Mosaic Government Money Market Trust
Management's Discussion of Fund Performance
September 30, 1998
Dear Shareholder,
Recent activity in U.S. financial markets has highlighted the benefits
investors can gain from investments in government money market securities.
For the one-year period ended September 30, 1998, investors from around the
world continued to look to U.S. government bonds for their safety and
stability. As financial difficulties continued in Asia, and while major
countries such as Russia faced both political and financial instability,
global investors rushed to U.S. markets seeking safe harbor from turmoil.
Your fund is heavily influenced by the monetary policy of the U.S. Federal
Reserve. Recently, in response to ongoing global financial crises, the
Federal Reserve has begun to lower interest rates. In brief, this initial
action arises from the Federal Reserve's concern that global economic problems
have begun to work their way onto our soil. The relatively static interest
rate environment of the past year is likely to give way to a period of
gradually decreasing interest rates.
During the one-year period covered by this report, the seven-day yield from
Government Money Market remained steady from 4.63% on September 30, 1997 to
4.62% on September 30, 1998. Over this one-year period the average maturity
of the fund has averaged 36 days. We anticipate the average maturity to
increase over the next few months as we seek to sustain portfolio yields.
Our outlook for the next six months centers on a gradually slowing domestic
economy as the international economic situation begins to affect domestic
businesses and consumers. With the Federal Reserve displaying a readiness to
lower short-term interest rates, the chances of a severe slow-down are
minimal. However, given the severity of the global situation, domestic
companies could see profits and sales decline over the coming months. We
consider the overall downward trend in interest rates to be firmly intact.
One potential benefit of a slowing domestic economy is that inflation
pressures, at least for now, will remain low.
The current economic backdrop is not, however, without risks. Until recently
the U.S. economy had shown few signs of weakness. At the same time the
economy remains on solid footing, domestic economic statistics show low
unemployment combined with strong productivity and strong housing markets.
The rapid decline in interest rates over the past few months could fuel a
pick-up in consumer and business activity and lead to renewed growth.
We appreciate your confidence in Mosaic Government Money Market Trust and
reaffirm our commitment to provide you with competitive money market returns,
safety of principal, and liquidity.
Sincerely,
(signature)
Christopher C. Berberet, CFA
Vice President
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders
of Mosaic Government Money Market Trust:
We have audited the accompanying statement of net assets of the Mosaic
Government Money Market Trust (the "Trust"), including the schedule of
investments, as of September 30, 1998, and the related statements of
operations for the year then ended, the changes in net assets and the
financial highlights for the year ended September 30, 1998 and for the six-
month period ended September 30, 1997. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial statements of the
Trust for the year ended March 31, 1997 and the financial highlights for each
of the years in the four year period ended March 31, 1997 were audited by
other auditors whose report, dated May 2, 1997, expressed an unqualified
opinion on those financial statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 1998, by correspondence
with the custodian and broker. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Mosaic Government
Money Market Trust as of September 30, 1998, the results of its operations for
the year then ended, the changes in its net assets, and its financial
highlights for the year ended September 30, 1998 and for the six-month period
ended September 30, 1997 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
(signature)
Princeton, New Jersey
November 6, 1998
<PAGE>
Mosaic Government Money Market Trust
Statement of Net Assets - September 30, 1998
<TABLE>
<CAPTION>
Principal Market
Amount Value
U.S. GOVERNMENT AGENCY OBLIGATIONS: 93.7% of Net Assets
<C> <C> <C>
Federal Farm Credit Bank Discount Notes,5.29%, 10/1/98 $2,000,000 $2,000,000
Federal Farm Credit Bank Discount Notes, 5.40%, 10/5/98 1,000,000 999,400
Federal Farm Credit Bank Discount Notes, 5.40%, 10/14/98 2,500,000 2,495,125
Federal Farm Credit Bank Discount Notes, 5.40%, 11/6/98 2,000,000 1,989,200
Federal Home Loan Mortgage Corp Discount Notes, 5.42%, 10/1/98 2,000,000 2,000,000
Federal Home Loan Mortgage Corp Discount Notes, 5.45%, 10/5/98 1,000,000 999,394
Federal Home Loan Mortgage Corp Discount Notes, 5.43%, 10/8/98 1,550,000 1,548,363
Federal Home Loan Mortgage Corp Discount Notes, 5.43%, 10/9/98 1,000,000 998,793
Federal Home Loan Mortgage Corp Discount Notes, 5.42%, 10/9/98 1,250,000 1,248,495
Federal Home Loan Mortgage Corp Discount Notes, 5.43%, 10/15/98 2,000,000 1,995,777
Federal Home Loan Mortgage Corp Discount Notes, 5.40%, 11/2/98 1,000,000 995,200
Federal Home Loan Mortgage Corp Discount Notes, 5.40%, 11/9/98 1,500,000 1,491,225
Federal Home Loan Mortgage Corp Discount Notes, 5.35%, 11/13/98 2,000,000 1,987,219
Federal Home Loan Mortgage Corp Discount Notes, 5.29%, 11/24/98 2,000,000 1,984,130
Federal Home Loan Mortgage Corp Discount Notes, 5.28%, 12/4/98 2,500,000 2,476,533
Federal Home Loan Mortgage Corp Discount Notes, 5.33%, 12/8/98 3,500,000 3,464,763
Federal Home Loan Mortgage Corp Discount Notes, 5.27%, 12/15/98 1,000,000 989,021
Federal National Mortgage Association Discount Notes, 5.43%, 10/8/98 1,000,000 998,944
Federal National Mortgage Association Discount Notes, 5.41%, 10/16/98 2,000,000 1,995,492
Federal National Mortgage Association Discount Notes, 5.45%, 10/19/98 2,000,000 1,994,550
Federal National Mortgage Association Discount Notes, 5.43%, 10/21/98 2,000,000 1,993,967
Federal National Mortgage Association Discount Notes, 5.43%, 10/30/98 2,000,000 1,991,252
Federal National Mortgage Association Discount Notes, 5.39%, 11/20/98 1,000,000 992,514
Federal National Mortgage Association Discount Notes, 5.40%, 11/23/98 1,000,000 992,050
Federal National Mortgage Association Discount Notes, 5.41%,11/25/98 2,000,000 1,983,469
Federal National Mortgage Association Discount Notes, 5.28%, 12/15/98 1,000,000 989,000
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $43,593,876) 43,593,876
REPURCHASE AGREEMENT: 6.1% of Net Assets
With Donaldson, Lufkin & Jenrette Securities Corporation issued 09/30/98
at 5.30% due 10/1/98 collateralized by $2,879,460 in United States Treasury
Notes due 12/31/00. Proceeds at maturity are $2,823,416 (Cost $2,823,000) 2,823,000
TOTAL INVESTMENTS: (Cost $46,416,876)+ $46,416,876
CASH AND RECEIVABLES LESS LIABILITIES: 0.2% of Net Assets 95,153
NET ASSETS: 100% $46,512,029
CAPITAL SHARES OUTSTANDING 46,512,117
NET ASSET VALUE PER SHARE $1.00
</TABLE>
Notes to Statement of Net Assets:
+ Aggregate cost for federal income tax purposes as of September 30, 1998
<PAGE>
Mosaic Government Money Market Trust
Statement of Operations
For the Year Ended September 30, 1998
INVESTMENT INCOME (Note 1)
Interest Income $2,639,939
EXPENSES (Notes 3 and 4)
Investment advisory fee 238,680
Transfer agent and administrative expenses 182,617
Expenses Waived (5,732)
Total expenses 415,565
NET INVESTMENT INCOME 2,224,374
TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,224,374
Mosaic Government Money Market Trust
Statements of Changes in Net Assets
For the period indicated
Six Month
Year Ended Period Ended Year Ended
Sept. 30, 1998 Sept. 30, 1997 March 31, 1997
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment income $ 2,224,374 $ 1,191,458 $ 2,357,321
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (2,224,374) (1,191,458) (2,357,321)
CAPITAL SHARE TRANSACTIONS
(Note 5) (4,280,811) (3,894,207) (2,510,082)
TOTAL DECREASE IN NET ASSETS (4,280,811) (3,894,207) (2,510,082)
NET ASSETS
Beginning of period 50,792,840 54,687,047 57,197,129
End of period $46,512,029 $50,792,840 $54,687,047
<PAGE>
Mosaic Government Money Market Trust
Financial Highlights
Selected data for a share outstanding throughout each year:
<TABLE>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net
Net asset Distributions Net asset Net assets Ratio of investment
Year value Net Total from from net Total value at at end expenses income to
ended beginning investment investment investment distri- end Total of period to average average
Sep. 30 of period income operations income butions of period return (thousands) net assets net assets
1998 $1.00 $0.05 $0.05 $(0.05) $(0.05) $1.00 4.76% $46,512 0.87%(3) 4.66%(3)
1997(1) $1.00 $0.02 0.02 (0.02) (0.02) 1.00 2.33 50,793 0.90(2) 4.58(2)
Fiscal Years Ended March 31
1997 1.00 0.04 0.04 (0.04) (0.04) 1.00 4.38 54,687 1.05 4.29
1996 1.00 0.05 0.05 (0.05) (0.05) 1.00 4.62 57,197 1.23 4.52
1995 1.00 0.04 0.04 (0.04) (0.04) 1.00 3.80 64,541 1.16 3.70
1994 1.00 0.02 0.02 (0.02) (0.02) 1.00 2.08 78,090 1.11 2.08
</TABLE>
1 For the six month period ended September 30, 1997.
2 Annualized.
3 See Note 4.
<PAGE>
Mosaic Government Money Market Trust
Notes to Financial Statements
September 30, 1998
1. Summary of Significant Accounting Policies. Mosaic Government Money Market
Trust (the "Trust"), known as Government Investors Trust prior to May 15,
1997, is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 as an open-end, diversified investment
management company. The Trust invests solely in securities issued and
guaranteed by the U.S. Government or any of its agencies or instrumentalities
or in repurchase agreements backed by such securities. Because the Trust is
100% no-load, its shares are offered and redeemed at the net asset value per
share.
<I>Fiscal Year:</I> Effective April 1, 1997, the Trust changed its fiscal year
end to September 30.
<I>Securities Value:</I> The Trust uses the amortized cost method of valuation
whereby portfolio securities are valued at acquisition cost as adjusted for
amortization of premium or accretion of discount rather than at value based on
market factors. As required, the Trust monitors the difference between market
value and amortized cost to assure that this valuation method fairly reflects
market value. Investment transactions are recorded on the trade date. The
cost of investments sold is determined on the identified cost basis for
financial statement and federal income tax purposes.
<I>Investment Income:</I> Interest income, net of amortization of premium or
discount, and other income (if any) are recorded as earned.
<I>Dividends:</I> Net investment income, determined as gross investment income
less expenses, is declared as a dividend each business day. Dividends are
distributed to shareholders or reinvested in additional shares as of the close
of business at the end of each month.
<I>Income Tax:</I> In accordance with the requirement of Subchapter M of the
Internal Revenue Code applicable to regulated investment companies, all of the
taxable income of the Trust is distributed to its shareholders, and therefore
no federal income tax provision is required.
<I>Use of Estimates:<I> The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
<I>Change of Independent Auditor.<I> Effective for fiscal years beginning on
and after April 1, 1997, the Trust's Independent Auditor is Deloitte & Touche
LLP. Financial information appearing in this Report for fiscal years
beginning prior to April 1, 1997 were audited by another independent auditor.
2. Investment in Repurchase Agreements. When the Trust purchases securities
under agreements to resell, the securities are held in safekeeping by the
Trust's custodian bank as collateral. Should the market value of the
securities purchased under such an agreement decrease below the principal
amount to be received at the termination of the agreement plus accrued
interest, the counterparty is required to place an equivalent amount of
additional securities in safekeeping with the Trust's custodian bank.
Repurchase agreements may be terminated within seven days. Pursuant to an
Exemptive Order issued by the Securities and Exchange Commission, the Trust,
along with other registered investment companies having Advisory and Services
Agreements with the same advisor, transfers uninvested cash balances into a
joint trading account. The aggregate balance in this joint trading account is
invested in one or more consolidated repurchase agreements whose underlying
securities are U.S. Treasury or federal agency obligations.
3. Investment Advisory Fees and Other Transactions with Affiliates. The
Investment Advisor to the Trust, Madison Mosaic, LLC, a wholly owned
subsidiary of Madison Investment Advisors, Inc. ("the Advisor"), earns an
advisory fee equal to 0.5% per annum of the average net assets of the Trust.
The fees are accrued daily and are paid monthly.
The Advisor will reimburse the Trust for the amount of any expenses of the
Trust (less certain excepted expenses) that exceed 1.5% per annum of the
average net assets of the Trust up to $40 million and 1% per annum of such
amount in excess of $40 million. No amounts were reimbursed to the Trust by
the Advisor for the period ended September 30, 1998.
4. Other Expenses. Effective October 1, 1997, all expenses and support
services are provided by the Advisor under a Services Agreement for fees based
on a percentage of average net assets. The fee equals 0.38%. The fee is
accrued daily and paid monthly. During this period, $5,732 of this fee was
irrevocably waived. Had this portion of the fee not been waived the ratio of
expenses and net investment income to average net assets would have been .88%
and 4.65%, respectively.
The Advisor is responsible for the fees and expenses of trustees who are
affiliated with the Advisor and certain promotional expenses.
5. Capital Share Transactions. An unlimited number of capital shares,
without par value, are authorized. Transactions in capital shares (in dollars
and shares) were as follows:
Year Ended Six Months Ended Year Ended
Sept. 30, 1998 Sept. 30, 1997 March 31, 1997
Shares sold 50,027,489 35,363,902 60,347,031
Shares issued in
reinvestment of
dividends 2,143,986 1,146,625 2,268,110
Total shares issued 52,171,475 36,510,527 62,615,141
Shares redeemed (56,452,286) (40,404,734) (65,125,223)
Net decrease (4,280,811) (3,894,207) (2,510,082)
