person or from one person which the
Custodian reasonably believes in good faith to be an Authorized Person
in writing, telex or any other data transmission system whereby the
receiver of such communication is able to verify by codes or otherwise
with a reasonable degree of certainty the authenticity of the senders of
such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Trusts, acting for and on behalf of their respective Funds,
hereby constitute and appoint the Custodian as custodian of Securities
and monies owned by the Funds during the period of this Agreement ("Fund
Assets").
2. The Custodian hereby accepts appointment as such Custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
DOCUMENTS TO BE FURNISHED BY THE TRUST
Each Trust hereby agrees to furnish to the Custodian the following
documents within a reasonable time after the effective date of this
Agreement:
1. A copy of its Declaration of Trust (the "Declaration of Trust")
certified by its Secretary.
2. A copy of its By-Laws certified by its Secretary.
3. Copies of the most recent Prospectuses of the Trust.
4. A Certificate of the President and Secretary setting forth the
names and signatures of the present Officers of the Trust.
ARTICLE IV
CUSTODY OF CASH AND SECURITIES
1. Each Trust will deliver or cause to be delivered to the Custodian
Fund Assets, including cash received for the issuance of its shares.
The Custodian will not e responsible for such Fund Assets until actually
received by it. Upon such receipt, the Custodian shall hold in
safekeeping and physically segregate at all times from the property of
any other persons, firms or corporations all Fund Assets received by it
from or for the accounts of the Funds. The Custodian will be entitled
to reverse any credits made on the Funds' behalf where such credits have
been previously made and monies are not finally collected within 90 days
of the making of such credits. The Custodian is hereby authorized by
the Trusts, acting on behalf of the Funds, to actually deposit and Fund
Assets in the Book-Entry System or in a Depository, provided, however,
that the Custodian shall always be accountable to the Trusts for the
Fund Assets so deposited. Funds Assets deposited in the Book-Entry
System or the Depository will be represented in accounts which include
only assets held by the Custodian for customers, including but not
limited to accounts in which the Custodian acts in fiduciary or
representative capacity.
2. The Custodian shall credit to a separate account or accounts in
the name of each respective Fund all monies received by it for the
account of such Fund, and shall disburse the same only:
(a) In payment for Securities purchased for the account of such Fund,
as provided in Article V;
(b) In payment of dividends or distributions, as provided in Article
VI hereof;
(c) In payment of original issue or other taxes, as provided in
Article VII hereof;
(d) In payment for shares of such Fund redeemed by it, as provided in
Article VII hereof;
(e) Pursuant to Certificates (i) directing payment and setting forth
the name and address of the person to whom the payment is to be made,
the amount of such payment and the purpose for which payment is to be
made (the Custodian not being required to questions such direction) or
(ii) if reserve requirements are established for a Fund by law or by
valid regulation, directing the Custodian to deposit a specified amount
of collected funds in the form of U. S. dollars at a specified Federal
Reserve Bank and state the purpose of such deposit; or
(f) In reimbursement of the expenses and liabilities of the Custodian,
as provided in paragraph 10 of Article IX hereof.
3. Promptly after the close of business on each day the Funds are
open and valuing their portfolios, the Custodian shall furnish the
respective Trusts with a detailed statement of monies held for the Funds
under this Agreement and with confirmations and a summary of all
transfers to or from the account of the Funds during said day. Where
Securities are transferred to the account of the Funds without physical
delivery, the Custodian shall also identify as belonging to the Funds a
quantity of Securities in a fungible bulk of Securities registered in
the name of the Custodian (or its nominee) or shown on the Custodian's
account on the books of the Book-Entry System or the Depository. At
least monthly and from time to time, the Custodian shall furnish the
Trusts with a detailed statement of the Securities held for the Funds
under this Agreement.
4. All Securities held for the Funds, which are issued or issuable
only in bearer form, except such Securities as are held in the Book-
Entry System, shall be held by the Custodian in that form; all other
Securities held for the Funds, may be registered in the name of the
Funds, in the name of any duly appointed registered nominee of the
Custodian as the Custodian may from time to time determine, or in the
name of the Book-Entry System or the Depository or their successor or
successors, or their nominee or nominees. Each Trust agrees to furnish
to the Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the name of
its registered nominee or in the name of the Book-Entry System or the
Depository, any Securities which it may hold for the account of the
Funds and which may from time to time be registered in the name of the
Funds. The Custodian shall hold all such Securities which are not held
in the Book-Entry System by the Depository or a Sub-Custodian in a
separate account or accounts in the name of the Funds segregated at all
times from those of any other fund maintained and operated by the Trust
and from those of any other person or persons.
5. Unless otherwise instructed to the contrary by a Certificate, the
Custodian shall with respect to all Securities held for the Funds in
accordance with this Agreement:
(a) Collect all income due or payable to the Funds with respect to
each Fund's Assets;
(b) Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed, or retired, or
otherwise become payable;
(c) Surrender Securities in temporary form for definitive Securities;
(d) Execute, as Custodian, any necessary declarations or certificates
of ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority, including any foreign taxing
authority, now or hereafter in effect; and
(e) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of the
Funds all rights and similar securities issued with respect to any
Securities held by the Custodian hereunder.
6. Upon receipt of Written Instructions and not otherwise, the
Custodian directly or through the use of the Book-Entry System or the
Depository shall:
(a) Execute and deliver to such persons as may be designated in such
Written Instructions proxies, consents, authorizations, and any other
instruments whereby the authority of the Funds as owner of any
Securities may be exercised;
(b) Deliver any Securities held for the Funds in exchange for other
Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization
of any corporation, or the exercise of any conversion privilege;
(c) Deliver any Securities held for the account of the Funds to any
protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, and receive and
hold under the terms of this Agreement such certificates of deposit,
interim receipts or other instruments or documents as may be issued to
it to evidence such delivery; and
(d) Make such transfers or exchanges of the assets of the Funds and
take such other steps as shall be stated in a Certificate to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Funds.
7. The Custodian shall promptly deliver to each respective Trust all
notices, proxy material and executed but unvoted proxies pertaining to
shareholder meetings of Securities held by the Funds. The Custodian
shall not vote or authorize the voting of any Securities or give any
consent, waiver or approval with respect thereto unless so directed by a
Certificate or Written Instruction.
8. The Custodian shall promptly deliver to the Trusts all material
and notices received by the Custodian and pertaining to Securities held
by the Funds with respect to tender or exchange offers, calls for
redemption or purchase, expiration of rights, name changes, stock splits
and stock dividends, or any other activity involving ownership rights in
such Securities.
9. The Custodian shall conduct such periodic physical inspection of
Securities held by it under this Agreement as it deems advisable to
verify the accuracy of its inventory. The Custodian shall promptly
report to the Trusts any discrepancies or shortages revealed by such
inspections and shall make every effort promptly to remedy such
discrepancies or shortages.
ARTICLE V
PURCHASE AND SALE OF INVESTMENTS OF THE FUNDS
1. Promptly after each purchase of Securities by the Funds, the
respective Trust shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a
Certificate or Written Instructions, and (ii) with respect to each
purchase of Money Market Securities, Written Instructions, a Certificate
or Oral Instructions, specifying with respect to each such purchase:
(a) the name of the issuer and the title of the Securities, (b) the
principal amount purchased and accrued interest, if nay, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the
total amount payable upon such purchase and (f) the name of the person
from whom or the broker through whom the purchase was made. The
Custodian shall upon receipt of Securities purchased by or for the
Funds, pay out of the monies held for the account of the Funds the total
amount payable to the person from whom or the broker through whom the
purchase was made, provided that the same conforms to the total amount
payable as set forth in such Certificate, Written Instructions or Oral
Instructions.
2. Promptly after each sale of Securities by the respective Trust for
the account of the Funds, such Trust shall deliver to the Custodian (i)
with respect to each sale of Securities which are not Money Market
Securities, a Certificate or Written Instructions, and (ii) with respect
to each sale of Money Market Securities, Written Instructions, a
Certificate or Oral Instructions, specifying with respect to each such
sale: (a) the name of the issuer and the title of the Security, (b)
the principal amount sold, and accrued interest, if any, (c) the date
of sale, (d) the sale price per unit, (e) the total amount payable to
the Funds upon such sale and (f) the name of the broker through whom or
the person to whom the sale was made. The Custodian shall deliver the
Securities upon receipt of the total amount payable to the Funds upon
such sale, provided that the same conforms to the total amount payable
as set forth in such Certificate, Written Instructions or Oral
Instructions. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
3. Promptly after the time as of which a Trust, on behalf of a Fund,
either -
(a) writes an option on Securities or writes a covered put option in
respect of a Security, or
(b) notifies the Custodian that its obligations in respect of any put
or call option, as described in such Trust's Prospectus, require that
the Fund deposit Securities or additional Securities with the Custodian,
specifying the type and value of Securities required to be so deposited,
or
(c) notifies the Custodian that its obligations in respect of any
other Security, as described in each Fund's respective Prospectus,
require that the Fund deposit Securities or additional Securities with
the Custodian, specifying the type and value of Securities required to
be so deposited, the Custodian will cause to be segregated or identified
as deposited, pursuant to the Fund's obligations as set forth in such
Prospectus, Securities of such kinds and having such aggregate values as
are required to meet the Fund's obligations in respect thereof.
The Trust will provide to the Custodian, as of the end of each trading
day, the market value of each Fund's option liability, if any, and the
market value of its portfolio of common stocks.
4. On contractual settlement date, the account of each respective
Fund will be charged for all purchases settling on that day, regardless
of whether or not delivery is made. On contractual settlement date,
sale proceeds will likewise be credited to the account of such Fund
irrespective of delivery.
In the case of "sale fails", the Custodian may request the assistance of
the Trusts in making delivery of the failed Security.
ARTICLE VI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. Each Trust shall furnish to the Custodian Written Instructions to
release or otherwise apply cash insofar as available for the payment of
dividends or other distributions to Fund shareholders entitled to
payment as determined by the Dividend and Transfer Agent of the Funds.
The Custodian may rely on any such Written Instructions so received, and
shall be indemnified by the Trust providing such instructions for such
reliance.
2. Upon the payment date specified in such Written Instructions, the
Custodian shall arrange for such payments to be made by the Dividend and
Transfer Agent out of monies held for the accounts of the Funds.
ARTICLE VII
SALE AND REDEMPTION OF SHARES OF THE FUNDS
1. The Custodian shall receive and credit to the account of each Fund
such payments for shares of such Fund issued or sold from time to time
as are received from the distributor for the Fund's shares, from the
Dividend and Transfer Agent of the Fund, or from the Trust.
2. Upon receipt of Written Instructions, the Custodian shall arrange
for payment of redemption proceeds to be made by the Dividend and
Transfer Agent out of the monies held for the account of the respective
Funds in the total amount specified in the Written Instructions.
3. Notwithstanding the above provisions regarding the redemption of
any shares of the Funds, whenever shares of the Funds are redeemed
pursuant to any check redemption privilege which may from time to time
be offered by the Funds, the Custodian, unless otherwise subsequently
instructed by Written Instructions setting forth that the redemption is
in good form for redemption in accordance with the check redemption
procedure, or pursuant to preauthorized Written Instructions or
procedures established with regard thereto, honor the check presented as
part of such check redemption privilege out of the money held in the
account of the Funds for such purposes.
ARTICLE VIII
INDEBTEDNESS
In connection with any borrowings, each Trust, on behalf of its
respective Funds, will cause to be delivered to the Custodian by a bank
or broker (including the Custodian, if the borrowing is from the
Custodian), requiring Securities as collateral for such borrowings, a
notice or undertaking in the form currently employed by any such bank or
broker will loan to the Funds against delivery of a stated amount of
collateral. Each Trust shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a) the
name of the bank or broker, (b) the amount and terms of the borrowing,
which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Trust, acting on behalf of a Fund,
or other loan particular Securities to be delivered as collateral by the
Custodian, the Custodian shall not be under any obligation to deliver
any Securities. The Custodian may require such reasonable conditions
with respect to such collateral and its dealings with third-party
lenders as it may deem appropriate.
ARTICLE IX
CONCERNING THE CUSTODIAN
1. Except as otherwise provided herein, the Custodian shall not be
liable for any loss or damage, including counsel fees, resulting from
its action or omission to act or otherwise, except for any such loss or
damage arising out of its own negligence or willful misconduct. Each
Trust, on behalf of its Funds and only from applicable Fund Assets (or
insurance purchased by a Trust with respect to its liabilities on behalf
of its Funds hereunder), shall defend, indemnify and hold harmless the
Custodian, its officers, employees and agents, with respect to any loss,
claim, liability or cost (including reasonable attorneys' fees) arising
or alleged to arise from or relating to each Trust's duties with respect
to its Funds hereunder or any other action or inaction of the respective
Trust or its Trustees, Officers, employees or agents as to the Funds,
except such as may arise from the negligent action, omission or willful
misconduct of the Custodian, its officers, employees or agents. The
Custodian shall defend, indemnify and hold harmless each Trust and its
Trustees, Officers, employees or agents with respect to any loss, claim,
liability or cost (including reasonable attorneys' fees) arising or
alleged to arise from or relating to agreement, (c) the date and time,
if known, on which the loan is to be entered into, (d) the date on
which the loan becomes due and payable, (e) the total amount payable to
the Fund on the borrowing date, (f) the market value of Securities
collateralizing the loan, including the name of the issuer, the title
and the number of shares or the principal amount of any particular
Securities and (g) a statement that such loan is in conformance with
the Investment Company Act of 1940 and the Fund's then current
Prospectus. The Custodian shall deliver on the borrowing date specified
in a Certificate the specified collateral and the executed promissory
note, if any, against delivery by the lending bank or broker of the
total amount payable as set forth in the Certificate. The Custodian
may, at the option of the lending bank or broker, keep such collateral
in its possession, but such collateral shall be subject to all rights
therein given the lending bank or broker, by virtue of any promissory
note or loan agreement. The Custodian shall deliver in the manner
directed by the Trust from time to time such Securities as additional
collateral as may be specified in a Certificate to collateralize further
any transaction described in the paragraph. Such Trust shall cause all
Securities released from collateral status to be returned directly to
the Custodian and the Custodian shall receive from time to time such
return of collateral as may be tendered to it. In the event that a
Trust fails to specify in a Certificate the name of the issuer, the
title and number of shares or the principal amount of any the
Custodian's duties with respect to the Funds hereunder or any other
action or inaction of the Custodian or its Trustees, Officers,
employees, agents, nominees or Sub-Custodians as to the Funds, except
such as may arise from the negligent action, omission or willful
misconduct of the Trust, its Trustees, Officers, employees or agents.
The Custodian may, with respect to questions of law apply for and obtain
the advice and opinion of counsel to the Trusts at the expense of the
Funds, or of its own counsel at its own expense, and shall be fully
protected with respect to anything done or omitted by it in good faith
in conformity with the advice or opinion of counsel to the Trusts, and
shall be similarly protected with respect to anything done or omitted by
it in good faith in conformity with the advice or opinion of its
counsel, unless counsel to the Funds shall, within a reasonable time
after being notified of legal advice received by the Custodian, have a
differing interpretation of such question of law. The Custodian shall
be liable to the Trusts for any proximate loss or damage resulting from
the use of the Book-Entry System or any Depository arising by reason of
any negligence, misfeasance or misconduct on the part of the Custodian
or any of its employees, agents, nominees or Sub-Custodians but not for
any special, incidental, consequential, or punitive damages; provided,
however, that nothing contained herein shall preclude recovery by a
Trust, on behalf of its Funds, of principal and of interest to the date
of recovery on, Securities incorrectly omitted from or included in a
Fund's accounts or penalties imposed on the Trusts, in connection with
the Funds, therefrom or for any failures to deliver Securities.
In any case in which one party hereto may be asked to indemnify the
other or hold the other harmless, the party from whom indemnification is
sought (the "Indemnifying Party") shall be advised of all pertinent
facts concerning the situation in question, and the party claiming a
right to indemnification (the "Indemnified Party") will use a reasonable
care to identify and notify the Indemnifying Party promptly concerning
any situation which presents or appears to present a claim for
indemnification against the Indemnifying Party. The Indemnifying Party
shall have the option to defend the Indemnified Party against any claim
which may be the subject of the indemnification, and in the event the
Indemnifying Party so elects, such defense shall be conducted by counsel
chosen by the Indemnifying Party and satisfactory to the Indemnified
Party and the Indemnifying Party will so notify the Indemnified Party
and thereupon such Indemnifying Party shall take over the complete
defense of the claim and the indemnifying Party shall sustain no further
legal or other expenses in such situation for which indemnification has
been sought under this paragraph, except the expenses of any additional
counsel retained by the Indemnified Party. In no case shall any party
claiming the right to indemnification confess any claim or make any
compromise in any case in which the other party has been asked to
indemnify such party (unless such confession or compromise is made with
such other party's prior written consent).
The Custodian acknowledges the limitation of liability provisions of
Article XI of each Trust's Declaration of Trust and agrees that the
obligations and liabilities of each Trust under this Agreement shall be
limited by and to the extent of the Trust and its assets and that the
Custodian shall not be entitled to seek satisfaction of any such
obligation or liability from the Trusts' shareholders, Trustees,
Officers, employees or agents.
The Custodian acknowledges the limitation of liability provisions of
Article XI of each Trust's Declaration of Trust and agrees that the
obligations and liabilities of each Trust under this Agreement shall be
limited by and to the extent of the Trust and its assets and that the
Custodian shall not be entitled to seek satisfaction of any such
obligation or liability from the Trusts' shareholders, Trustees,
Officers, employees or agents.
The obligations of the parties hereto under this paragraph shall survive
the termination of this Agreement.
2. Without limiting the generality of the foregoing, the Custodian,
acting in the capacity of Custodian hereunder, shall be under not
obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased by or for
the account of the Funds, the legality of the purchase thereof, or the
propriety of the amount paid therefor;
(b) The legality of the sale of any Securities by or for the account
of the Funds, or the propriety of the amount for which the same are
sold;
(c) The legality of the issue or sale of any shares of the Funds, or
the sufficiency of the amount to be received therefor;
(d) The legality of the redemption of any shares of the Funds, or the
propriety of the amount to be paid therefor;
(e) The legality of the declaration or payment of any dividend by the
Trust in respect of shares of the Funds;
(f) The legality of any borrowing by the Trust, on behalf of the
Funds, using Securities as collateral;
(g) The sufficiency of any deposit made pursuant to a Certificate
described in clause (ii) of paragraph 2 (e) of Article IV hereof.
3. The Custodian shall not be liable for any money or collected funds
in U.S. dollars deposited in a Federal Reserve Bank other than the
Custodian in accordance with a Certificate described in clause (ii) of
paragraph 2 (e) of Article IV hereof, nor be liable for or considered to
be the Custodian of any money, whether or not represented by any check,
draft, or other instrument for the payment of money, received by it on
behalf of the Funds until the Custodian actually receives and collects
such money directly or by the final crediting of the account
representing the Funds' interest at the Book-Entry System or Depository.
4. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Funds from the
Dividend and Transfer Agent of the Funds nor to take any action to
effect payment or distribution by the Dividend and Transfer Agent of the
Funds of any amount paid by the Custodian to the Dividend and Transfer
Agent of the Funds in accordance with this Agreement.
5. Income due or payable to the Funds with respect to Funds Assets
will be credited to the account of the Funds as follows:
(a) Dividends will be credited on the first business day following
payable date irrespective of collection.
(b) Interest on fixed rate municipal bonds and debt securities issued
or guaranteed as to principal and/or interest by the government of the
United States or agencies or instrumentalities thereof (excluding
securities issued by the Government National Mortgage Association) will
be credited on payable date irrespective of collection.
(c) Interest on fixed rate corporate debt securities will be credited
on the first business day following payable date irrespective of
collection.
(d) Interest on variable and floating rate debt securities and debt
securities issued by the Government National Mortgage Association will
be credited upon the Custodian's receipt of funds.
(e) Proceeds from options will be credited upon the Custodian's
receipt of funds.
6. Notwithstanding paragraph 5 of this Article IX, the Custodian
shall not be under any duty or obligation to take action to effect
collection of any amount, if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such
action by a Certificate and (ii) it shall be assured to its satisfaction
or reimbursement of its costs and expenses in connection with any such
action or, at the Custodian's option, prepayment.
7. The Custodian may appoint one or more financial or banking
institutions, as Depository or Depositories or as Sub-Custodian or Sub-
Custodians, including, but not limited to, banking institutions located
in foreign countries, or Securities and monies at any time owned by the
Funds, upon terms and conditions approved in a Certificate. Current
Depository(s) and Sub-Custodians(s) are noted in Appendix B. The
Custodian shall not be relieved of any obligation or liability under
this Agreement in connection with the appointment or activities of such
Depositories or Sub-Custodians.
8. The Custodian shall not be under any duty or obligation to
ascertain whether any Securities at any time delivered to or held by it
for the account of the Funds are such as properly may be held by the
Funds under the provisions of the Declarations of Trust and the Trusts'
By-Laws.
9. The Custodian shall treat all records and other information
relating to the Trusts, the Funds and the Funds' Assets as confidential
and shall not disclose any such records or information to any other
person unless (a) the respective Trust shall have consented thereto in
writing or (b) such disclosure is compelled by law.
10. The Custodian shall be entitled to receive and the Trusts agree to
pay to the Custodian such compensation as shall be determined pursuant
to Appendix C attached hereto, or as shall be determined pursuant to
amendments to such Appendix approved by the Custodian and the Trust, on
behalf of the Funds. The Custodian shall be entitled to charge against
any money held by it for the account of the Funds the amount of any
loss, damage, liability or expense, including counsel fees, for which it
shall be entitled to reimbursement under the provisions of this
Agreement as determined by agreement of the Custodian and the applicable
Trust or by the final order of any court or arbitrator having
jurisdiction and as to which all rights of appeal shall have expired.
The expenses which the Custodian may charge against the accounts of the
Funds include, but are not limited to, the expenses of Sub-Custodians
incurred in settling transactions involving the purchase and sale of
Securities of the Funds.
Notwithstanding the above, to the extent such compensation and expenses
of the Custodian are paid to the Custodian by the Adviser pursuant to
the services agreements between the Trusts and the Adviser, no charges
shall be made against the accounts of the Funds by the Custodian.
11. The Custodian shall be entitled to rely upon any Certificate. The
Custodian shall be entitled to rely upon any Oral Instructions and any
Written Instructions actually received by the Custodian pursuant to
Article IV or V hereof. Each Trust agrees to forward to the Custodian
Written Instructions from Authorized Persons confirming Oral
Instructions in such manner so that such Written Instructions are
received by the Custodian, whether by hand delivery, telex or otherwise,
on the first business day following the day on which such Oral
Instructions are given to the Custodian. Each Trust agrees that the
fact that such confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Trust. Each
Trust agrees that the Custodian shall incur no liability to the Funds in
acting upon Oral Instructions given to the Custodian hereunder
concerning such transactions.
12. The Custodian will (a) set up and maintain proper books of
account and complete records of all transactions in the accounts
maintained by the Custodian hereunder in such manner as will meet the
obligations of the Funds under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31 a-1 and 31 a-2
thereunder, and (b) preserve for the periods prescribed by applicable
Federal statute or regulation all records required to be so preserved.
The books and records of the custodian shall be open to inspection and
audit at reasonable times and with prior notice by officers and auditors
employed by the Trusts.
13. The Custodian and its Sub-Custodians shall promptly send to the
Trusts, for the account of the Funds, any report received on the systems
of internal accounting control of the Book-Entry System or the
Depository and with such reports on their own systems of internal
accounting control as the Trusts may reasonably request from time to
time.
14. The Custodian performs only the services of a custodian and shall
have no responsibility for the management, investment or reinvestment of
the Securities from time to time owned by the Funds. The Custodian is
not a selling agent for shares of the Funds and performance of its
duties as a custodial agent shall not be deemed to be a recommendation
to the Custodian's depositors or others of shares of the Funds as an
investment.
ARTICLE X
TERMINATION
1. The Custodian or any of the Trusts may terminate this Agreement
for any reason by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than
ninety (90) days after the date of giving of such notice. If such
notice is given by any Trust, on behalf of any of its Funds, it shall
state in writing that the Trust is electing to terminate this Agreement
and shall designate a successor custodian or custodians, each of which
shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. In the event such
notice is given by the Custodian, the Trusts shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of
their Board of Trustees, certified by the Secretary or Assistant
Secretary, designating a successor custodian or custodians to act on
behalf of the Funds. In the absence of such designation by the Trusts,
the Custodian may designate a successor custodian which shall be a bank
or trust company having not less than $2,000,000 aggregate capital,
surplus, and undivided profits. Upon the date set forth in such notice
this Agreement shall terminate, and the Custodian, provided that it has
received a notice of acceptance by the successor custodian, shall
deliver, on that date, directly to the successor custodian all
Securities and monies then owned by the Funds and held by it as
Custodian. Upon termination of the Agreement, the Trusts shall pay to
the Custodian on behalf of the Funds such compensation as may be due as
of the date of such termination. The Trusts agree on behalf of the
Funds that the Custodian shall be reimbursed for its reasonable costs in
connection with the termination of this Agreement.
2. If a successor custodian is not designated by the Trusts, on
behalf of the Funds, or by the Custodian in accordance with the
preceding paragraph, or the designated successor cannot or will not
serve, each Trust shall upon the delivery by the Custodian to each Trust
of all Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Trust) and monies then owned by its
Funds, other than monies deposited with a Federal Reserve Bank pursuant
to a Certificate described in clause (ii) of paragraph 2(e) of Article
IV, be deemed to be the custodian for its Funds, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in the
Book-Entry System which cannot be delivered to the Trust to hold such
Securities hereunder in accordance with this Agreement.
ARTICLE XI
MISCELLANEOUS
1. Appendix A sets forth the names and the signatures of all
Authorized Persons. Each Trust agrees to furnish to the Custodian, on
behalf of its Funds, a new Appendix A in form similar to the attached
Appendix A, if any present Authorized Person ceases to be an Authorized
Person or if any other or additional Authorized Persons are elected or
appointed. Until such new Appendix A shall be received, the Custodian
shall be fully protected in acting unde the provisions of this Agreement
upon Oral Instructions or signatures of the present Authorized Persons
as set forth in the last delivered Appendix A.
2. No recourse under any obligation of this Agreement or for any
claim based thereon shall be had against any organizer, shareholder,
Officer, Trustee, past, present or future as such, of the Trusts or of
any predecessor or successor, either directly or through the Trusts or
any such predecessor or successor, whether by virtue of any
constitution, statute or rule of law or equity, or by the enforcement of
any assessment or penalty or otherwise; it being expressly agreed and
understood that this Agreement and the obligations thereunder are
enforceable solely against Fund Assets, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
organizers, shareholders, Officers, Trustees of the Trusts or of any
predecessor or successor, or any of them as such, because of the
obligations contained in this Agreement or implied therefrom and that
any and all such liability is hereby expressly waived and released by
the Custodian as a condition of, and as a consideration for, the
execution of this Agreement.
3. The obligations set forth in this Agreement as having been made by
the Trusts have been made by each Trust for and on behalf of its Funds,
pursuant to the authority vested in the Trusts under the laws of the
Commonwealth of Massachusetts, the Declarations of Trust and the By-Laws
of the Trusts. This Agreement has been executed by Officers of the
Trusts as officers, and not individually, and the obligations contained
herein are not binding upon any of the Trustees, Officers, Agents or
holders of shares, personally, but bind only the Trusts and then only to
the extent of the respective Trust's Fund Assets.
4. Such provisions of the Prospectuses of the Funds and any other
documents (including advertising material) specifically mentioning the
Custodian (other than merely by name and address) shall be reviewed with
the Custodian by the Trust.
5. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently
given if addressed to the Custodian and mailed or delivered to it at its
offices at Star Bank Center, 425 Walnut Street, M.L. 5127, Cincinnati,
Ohio 45202, attention Mutual Funds Custody Department, or at such
other place as the Custodian may from time to time designate in writing.
6. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to any Trust shall be sufficiently given
if addressed to the Trust and mailed or delivered to it at its office at
1655 Fort Myer Drive, 10th Floor, Arlington, Virginia 22209, or at such
other place as the Trusts may from time to time designate in writing.
7. This Agreement with the exception of Appendices A & B may not be
amended or modified in any manner except by a written agreement executed
by all parties provided that no amendment shall be in contravention of
or inconsistent with any federal or state law or regulation or the
Declarations of Trust or By-Laws of the Trusts.
8. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trusts or by
the Custodian, and not attempted assignment by the Trusts or the
Custodian shall be effective without the written consent of the other
party hereto.
9. This Agreement shall be construed in accordance with the laws of
the State of Ohio.
10. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
11. Where applicable and required based upon the context used, the
singular of any term used in this Agreement shall include the plural and
the plural may refer to the singular.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized as of
the day and year first above written.
ATTEST: Mosaic Equity Trust
Mosaic Income Trust
Mosaic Government Money Market Trust
Mosaic Tax-Free Trust
Mosaic Focus Fund Trust
Julia M. Nelson
(signature) By: (signature)
W. Richard Mason
Star Bank, N.A.
(signature) By: (signature)
Lynnette C. Gibson Marsha A. Croxton
Senior Vice President
APPENDIX A
AUTHORIZED PERSONS SPECIMEN SIGNATURES
Fund Officers:
Chris Berberet (signature)
Frank E. Burgess (signature)
Katherine L. Frank (signature)
W. Richard Mason (signature)
Jay R. Sekelsky (signature)
Julia M. Nelson (signature)
Adviser Employes:
Rita Bauer* (signature)
Michael Peters* (signature)
See Signature Cards for additional adviser employees authorized to sign
checks on fund accounts.
* Denotes authority restricted to securities trades.
Dated: _____________________________________
APPENDIX B
The following Depository(s) and Sub-Custodian(s) are employed currently
by Star Bank, N.A. for securities processing and control.
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
(For Foreign Securities and certain non-DTC eligible Securities)
SCHEDULE C
Star Bank, N.A., as Custodian, will receive monthly compensation for
services according to the terms of the following Schedule:
Portfolio Transaction Fees:
(a) For each repurchase agreement transaction $7.00
(b) For each portfolio transaction processed through
DTC or Federal Reserve $10
(c) For each portfolio transaction processed through
our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $40
(e) For each GNMA Prin/Int Paydown, GNMA Sales $8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euro clear transaction $100.00
(h) For each Disbursement (Fund expenses only) $5.00
A transaction is a purchase/sale of a security, free receipt/free
delivery (excludes initial conversion), maturity, tender or exchange:
II. Monthly Market Value Fee
Based upon Month-end at a rate of: Million
.0002 Basis Points on First $5
.0001 Basis Point on Next $25
.00075 Basis Points on Next Balance
Out-of-Pocket Expenses
The only out-of-pocket expenses charged to your account will be shipping
fees or transfer fees.
Services Agreement
This Agreement is made by and between Bankers Finance Advisors, LLC
(a/k/a Madison Mosaic), a Wisconsin limited liability company having its
principal place of business in Arlington, Virginia ("MM-LLC"), and
Mosaic Focus Fund Trust, a Massachusetts business trust created pursuant
to a Declaration of Trust filed with the Commonwealth of Massachusetts
(the "Trust").
The parties hereto, intending so to be legally bound, agree with each
other as follows:
1. Provision of Services. MM-LLC hereby undertakes to provide the Trust
with such operational support services as it may require in the conduct
of its business, to extent which MM-LLC (or any other person), acting as
the Trust's investment adviser, has not undertaken to provide such
services. Such services may include the functions of shareholder
servicing agent and transfer agent, bookkeeping and portfolio accounting
services, the handling of telephone inquires, cash withdrawals and other
customer service functions (including processing and monitoring wire
transfers), and providing to the Trust appropriate supplies, equipment
and ancillary services necessary to the conduct of its affairs. Such
services may also include providing or arranging for and making
reimbursable expenditures with respect to any activities intended to be
financed by the Trust pursuant to its Plan of Distribution. The Trust
hereby engages MM-LLC to provide it with such services.
2. Scope of Authority. MM-LLC shall be at all times, in the performance
of its functions hereunder, subject to any direction and control of the
Trustees of the Trust and of its officers, and to the terms of its
Declaration of Trust and By-Laws, except only that it shall have no
obligation to provide to the Trust any services that are clearly outside
the scope of those contemplated in this Agreement. In the performance
of its duties hereunder, MM-LLC shall be authorized to take such action
not inconsistent with the express provisions hereof as it deems
advisable. It may contract with other persons to provide to the Trust
any of the services contemplated herein under such terms as it deems
reasonable and shall have the authority to direct the activities of such
other persons in the manner it deems appropriate.
3. Other Activities of MM-LLC. MM-LLC and any of its affiliates shall
be free to engage in any other lawful activity, including the rendering
to others services similar to those to be rendered to the Trust
hereunder; and MM-LLC or any interested person thereof shall be free to
invest in the Trust as a shareholder, to become an officer or Trustee
thereof if properly elected, or to enter into any other relationship
with the Trust approved by the Trustees and in accordance with law.
MM-LLC agrees that it will not deal with the Trust in any transaction in
which MM-LLC acts as a principal, except to the extent as may be
permitted by the terms of this Agreement. The records MM-LLC maintains
on behalf of the Trust are the sole property of the Trust and will be
surrendered promptly to the Trust upon its request pursuant to Rule 31a-
3 of the Investment Company Act of 1940.
4. Compensation to MM-LLC. MM-LLC shall have no responsibility
hereunder to bear at its own expense any costs or expenses of the Trust.
The Trust shall pay to MM-LLC a fee per annum for all services provided
to the Trust hereunder (including, by way of example and not limitation,
transfer agency and shareholder service, portfolio and shareholder
accounting, registration fees, audit and legal expenses). Such fee
shall be calculated daily, based on the ending daily net assets of the
applicable series of the Trust. Such fee shall be payable monthly as of
the last day of the month and shall be the sum of the daily fees
calculated as one-three hundred sixty-fifth (1/365), except in leap
years one-hundred sixty-sixth (1/366), of the annual fee. Such fee is
set forth below determined according to the level of net assets of the
applicable series of the Trust. This fee may not be raised without
approval by the Trust. MM-LLC may lower this fee at any time, which
lower fee must be ratified by the Trust. Once lowered, MM-LLC may not
raise the fee without approval by the Trust. Nothing herein prevents
MM-LLC from waiving any or all of this fee at any time.
Series Fee in Basis Points
Mosaic Focus Fund 50
5. Relationship to Investment Adviser. It is understood by the parties
hereto that concurrently with the execution of this Agreement, the Trust
has entered into an Investment Advisory Agreement with Bankers Finance
Advisors, LLC, in its separate capacity as the investment adviser to the
Trust (the "Adviser") pursuant to which the Adviser will provide
management services to the Trust and administer its affairs. MM-LLC has
entered into this Agreement to perform certain services at its cost in
consideration of the Trust's employment of it as the Adviser as
aforesaid. If at any time the Adviser ceases to act as investment
adviser to the Trust under terms substantially those of the Investment
Advisory Agreement or if at any time the Adviser ceases to be a
subsidiary owned at least 50% (in terms of voting rights) under common
control with MM-LLC, then this Agreement shall immediately terminate as
of a date 30 days from the date of such event, unless within such 30-day
period MM-LLC gives written notice to the Trust that it waives such
termination. The Trust specifically acknowledges and accepts the
relationship between separate capacities of MM-LLC hereunder and as the
Adviser.
6. Limitation of MM-LLC's Liability. MM-LLC shall not be liable for any
loss incurred in connection with any of its services hereunder, nor for
any action taken, suffered or omitted and believed by it to be advisable
or within the scope of its authority of discretion, except for acts or
omissions involving willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties assumed by it under this Agreement.
7. Force Majeure. It is specifically agreed by the parties that if MM-
LLC is delayed in the performance of any of the services to be performed
by it hereunder or prevented entirely or in part from performing such
services due to causes or events beyond its control, then such delay or
non-performance may either be excused and the reasonable time for
performance thereby extended as necessary, or if such delay or non-
performance continues for 30 days then the Trust may cancel this
Agreement immediately thereafter or at any time prior to the cessation
of delay or resumption of performance by MM-LLC; but MM-LLC shall not
otherwise be liable for and the Trust shall otherwise hold it harmless
from any such delay or non-performance. "Causes or events beyond
control" shall include, without limitation, the following: Acts of God;
interruption of power or other utility, transportation or communications
services; malfunction of computer equipment; acts of civil or military
authority; sabotage national emergencies, war, explosion, flood,
accident, earthquake, fire, or other catastrophe; strike or other labor
problem; shortage of suitable parts, material, labor or transportation;
or present or future law, governmental order, rule, regulations or
official policy.
8. Limitation of Trust's Liability. MM-LLC acknowledges that it has
received notice of and accepts the limitations upon the Trust's
liability set forth in its Declaration of Trust. MM-LLC agrees that the
Trust's obligations hereunder in any case shall be limited to the Trust
and to its assets and that MM-LLC shall not seek satisfaction of any
such obligation from the shareholders of the Trust nor from any Trustee,
officer, employee or agent of the Trust.
9. Term of Agreement. This Agreement shall continue in effect for two
years from the date of its execution; and it shall continue in force
thereafter (but subject to the termination provisions below), provided
that it is specifically approved at least annually by the Trustees of
the Trust or a majority vote of the outstanding securities of each
series and class of the Trust's shares with respect to which it is to
continue in effect, and in either case by either case by the vote of a
majority of the Trustees who are not interested persons of the Trust,
cast in person at a meeting called for that purpose.
10. Termination by Notice. Notwithstanding any provision of this
Agreement, it may be terminated at any time without penalty, by the
Trustees of the Trust or, with respect to any series or class of the
Trust's shares, by the vote of the majority of the outstanding voting
securities of such series or class, or by MM-LLC, upon thirty days
written notice to the other party.
11. Termination upon Assignment. This Agreement may not be assigned by
MM-LLC and shall automatically terminate upon any such assignment;
except that MM-LLC may assign or transfer its interest herein to a
wholly-owned subsidiary of MM-LLC, or to another entity operated
substantially under common control with MM-LLC, provided MM-LLC
represents to the Trust that substantial continuity of management,
personnel and services previously available to the Trust will be
maintained following such assignment or transfer and that the Trustees
of the Trust (including a majority of the Trustees who are not
interested persons of the Trust) accept such representation. Nothing
herein shall limit the right of MM-LLC to obtain goods and services from
other persons as described in Section 2 above.
12. Use of Terms. The terms "affiliated person," "interested persons,"
"assignment," and "majority of the outstanding voting securities," as
used herein, shall have the same meanings as in the Investment Company
Act of 1940 and any applicable regulations thereunder. In Witness
Whereof, the parties have caused this Agreement to be signed in their
behalf by their respective officers duly authorized and their respective
seals to affixed hereto, this 21 day of April, 1998
Madison Mosaic
By: (signature)
Katherine L. Frank
Its President/Manager
Mosaic Focus Fund Trust
Frank E. Burgess
By (signature)
Trustee
Lorence Wheeler
By (signature)
Trustee
Thomas Kleppe
By (signature)
Trustee
James Imhoff
By (signature)
Trustee
Bingham Dana Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110-1726
Tel: (617) 951-8000
Fax: (617) 951-8736
Boston, New York, Washington,
Los Angeles, Hartford and London
April 21, 1998
Mosaic Focus Fund Trust
1655 Fort Myer Drive
Arlington, Virginia 22209
Ladies and Gentlemen:
We have acted as special Massachusetts counsel for Mosaic Focus Fund
Trust (the "Trust"), a Massachusetts business trust created under a
written Declaration of Trust effective as of April 14, 1998 (the
"Declaration of Trust").
In connection with this opinion, we have examined the following
described documents:
(a) a certificate of the Secretary of State of the Commonwealth of
Massachusetts as to the existence of the Trust;
(b) a copy, as filed with the Secretary of State of the
Commonwealth of Massachusetts on April 13, 1998, of the Trust's
Declaration of Trust; and
(c) A certificate executed by an appropriate officer of the Trust
certifying as to, and attaching copies of, the Trust's Declaration of
Trust and By-Laws and certain votes of the Trustees of the Trust
authorizing the issuance of shares of beneficial interest in the Trust.
In such examination, we have assumed the genuineness of all
signatures, the conformity to the originals of all the documents
reviewed by us as copies or as conformed copies, the authenticity and
completeness of all original documents reviewed by us in original or
copy form and the legal competence of each individual executing any
document.
This opinion is based entirely on our review of the documents listed
above. We have made no other review or investigation of any kind
whatsoever, and we have assumed, without independent inquiry, the
accuracy of the information set forth in such documents.
This opinion is limited solely to the laws of the Commonwealth of
Massachusetts (other than the Massachusetts Uniform Securities Act, as
to which we express no opinion) as applied by courts in such
Commonwealth.
We understand that all the foregoing assumptions and limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it
is our opinion that:
1. The Trust is duly organized and existing under the Trust's
Declaration of Trust and the laws of the Commonwealth of Massachusetts
as a voluntary association with transferable shares of beneficial
interest commonly referred to as a "Massachusetts business trust."
2. The shares of beneficial interest of such Trust, when issued and
sold in accordance with the Declaration of Trust will be legally issued,
fully paid and non-assessable. Shareholders of the Trust may under
certain circumstances be held personally liable for the Trust's
obligations.
We understand that this opinion will be filed with the Securities
and Exchange Commission as an exhibit to the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933, and we hereby
consent to such use and filing of this opinion.
Very truly yours,
(signature)
Bingham Dana LLP
bos-busn:543014.1
