Mosaic Tax-Free Trust
Semi-Annual Report
March 31, 1997
Unaudited
Arizona Fund
Maryland Fund
Missouri Fund
Virginia Fund
National Fund
Money Market
<PAGE>
Mosaic Tax-Free Trust
Letter to Shareholders
May 15, 1997
Dear Shareholder,
The semi-annual period ending March 31, 1997 was marked by
rising interest rates, a flattening of the yield curve, and
a preemptive Fed tightening. The 30-year U.S. Treasury bond
increased 17 basis points in yield from 6.92% on September
30, 1996 to 7.09% on March 31, 1997, while the 30-year
generic municipal bond increased 20 basis points from 5.55%
to 5.75% for the same period. More dramatic yield increases
occured in shorter bonds as the 2-year Treasury jumped up 31
basis points and the 2-year generic muni increased 35 basis
points to end the period at 6.41% and 4.35% respectively.
The "flattening" of the yield curve, where short rates rise
faster than long rates, is directly attributable to
continued strong economic growth that ultimately moved the
Fed to increase the Federal Funds rate 1/4 % to 5.5% on
March 25, 1997. Despite the rising rate environment, the
municipal bond market posted a 2.3% total return for the
six-month period as measured by the Lehman Brothers
Municipal Bond Index.
In addition to rising bond yields, municipal market
participants kept a watchful eye on developments out of
Washington in terms of tax reform and balanced budget
negotiations. Although radical tax reform such as the flat
tax seems to have faded since the '96 election, investors in
the short end of the muni market remain cautious of a repeal
of the incentives for corporations to buy tax-exempt bonds.
Should congress decide to eliminate the so-called de minimis
exemption (which allows corporations to buy up to two
percent of their assets in munis and retain their taxable
debt write-off), corporations would no longer be a major
funding source for the short end of the muni curve. On a
positive note, the strong economy has translated into larger
than expected state and local tax receipts and budget
surpluses in many parts of the country.
Our response to this environment was to improve the overall
structure of the Tax-Free Trust funds. We purchased bonds
that would allow the funds to continue to generate
attractive levels of tax-free income while improving the
prospects for price appreciation when yields begin to come
back down. We also modestly extended the duration of the
portfolios to be more "in line" with the overall market as
measured by the Lehman Index. We continue to believe credit
spreads are tight and therefore prefer to buy or "swap" into
higher quality bonds.
NATIONAL FUND
Municipalities continued to benefit from a strong economy
and tax payments. The increased revenues allow state and
local governments to pay for projects with current funds
rather than borrow in the credit markets. This helps to
explain the 9% drop in issuance nationally for the first
quarter of this year. We extended the duration of the
National Fund to 7.95 years and maintained an average credit
quality rating of AA. The total return for the six-month
period was 1.6% and the 30-day SEC yield was 4.41% as of
March 31, 1997.
ARIZONA FUND
Arizona continues to enjoy a strong, well-diversified
service and tourism based economy. Major municipal issurers
such as Phoenix, Tucson, and the Salt River Project maintain
AA credit ratings. Arizona ranked 23rd nationally in new
issuance during the first quarter of 1997. The largest deal
in the State during the six month period was Mesa Utility
System revenue bonds that totalled $95 million. The
duration of the Arizona portfolio stood at 6.83 and the
credit quality was maintained at AA. The total return for
the six month period was 2.05% and the 30-day SEC yield was
4.25% as of March 31, 1997.
MISSOURI FUND
Missouri has a broad-based and diversified economy that is
service-sector oriented. The state maintains a AAA credit
rating and is known for its conservative budget practices
and sound fiscal management. Missouri ranked 16th in new
issuance during the first quarter of 1997. The University
of Missouri brought two issues to market in the last six
months totalling approximately $185 million while the
Missouri Regional Convention Authority lowered its debt
service costs by issuing $61 million in refunding bonds for
the Trans World dome. The duration of the Missouri
portfolio was extended to 7.02 years while the average
credit quality was maintained at AA. The total return for
the six-month period was 1.46% and the 30-day SEC yield was
4.19% as of March 31, 1997.
MARYLAND FUND
Maryland's economy is diversified among services, light
manufacturing, and the federal government. The state is
rated AAA and maintains conservative budget operations.
Maryland ranked 21st in new issuance during the first
quarter of this year and actually saw a 21% drop in new
bonds during the period. Despite lower issuance, the State
did bring two large general obligation issues during the
semi-annual period via the competive market totalling $410
million. The duration of the Maryland portfolio stood at
6.85 years while the average credit quality remained at AA.
The total return for the six-month period was 1.64% and the
30-day SEC yield was 4.26% as of March 31, 1997.
VIRGINIA FUND
The Commonwealth of Virginia maintains a AAA general
obligation bond rating despite some credit deterioration in
the heavily defense-based Tidewater area. The
Commonwealth's economy is well diversified with an emphasis
on government and services. Virginia ranked 18th in new
issuance during the first quarter of 1997. Major issuers
during the semi-annual period included the Virginia
Transportation Board ($183 million) and the Virginia Public
Building Authority ($152 million). The duration on the
Virginia Fund was extended to 7.29 years while the average
credit quality remained at AA. The total return for the
six-month period was 1.62% and the 30-day SEC yield was
4.55% as of March 31, 1997.
MONEY MARKET
The fund continues to provide a high degree of liquidity and
safety. As of March 31, 1997, the fund's seven day yield
was 2.68% which is equivalent to a taxable yield of 4.19%
for an investor in the 36% federal tax bracket. The average
maturity of the fund stood at 41 days at the end of the
first quarter 1997.
We appreciate your confidence in Mosaic Funds (formerly
known as GIT Investment Funds) and reaffirm our commitment
to provide you with competitive returns to meet your
investment objectives.
Sincerely,
(signature)
Michael J. Peters, CFA
Vice President
<PAGE>
Arizona Fund
Portfolio of Investments - March 31, 1997
(Unaudited)
Credit Rating Principal
Moody'sS&P Amount Value
LONG-TERM MUNICIPAL BONDS: 95.6% of Net Assets
AIRPORT: 10.6%
Aaa AAA Tucson Airport Authority, Airport Revenue
(MBIA Insured), 5.7%, 6/1/13 $500,000 $ 498,750
Aa AA+ Phoenix Civic Improvement Corporation,
Airport Revenue, 6%, 7/1/07 400,000 421,000
EDUCATION: 4.9%
A nr Arizona Educational Loan Marketing
Corporation, Student Loan Revenue (AMT), 7%, 3/1/03 400,000 427,500
ELECTRIC: 5.9%
Aa AA Salt River Project Agricultural Improvements
and Power District, Electric Revenue, 6%, 1/1/16 500,000 506,875
GENERAL OBLIGATION: 23.1%
Aaa AAA Chandler (FGIC Insured), 7%, 7/1/12 300,000 326,625
Aaa AAA Maricopa County School District (FGIC Insured),
6.25%, 7/1/11 500,000 540,000
Aaa AAA Maricopa County School District (FGIC Insured),
6.7%, 7/1/11 300,000 321,375
Aaa AAA Mohave County Elementary School District
(MBIA Insured), 5.375%, 7/01/13 425,000 414,906
Aa3 AA Tucson, 5.6%, 7/1/16 400,000 395,500
HOSPITAL: 5.5%
Aaa AAA Arizona Health Facilities Authority, Hospital
Revenue (Samaritan Health Services) (MBIA Insured),
6.25%, 12/1/06 250,000 263,437
Aaa AAA Arizona Health Facilities Authority, Hospital
Revenue (Phoenix Baptist Hospital) (MBIA Insured),
6.25%, 9/1/11 200,000 213,500
HOUSING: 11.8%
nr AAA Phoenix Industrial Development Authority,
Mortgage Revenue (Chris Ridge)(FHA), 6.75%, 11/1/12 500,000 517,500
nr AAA Pima County Industrial Development Authority,
Single-Family Mortgage Revenue (GNMA Collateralized)
(AMT), 6.2%, 5/1/27 500,000 503,125
INDUSTRIAL DEVELOPMENT: 3.7%
nr AA+ Mohave County Industrial Development Authority,
Industrial Development Revenue (Citizens Utilities),
7.05%, 8/1/20 300,000 323,250
LEASING: 3.6%
Aaa AAA Scottsdale Municipal Property Corporation,
Lease Revenue (FGIC Insured), 6.25%, 11/1/14 300,000 310,500
TRANSPORTATION: 16.5%
Aa AA Arizona State Transportation Board, Highway
Revenue, 6%, 7/1/08 400,000 428,500
Aaa AAA Flagstaff, Street And Highway User Revenue
(FGIC Insured), 5.9%, 7/1/10 500,000 519,375
Baa1 A Puerto Rico Commonwealth Highway and Trans-
portation Authority, Highway Revenue, 6.375%, 7/1/08 450,000 475,875
WATER AND SEWER: 10.0%
Aaa AAA Arizona State Wastewater Manangement Authority,
Revenue (AMBAC Insured), 5.95%, 7/1/12 200,000 204,000
Aaa AAA Chandler, Water and Sewer Revenue (FGIC
Insured), 6.75%, 7/1/06 250,000 268,438
Aa AA- Phoenix Civic Improvement Corporation, Water
Revenue, 5.6%, 7/1/18 400,000 390,500
TOTAL INVESTMENTS (Cost $8,004,639)+ $ 8,270,531
See Notes to Portfolio of Investments.
Maryland Fund
Portfolio of Investments - March 31, 1997
(Unaudited)
Credit Rating Principal
Moody'sS&P Amount Value
LONG-TERM MUNICIPAL BONDS: 92.7% of Net Assets
EDUCATION: 9.8%
Aa2 AA- Maryland State Health and Higher Educational
Facilities Authority, University Revenue (Johns
Hopkins University) 7.5%, 7/1/20 $100,000 $105,125
Aaa AAA Saint Mary's College, University Revenue
(MBIA Insured), 5.55%, 9/1/23 100,000 99,500
ELECTRIC: 4.9%
Baa1 BBB+ Puerto Rico Electric Power Authority, Power
Revenue, 6%, 7/1/14 100,000 101,625
GENERAL OBLIGATION: 18.4%
Aa AA+ Anne Arundel County (AMT), 5.5%, 9/1/16 100,000 97,250
Aaa AAA Baltimore (AMBAC Insured), 6%, 10/15/04 100,000 106,375
Aa AA- Harford County, 5.75%, 9/1/08 25,000 25,750
Aaa AA+ Howard County, 6%, 5/15/13 150,000 153,937
HOSPITAL: 4.7%
Baa3 nr Prince George's County Hospital, Hospital
Revenue (Greater Southeast Healthcare System), 6.2%,
1/1/08 100,000 98,750
HOUSING: 4.8%
Aa nr Maryland State Community Development Administration,
Single-Family Housing Revenue (AMT), 6.2%, 4/1/17 100,000 100,625
LEASING: 11.3%
Aa AA- Maryland State Stadium Authority, Sports
Facilities Lease Revenue (AMT), 7.5%, 12/15/10 125,000 135,469
nr AA Montgomery County, Lease Revenue (Human
Services Headquaters Project), 5.6%, 8/1/14 100,000 98,625
POLLUTION CONTROL: 11.1%
A2 A Anne Arundel County, Pollution Control Revenue
(Baltimore Gas and Electric Company), 6%, 4/1/24 100,000 100,750
A1 A Prince George's County, Pollution Control
Revenue (Potomac Electric), 6.375%, 1/15/23 125,000 129,531
PUBLIC FACILITIES: 12.4%
Aaa AAA Baltimore, Convention Center Revenue (FGIC
Insured), 6.1%, 9/1/14 150,000 154,125
Aa AA- Howard County, Recreational Revenue, 5.95%,
2/15/10 100,000 103,500
TRANSPORTATION: 10.5%
Aa3 AA- Baltimore, Port Facilities Revenue (Consolidated
Coal Sales), 6.5%, 10/1/11 100,000 107,250
#Aaa AAA Maryland State Transportation Authority,
Transportation Revenue, 6.8%, 7/1/16 100,000 110,750
WASTE: 4.8%
A nr Northeast Waste Disposal Authority, Waste
Revenue (Montgomery County)(AMT), 6.3%, 7/1/16 100,000 100,125
TOTAL INVESTMENTS (Cost $1,901,072)+ $1,929,062
See Notes to Portfolio of Investments.
Missouri Fund
Portfolio of Investments - March 31, 1997
(Unaudited)
Credit Rating Principal
Moody'sS&P Amount Value
LONG-TERM MUNICIPAL BONDS: 94.1% of Net Assets
AIRPORT: 4.7%
Aaa AAA St. Louis, Airport Revenue, Lambert-St. Louis
International (FGIC Insured) (AMT), 6.125%, 7/1/12 $500,000 $516,250
EDUCATION: 6.0%
A nr Missouri Higher Education Loan Authority,
Student Loan Revenue (AMT), 5.9%, 2/15/08 500,000 497,500
Aaa AAA Missouri State Health & Educational Facilities
Authority, University Revenue, (St. Louis University)
(AMBAC Insured) 6.5%, 8/1/16 150,000 160,313
ELECTRIC: 10.1%
nr AAA Puerto Rico Electric Power Authority, Power
Revenue, 8%, 7/1/08 175,000 186,813
Aaa AAA Sikeston, Electric Revenue (MBIA Insured),
6%, 6/1/14 400,000 420,000
nr A University Development Foundation, Lease
Revenue (Missouri Power), 5.75%, 5/1/13 500,000 496,875
GENERAL OBLIGATION: 34.1%
Aa nr Clayton School District, 5.65%, 2/1/14 500,000 495,000
Aa nr Jefferson City School District, 6.7%, 3/1/11 200,000 223,500
Aaa AAA Missouri State, Correctional Facilities
Improvements, 5.5%, 4/1/20 500,000 487,500
Aaa AAA Missouri State (Fourth State Building),
5.75%, 8/1/19 400,000 401,500
nr AA North Kansas City School District, 5.25%,
3/1/12 450,000 434,812
Aaa AAA St. Charles County, Francis Howell School
District (FGIC Insured), 6.5%, 3/1/05 250,000 267,187
Aa1 nr St. Louis County, 6.3%, 2/1/11 400,000 417,000
Aa nr St. Louis County School District, 5.5%,
2/15/12 500,000 495,625
Aa nr St. Louis County School District, 5.5%,
2/15/13 500,000 492,500
HOSPITAL: 12.8%
Aaa AAA Missouri State Health and Educational
Facilities Authority, Health Facilities Revenue (SSM
Health Care) (MBIA Insured), 6.25%, 6/1/16 250,000 258,750
Aaa AAA Missouri State Health and Educational
Facilities Authority, Health Facilities Revenue (Heartland
Health System) (AMBAC Insured), 6.35%, 11/15/17 500,000 521,250
nr nr Missouri State Health and Educational Facilities
Authority, Health Facilities Revenue, 7.625%, 7/1/18 95,000 103,906
Aaa AAA Missouri State Health and Educational Facilities
Authority, Health Facilities Revenue (Health Midwest)
(MBIA Insured), 6.25%, 6/1/16 500,000 515,625
HOUSING: 7.0%
nr AAA Missouri State Housing Development Commission,
Single-Family Mortgage Revenue (GNMA Collaterized) (FHA)
(AMT), 7.75%, 6/1/22 75,000 78,750
nr AAA Missouri State Housing Development Commission,
Single-Family Mortgage Revenue (GNMA Collaterized) (FHA)
(AMT), 7.375%, 8/1/23 190,000 200,925
nr AAA St. Louis County, Mortgage Revenue (Certificates
of Receipt) (AMT), 5.65%, 2/1/20 500,000 484,375
LEASING: 9.9%
#Aaa AAA Kansas City Municipal Assistance Corporation, Lease
Revenue (H. Roe Bartle)(AMBAC Insured), 6%, 4/15/20 500,000 523,750
Aa AA Missouri State Board of Public Buildings, Lease
Revenue (State Office Building), 6.4%, 12/1/08 300,000 317,625
A1 A+ Missouri State Regional Convention and Sports
Complex Authority, 5.5%, 8/15/13 250,000 237,500
WASTE: 2.0%
A1 AA- St. Louis Industrial Development Authority,
Pollution Control Revenue (Anheuser Busch Company),
6.65%, 5/1/16 200,000 219,750
WATER: 7.4%
A1 AA Columbia, Water Revenue, 6.125%, 10/1/12 400,000 411,000
Aa AA Kansas City, Water Revenue, 5%, 12/1/05 400,000 399,000
TOTAL LONG-TERM MUNICIPAL BONDS (Cost $10,079,907) 10,264,581
SHORT-TERM MUNICIPAL BONDS: 2.8% of Net Assets
HOSPITAL: 2.8%
nr A-1+ Missouri State Health and Educational Facilities
Authority, Hospital Revenue (St. Francis Medical Center)
(LOC - Credit Local de France), 3.8%, 6/1/26^ 300,000 300,000
TOTAL INVESTMENTS (Cost $10,379,907)+ $10,564,581
See Notes to Portfolio of Investments.
Virginia Fund
Portfolio of Investments - March 31, 1997
(Unaudited)
Credit Rating Principal
Moody'sS&P Amount Value
LONG-TERM MUNICIPAL BONDS: 97.6% of Net Assets
AIRPORT: 4.8%
Aaa AAA Capital Regional Airport Commission, Airport
Revenue (AMBAC Insured), 5.625%, 7/1/15 $ 500,000 $489,375
Aaa AAA Metropolitan Washington D.C. Airports Authority,
Airport Revenue (MBIA Insured) (AMT), 6.625%, 10/1/12 500,000 535,000
Aaa AAA Metropolitan Washington D.C. Airports Authority,
Airport Revenue (FGIC Insured)(AMT), 7%, 10/1/18 500,000 536,250
EDUCATION: 14.1%
A1 nr Loudoun County Industrial Development Authority,
Facilities Revenue (George Washington University), 6.25% 500,000 504,375
nr BBB- Virginia College Building Authority, Facilities
Revenue (Marymount University), 7%, 7/1/22 350,000 366,187
Aa2 AA Virginia College Building Authority, Facilities
Revenue (Washington and Lee University), 6.4%, 1/1/12 500,000 521,875
Aa2 AA Virginia College Building Authority, Facilities
Revenue (Washington and Lee University), 5.75%, 1/1/14 555,000 550,838
Aa AA Virginia State Public School Authority,
Revenue, 6.25%, 8/1/10 500,000 525,000
Aa AA Virginia State Public School Authority,
Revenue, 6.2%, 8/1/13 500,000 535,625
Aa AA Virginia State Public School Authority,
Revenue, 6.5%, 8/1/15 500,000 508,750
Aa AA Virginia State Public School Authority,
Special Obligation (York County), 5.9%, 7/15/13 500,000 526,250
A1 AA- Virginia State Universities, University Revenue
(Virginia Commonwealth University), 5.75%, 5/1/15 500,000 494,375
ELECTRICAL: 3.1%
Aaa AAA Halifax County Industrial Development Authority,
Power Revenue (Old Dominion Electric) (MBIA Insured)
(AMT), 6%, 12/1/22 1,000,000 1,010,000
GENERAL OBLIGATION: 23.9%
Aaa AAA Arlington County, 6%, 8/1/12 1,000,000 1,042,500
Aaa AAA Fairfax County, 5.625%, 6/1/13 500,000 504,375
Aaa AAA Franklin County (FGIC Insured), 6.5%,7/15/12 300,000 315,375
Aa AA- Hampton, 6%, 1/15/08 500,000 526,250
A A Henry County, 6%, 7/15/14 500,000 509,375
Aaa AAA Leesburg (AMBAC Insured), 5.6%, 6/1/15 500,000 497,500
Aaa AAA Norfolk (MBIA Insured), 5.75%, 6/1/13 500,000 503,750
Aa AA Norfolk, 5.125%, 6/1/06 750,000 750,938
A1 AA Richmond, 6.25%, 1/15/18 1,000,000 1,027,500
Aa AA Virginia Beach, 6.2%, 9/1/13 1,000,000 1,052,500
Aa AA Winchester, 5.5%, 1/15/14 1,000,000 971,250
HOSPITAL: 6.5%
Aaa AAA Danville Industrial Development Authority,
Hospital Revenue (Danville Regional Medical Center)
(FGIC Insured), 6.375%, 10/1/14 500,000 529,375
Aa2 AA Norfolk Industrial Development Authority,
Hospital Revenue (Sentara Hospital), 6.5%, 11/1/13 1,000,000 1,052,500
Aaa AAA Roanoke Industrial Development Authority,
Hospital Revenue (Roanoke Memorial Hospitals) (MBIA
Insured), 6.125%, 7/1/17 500,000 525,625
HOUSING: 3.2%
Aa1 AA+ Virginia State Housing Development Authority,
Mortgage Revenue (AMT), 6.95%, 1/1/10 1,000,000 1,042,500
INDUSTRIAL DEVELOPMENT: 4.9%
Baa3 BBB- Peninsula Ports Authority, Coal Terminal
Revenue, 7.375%, 6/1/20 1,000,000 1,057,500
A1 A Puerto Rico, Industrial Revenue (Pepsico,
Inc.), 6.25%, 11/15/13 500,000 530,625
LEASING AND OTHER FACILITIES: 9.4%
Aa AA Fairfax County Economic Development Authority,
Lease Revenue, 5.5%, 5/15/18 500,000 470,000
nr BBB Fairfax County Park Authority, Facilities
Revenue, 6.625%, 7/15/14 500,000 510,000
nr A- Prince William County Park Authority, Revenue,
6.875%, 10/15/16 500,000 529,375
Aa AA Virginia State Public Building Authority,
Building Revenue, 6%, 8/1/08 500,000 526,250
Aa AA Virginia State Public Building Authority,
Building Revenue, 5.1%, 8/1/05 1,000,000 1,000,000
TRANSPORTATION: 12.6%
Aaa AAA Chesapeake Bay Bridge and Tunnel Commission,
Highway Revenue (MBIA Insured), 5.25%, 7/1/19 1,000,000 926,250
Aaa AAA Richmond Metropolitan Authority, Expressway
Revenue (FGIC Insured), 6.375%, 7/15/16 1,000,000 1,043,750
Aa AA Virginia State Transportation Board, Revenue
(Route 28), 6%, 4/1/10 1,000,000 1,026,250
Aaa AAA Washington D.C. Metropolitan Area Transportation
Authority, Transit Revenue (FGIC Insured), 6%, 7/1/07 1,000,000 1,067,500
WASTE: 5.7%
A1 A+ Fairfax County Economic Development Authority,
Revenue (Ogden Martin Systems) (AMT), 7.75%, 2/1/11 500,000 537,500
A1 AA- Henrico County, Water and Sewer Revenue,
6.25%, 5/1/13 500,000 511,250
Aaa AAA Loudoun County Sanitation Authority, Water
and Sewer Revenue (FGIC Insured), 6.25%, 1/1/16 500,000 523,125
Baa3 BBB West Point Industrial Development Authority,
Waste Revenue (Chesapeake Corporation), 6.25%, 3/1/19 250,000 254,062
WATER: 9.3%
Aa AA- Fairfax County Water Authority, Water Revenue,
6%, 4/1/22 1,500,000 1,511,250
Aaa AAA Frederick-Winchester Service Authority, Sewer
Revenue (AMBAC Insured), 5.75%, 10/1/15 1,000,000 988,750
Aaa AAA Norfolk, Water Revenue (MBIA Insured),
5.75%, 11/1/12 500,000 502,500
LONG-TERM MUNICIPAL BONDS (Cost $30,739,215)+ $ 31,471,150
See Notes to Portfolio of Investments.
National Fund
Portfolio of Investments - March 31, 1997
(Unaudited)
Credit Rating Principal
Moody'sS&P Amount Value
LONG-TERM MUNICIPAL BONDS: 97.1% of Net Assets
ARIZONA: 3.8%
Aa AA Arizona State Transportation Board, Highway
Revenue, 6%, 7/1/08 $ 1,000,000 $ 1,071,250
DISTRICT OF COLUMBIA: 3.8%
Aaa AAA Metropolitan Washington D.C. Airports Authority,
Airport Revenue (MBIA Insured)(AMT), 6.625%,
10/1/19 1,000,000 1,057,500
GEORGIA: 3.6%
Aaa AAA Georgia Municipal Electric Authority, Electric
Revenue, 5.5%, 1/01/12 1,000,000 1,000,000
HAWAII: 5.8%
Aaa AAA Hawaii, Airport Revenue (FGIC Insured)
(AMT), 7%, 7/1/20 1,500,000 1,621,875
ILLINOIS: 4.8%
Aaa AAA Illinois State, General Obligation (FGIC
Insured), 5.375%, 9/1/07 1,000,000 1,013,750
Aaa AAA Regional Transportation Authority, Transit
Revenue (AMBAC Insured), 7.2%, 11/1/20 300,000 349,875
IOWA: 3.8%
Aaa AAA Mason City, Hospital Revenue (Sisters of
Mercy) (FSA Insured), 7%, 8/15/14 1,000,000 1,081,250
KANSAS: 1.9%
Aa AA Kansas State Department of Transportation,
Highway Revenue, 6.125%, 9/1/09 500,000 540,000
LOUISIANA: 1.8%
Aaa AAA Louisiana, General Obligation (MBIA Insured),
6%, 5/15/15 500,000 511,875
MAINE: 1.8%
Aaa AAA Maine State Turnpike Authority, Highway Revenue
(MBIA Insured), 6%, 7/1/18 500,000 509,375
MASSACHUSETTS: 4.1%
A1 A+ Massachusetts Bay Transportation Authority,
Transit Revenue, 7%, 3/1/14 1,000,000 1,152,500
MINNESOTA: 1.8%
Aa2 AA+ Minnesota State Housing Finance Agency,
Housing Revenue (Single-Family Mortgage)
(AMT), 6.25%, 7/1/26 500,000 501,875
MISSISSIPPI: 4.7%
Aaa AAA Harrison County Wastewater Management District,
Sewer Revenue (Wastewater Treatment Facilities)
(FGIC Insured) 8.5%, 2/1/13 500,000 661,250
Aaa AAA Harrison County Wastewater Management District,
Sewer Revenue (Wastewater Treatment Facilities)
(FGIC Insured) 7.75%, 2/1/14 500,000 621,250
NEVADA: 1.8%
Aaa AAA Washoe County, Gas and Water Facilities Revenue
(AMBAC Insured), 6.3%, 12/1/14 500,000 518,125
PENNSYLVANIA: 9.6%
Aaa AAA Lehigh County, Hospital Revenue (Lehigh Valley
Hospital) (MBIA Insured), 7%, 7/1/16 1,000,000 1,136,250
Aaa AAA Pennsylvania State Higher Educational Facilities
Authority, University Revenue (Duquesne University)
(MBIA Insured), 6.75%, 4/1/20 500,000 525,625
Aaa AAA Pennsylvania State Industrial Development Authority,
Economic Development Revenue (AMBAC Insured),
6%, 1/1/12 1,000,000 1,027,500
RHODE ISLAND: 1.8%
Aa1 AA Rhode Island State Health and Higher Educational
Facilities, University Revenue (Brown University),
6.75%, 9/1/16 500,000 517,500
SOUTH CAROLINA: 3.9%
#Aaa AAA Piedmont Municipal Power Agency Electric Revenue
(FGIC Insured), 6.5%, 1/01/16 145,000 161,856
Aaa AAA Piedmont Municipal Power Agency Electric Revenue
(FGIC Insured), 6.5%, 1/01/16 855,000 934,088
TEXAS: 11.9%
Aa3 AA Harris County, General Obligtion, 6.5%,
8/15/15 1,000,000 1,076,250
Aaa AAA Texas Public Building Authority, Building
Revenue (MBIA Insured), 7.125%, 8/1/11 1,000,000 1,143,750
Aaa AAA United Independent School District, General
Obligation (PSFG Insured), 7%, 8/15/05 1,000,000 1,132,500
UTAH: 3.6%
A1 A+ Intermountain Power Agency, Electric
Revenue, 6.15%, 7/01/14 1,000,000 1,026,250
VIRGINIA: 10.2%
Aa2 AA Fairfax County Industrial Development Authority,
Revenue (Inova Health System), 5.25%, 8/15/19 1,000,000 922,500
nr A- Prince William County Park Authority,
Revenue, 6.875%, 10/15/16 500,000 529,375
Aa1 AA+ Virginia State Housing Development Authority,
Multifamily Housing Revenue, 6.65%, 11/1/13 400,000 418,500
Aaa AAA Virginia Beach Development Authority, Hospital
Revenue (General Hospital) (AMBAC Insured), 5%,
2/15/06 1,000,000 987,500
WASHINGTON: 10.8%
Aa1 AA+ King County, General Obligation, 5.25%,
1/01/14 1,000,000 958,750
A1 AA- Port Seattle, Revenue (AMBAC Insured)
(AMT), 7.6%, 12/1/09 500,000 553,125
A1 A+ Snohomish County Public Utility District,
Electric Revenue, 7%, 1/1/16 1,000,000 1,052,500
Aa1 AA- Washington State Public Power Supply, Electric
Revenue (System Nuclear Project Number 2),
4.9%, 7/01/05 500,000 482,500
WYOMING: 1.8%
Aaa AAA Wyoming Municipal Power Agency Authority, Electric
Revenue (MBIA Insured), 6.125%, 1/1/16 500,000 512,500
TOTAL LONG-TERM MUNICIPAL BONDS (Cost $26,765,466) 27,310,569
SHORT-TERM MUNICIPAL BONDS: 1.4% of Net Assets
MISSOURI: 0.4%
VMIG1 A-1 Kansas City Industrial Development Authority,
Hospital Revenue (Research Health Services
Systems) (MBIA Insured), 3.85%, 10/15/14 100,000 100,000
VIRGINIA: 1.1%
VMIG1 A-1 Capital Region Airport Commission, Airport
Revenue (Richmond International Airport)
(AMBAC Insured), 3.35%, 7/1/25^ 300,000 300,000
TOTAL SHORT-TERM MUNICIPAL BONDS (Cost $400,000) 400,000
TOTAL INVESTMENTS (Cost $27,165,466)+ $27,710,569
See Notes to Portfolio of Investments.
Money Market
Portfolio of Investments - March 31, 1997
(Unaudited)
Credit Rating Principal
Moody'sS&P Amount Value
SHORT-TERM MUNICIPAL SECURITIES: 97.4% of Net Assets
FLORIDA: 2.8%
VMIG1 nr Atlantic Beach, Hospital Revenue (Fleet Landing)
(LOC - Barnett Bank), 3.9%, 10/1/24^ $ 200,000 $ 200,000
GEORGIA: 8.3%
nr A-1+ Fulton County Residential Care Facilities, Hospital
Revenue (Lenbrook Square Foundation) (LOC-Rabobank
Nederland, NY), 3.8%, 1/1/18^ 300,000 300,000
Aaa AA+ Georgia State, General Obligation, 7.7%,
4/1/97 300,000 300,000
LOUISIANA: 14.0%
VMIG1 AAA Louisiana Public Facilities Authority, Hospital
Revenue (Willis-Knighton) (AMBAC Insured),
3.5%, 9/1/23 ^ 300,000 300,000
#Aaa A- Louisiana State, General Obligation,7%, 8/1/97 300,000 308,907
VMIG1 A-1+ New Orleans Aviation Board, Airport Revenue
(MBIA Insured) (LOC - Credit Local de France),
3.4%, 8/1/16 ^ 400,000 400,000
MARYLAND: 4.9%
Aaa AAA Baltimore County, General Obligation, 6.8%,
9/1/97 100,000 101,283
Aaa AAA Maryland State, General Obligation, 3.5%,
8/1/97 250,000 249,900
MICHIGAN: 4.3%
Aaa AAA Detroit, Sewer Revenue (BIG Insured), 8%,
7/1/97 300,000 308,916
MINNESOTA: 1.4%
VMIG1 A-1+ Minneapolis and St. Paul Housing and Redevelopment
Authority, Health Care Revenue (Childrens Health
Care) (FSA Insured), 3.85%, 8/15/25^ 100,000 100,000
MISSOURI: 11.8%
VMIG1 nr Columbia (LOC - Toronto Dominion Bank), 3.85%,
6/1/08 ^ 300,000 300,000
Aaa AAA Missouri State, General Obligation (Third
State Building), 6.3%, 8/1/97 300,000 302,565
VMIG1 nr Missouri State Health & Educational Facilities
Authority, University Revenue (LOC-Chase
Manhattan), 3.85%, 8/15/21^ 250,000 250,000
NEBRASKA: 5.6%
VMIG1 AAA Nebraska Higher Education Loan Program, Student
Loan Revenue (MBIA Insured), 3.55%, 12/1/15 ^ 400,000 400,000
NEW YORK: 4.2%
VMIG1 A-1+ New York, General Obligation (LOC-State Street
B&T NY), 3.85%, 8/1/22 ^ 200,000 200,000
#Aaa AAA New York State Housing Finance Agency, General
Obligation, 6.6%, 11/1/97 100,000 101,563
NORTH CAROLINA: 14.2%
Aa1 AAA Durham, General Obligation, 4.7%, 5/1/97 225,000 225,212
VMIG1 A-1+ Greensboro, General Obligation (LOC - Wachovia
Bank), 3.4%, 4/1/07 ^ 300,000 300,000
VMIG1 A-2 North Carolina Medical Care Commission, Hospital
Revenue (MBIA Insured), 3.5%, 12/1/25 ^ 300,000 300,000
Aaa AAA North Carolina State, General Obligation, 3.5%,
8/1/97 200,000 199,908
OHIO: 1.4%
Aaa AAA Ohio State Public Facilities Commisssion,
University Revenue (AMBAC Insured), 5.2%, 5/1/97 100,000 100,131
TEXAS: 11.3%
Aaa AAA El Paso Independent School District, General
Obligation (AMBAC Insured), 9.25%, 7/1/97 115,000 116,455
VMIG1 A-1+ Port Development Corporation, Marine Terminal
Revenue (Stolt Terminals) (LOC - Credit Suisse,
NY), 3.45%, 1/15/14^ 400,000 400,000
MIGI Sp1+ Texas State, General Obligation (Tax and Revenue
Anticipatory Note), 4.75%, 8/29/97 300,000 301,110
UTAH: 4.2%
VMIG1 A-1+ Salt Lake City, Airport Revenue (LOC - Credit
Suisse, N.Y.) (AMT), 3.45%, 6/1/98 ^ 300,000 300,000
VIRGINIA: 2.8%
VMIG1 nr Henrico County, Industrial Development Revenue
(Hermitage Project) (LOC - NationsBank of Virginia),
3.9%, 5/1/24 ^ 200,000 200,000
WASHINGTON: 6.2%
nr A-1+ Port Kalama, Port Facilities Revenue (Conagra)
(LOC - Morgan Guaranty Trust), 3.30%, 1/1/04 ^ 50,000 50,000
nr A-1+ Washington State Housing Finance Commission,
Multifamily Mortgage Revenue (LOC - Pacific
First Federal Savings), 3.5%, 7/1/20^ 300,000 300,000
VMIG1 nr Washington State Housing Finance Commission,
Housing Revenue (Panorama City Project)
(LOC-Key Bank of Washington), 3.85%, 1/1/27^ 100,000 100,000
TOTAL INVESTMENTS (Cost $7,016,823)+ $7,015,950
Notes to Portfolio of Investments:
+ Aggregate cost for federal income tax purposes
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Arizona Maryland Missouri Virginia National Money
Fund Fund Fund Fund Fund Market
Aggregate cost $8,004,639 $1,901,072 $10,379,907 $30,739,215 $27,165,466 $7,016,823
Gross unrealized
appreciation 279,696 35,902 258,164 864,084 730,609 441
Gross unrealized
depreciation (13,804) (7,912) (73,490) (132,149) (185,506) (1,314)
Net unrealized
appreciation 265,892 27,990 184,674 731,935 545,103 (873)
(depreciation)
</TABLE>
^ Security has a variable coupon rate and is subject to a demand
feature before final maturity. Coupon rate as of March 31, 1997
#Aaa Refunded Bonds
AMBAC American Municipal Bond Assurance Corporation
AMT Subject to Alternative Minimum Tax
BIG Bond Investors Guaranty Insurance Company
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Administration
FSA Federal Security Assistance
GNMA Government National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
Moody's Moody's Investors Service, Inc.
nr Not rated
PSFG Permanent School Fund Guaranty
S&P Standard & Poor's Corporation
The Notes to Financial Statements are an integral part of these
statements.
<PAGE>
Statement of Assets and Liabilities
March 31, 1997
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Arizona Maryland Missouri Virginia National Money
Fund Fund Fund Fund Fund Market
ASSETS
Investments,
at cost $8,004,639 $1,901,072 $10,379,907 $30,739,215 $27,165,466 $7,016,823
Investments, at value
(Note 1) $8,270,531 $1,929,062 $10,564,581 $31,471,150 $27,710,569 $7,015,950
Cash 156,859 120,276 191,968 258,380 56,734 130,383
Receivables
Investment securities
sold 526,250 - - - - - - - - - -
Interest 132,777 31,584 152,735 562,036 378,384 59,648
Capital shares
sold - - - - - - - - - - 20
Share subscriptions
(Note 1) 292 253 - - 199,844 8,810 9,299
Other assets - - - - - - 196 - - - -
Total assets 9,086,709 2,081,175 10,909,284 32,491,606 28,154,497 7,215,300
LIABILITIES
Payables
Investment securities
purchased 423,347 - - - - - - - - - -
Dividends 8,278 824 5,557 18,144 8,859 413
Capital shares
redeemed - - - - - - 30,679 120 - -
Shares reserved for subscription
(Note 1) 292 253 - - 199,844 8,810 9,299
Other liabilities - - - - 8 45 34 29
Total liabilities 431,917 1,077 5,565 248,712 17,823 9,741
NET ASSETS
(Note 4) $8,654,792 $2,080,098 $10,903,719 $32,242,894 $28,136,674 $7,205,559
CAPITAL SHARES
OUTSTANDING 854,662 215,237 1,074,895 2,895,705 2,751,095 7,206,603
NET ASSET VALUE
PER SHARE $10.127 $9.664 $10.144 $11.135 $10.227 $1.000
</TABLE>
Statements of Operations
For the Six Months Ended March 31, 1997
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Arizona Maryland Missouri Virginia National Money
Fund Fund Fund Fund Fund Market
INVESTMENT INCOME (Note 1)
Interest income $254,814 $ 55,621 $313,801 $935,704 $783,022 $123,614
EXPENSES (Notes 3 and 4)
Investment
advisory fee 27,781 6,172 35,337 102,637 90,753 18,607
Transfer agent and
administrative
expenses 18,205 3,829 22,250 66,232 46,798 14,765
Securities registration
and blue sky
expenses 714 369 841 216 4,175 3,751
Auditing fees 1,061 191 2,824 6,734 5,078 1,399
Trustees' fees 1,000 1,000 1,000 1,000 1,000 1,000
Custodian fees 1,409 540 1,614 5,514 4,631 1,160
Printing costs 746 160 959 2,746 2,070 773
Fidelity bond 486 27 422 1,020 748 199
Legal fees 535 61 961 2,312 1,703 444
Custodian fees paid
indirectly (1,584) (753) (2,251) (3,281) (5,217) (3,170)
Expenses incurred and
paid by
investment
advisor - - - - - - - - - - (8,784)
Total expenses 50,353 11,596 63,957 185,130 151,739 30,144
NET INVESTMENT
INCOME 204,461 44,025 249,844 750,574 631,283 93,470
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss)
on investments 41,999 (21) 42,591 59,666 107,812 - -
Net unrealized
depreciation of
investments (62,170) (10,532) (120,186) (271,621) (263,141) (727)
NET LOSS ON
INVESTMENTS (20,171) (10,553) (77,595) (211,955) (155,329) (727)
TOTAL INCREASE IN
NET ASSETS
RESULTING FROM
OPERATIONS $ 184,290 $ 33,472 $172,249 $538,619 $475,954 $ 92,743
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Arizona Fund Maryland Fund Missouri Fund
Six Months Ended Six Months Ended Six Months Ended
3/31/97 Year Ended 3/31/97 Year Ended 3/31/97 Year Ended
(Unaudited) 9/30/96 (Unaudited) 9/30/96 (Unaudited) 9/30/96
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment
income $ 204,461 $ 413,956 $ 44,025 $ 107,533 $ 249,844 $ 486,004
Net realized gain
(loss) on
investments 41,999 67,565 (21) (13,070) 42,591 60,309
Net unrealized
appreciation
(depreciation)
of investments (62,170) (20,919) (10,532) 2,576 (120,186) 41,399
Total increase in
net assets
resulting from
operations 184,290 460,602 33,472 97,039 172,249 587,712
DISTRIBUTIONS TO SHAREHOLDERS
Net investment
income (204,461) (413,956) (44,025) (107,533) (249,844) (486,004)
CAPITAL SHARE
TRANSACTIONS
(Note 6) (390,968) (989,440) 48,710 (827,686) (399,793) (114,267)
TOTAL INCREASE (DECREASE)
IN NET ASSETS (411,139) (942,794) 38,157 (838,180) (477,388) (12,559)
NET ASSETS
Beginning of
period 9,065,931 10,008,725 2,041,941 2,880,121 11,381,107 11,393,666
End of period $8,654,792 $ 9,065,931 $2,080,098 $2,041,941 $10,903,719 $11,381,107
</TABLE>
<TABLE>
<CAPTION>
Virginia Fund National Fund Money Market Fund
Six Months Ended Six Months Ended Six Months Ended
3/31/97 Year Ended 3/31/97 Year Ended 3/31/97 Year Ended
(Unaudited) 9/30/96 (Unaudited) 9/30/96 (Unaudited) 9/30/96
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment
income $ 750,574 $ 1,548,399 $ 631,283 $ 1,333,386 $ 93,470 $ 215,682
Net realized gain
on investments 59,666 394,667 107,812 139,533 - - - -
Net unrealized
appreciation
(depreciation) of
investments (271,621) (128,139) (263,141) 106,127 (727) 414
Total increase in
net assets
resulting from
operations 538,619 1,814,927 475,954 1,579,046 92,743 216,096
DISTRIBUTIONS TO
SHAREHOLDERS
Net investment
income (750,574) (1,548,399) (631,283) (1,333,386) (93,470) (215,787)
CAPITAL SHARE
TRANSACTIONS(Note 6)(885,099) (748,933) (994,134) (3,693,916) (292,982) (955,285)
TOTAL DECREASE IN NET
ASSETS (1,097,054) (482,405)(1,149,463) (3,448,256) (293,709) (954,976)
NET ASSETS
Beginning of
period 33,339,948 33,822,353 29,286,137 32,734,393 7,499,268 8,454,244
End of period $32,242,894 $33,339,948 28,136,674 $29,286,137 $7,205,559 $7,499,268
</TABLE>
<TABLE>
The Notes to Financial Statements are an integral part of these statements.
Financial Highlights
Selected data for a share outstanding throughout each period:
Arizona Portfolio
Years ended September 30,****
<C> <C> <C> <C> <C> <C>
1997# 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $10.153 10.113 9.706 11.208 10.568 10.187
Net
investment
income $0.234 0.444 0.440 0.436 0.490 0.528
Net
realized &
unrealized
gains
(losses) on
securities $(0.026)$0.040 0.407 (1.102) 0.786 0.434
Total from
investment
operations $0.208 0.484 0.847 (0.666) 1.276 0.962
Distributions
from net
investment
income $(0.234)(0.444)(0.440)(0.436)(0.490)(0.528)
Distributions
from capital
gains $ -- -- -- (0.400)(0.146)(0.053)
Total
Distributions$(0.234)(0.444)(0.440)(0.836)(0.636)(0.581)
Net asset
value end
of period $10.127 10.153 10.113 9.706 11.208 10.568
Total
Return 4.10%2 4.85% 8.95% (6.20)%12.57% 9.74%
Net assets
at end of
period
(thousands) $ 8,655 9,066 10,009 11,815 15,471 11,911
Ratio of
expenses to
average net
assets*** 1.16%2 1.35% 1.31% 1.29% 1.23% 1.15%
Net
investment
income to
average
net assets 4.58%2 4.35% 4.48% 4.23% 4.54% 5.14%
Portfolio
turnover 5% 9% 24% 67% 63% 23%
Maryland Portfolio
Years ended September 30,****
<C> <C> <C> <C> <C>
1997# 1996 1995 1994 1993*
Net asset
value
beginning
of period $ 9.714 9.738 9.323 10.441 10.000
Net
investment
income $ 0.210 0.405 0.418 0.455 0.274
Net
realized &
unrealized
gains
(losses) on
securities $(0.050)(0.024) 0.415 (1.102) 0.441
Total from
investment
operations $0.160 0.381 0.833 (0.647) 0.715
Distributions
from net
investment
income $(0.210)(0.405)(0.418)(0.455)(0.274)
Distributions
from capital
gains $ -- -- -- (0.016) --
Total
Distributions$(0.210)(0.405)(0.418)(0.471)(0.274)
Net asset
value end
of period $ 9.664 9.714 9.738 9.323 10.441
Total
Return 3.27%2 3.96% 9.17% (6.33)%11.91%2
Net assets
at end of
period
(thousands) $2,080 2,042 2,880 3,083 3,377
Ratio of
expenses to
average net
assets*** 1.20%2 1.28% 0.87% 0.64% 0.20%2
Net
investment
income to
average
net assets 4.29%2 4.12% 4.42% 4.60% 4.72%2
Portfolio
turnover -- 21% 9% 78% 35%
Missouri Portfolio
Years ended September 30,****
<C> <C> <C> <C> <C> <C>
1997# 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $10.220 10.113 9.728 11.173 10.468 10.117
Net
investment
income $0.226 0.438 0.436 0.437 0.494 0.514
Net
realized &
unrealized
gains
(losses) on
securities $(0.076)0.087 0.405 (1.058) 0.726 0.377
Total from
investment
operations $0.150 0.525 0.841 (0.621) 1.220 0.891
Distributions
from net
investment
income $(0.226)(0.438)(0.436)(0.437)(0.494)(0.514)
Distributions
from capital
gains $ -- -- -- (0.387)(0.021)(0.026)
Total
Distributions$(0.226)(0.438)(0.436)(0.824)(0.515)(0.540)
Net asset
value end
of period $10.144 10.220 10.133 9.728 11.173 10.468
Total
Return 2.92%2 5.24% 8.87% (5.80)%11.98% 9.06%
Net assets
at end of
period
(thousands) $10,904 11,381 11,394 11,490 14,001 11,023
Ratio of
expenses to
average net
assets*** 1.13%2 1.34% 1.31% 1.29% 1.23% 1.18%
Net
investment
income to
average
net assets 4.40%2 4.27% 4.43% 4.23% 4.59% 5.05%
Portfolio
turnover 4% 21% 16% 52% 65% 8%
Virginia Portfolio
Years ended September 30,****
<C> <C> <C> <C> <C> <C>
1997# 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $11.209 11.115 10.631 12.372 11.621 11.351
Net
investment
income $ 0.257 0.508 0.503 0.479 0.569 0.592
Net
realized &
unrealized
gains
(losses) on
securities $(0.074)0.094 0.484 (1.146) 0.871 0.387
Total from
investment
operations $0.183 0.602 0.987 (0.667) 1.440 0.979
Distributions
from net
investment
income $(0.257)(0.508)(0.503)(0.479)(0.569)(0.592)
Distributions
from capital
gains $ -- -- -- (0.595)(0.120)(0.117)
Total
Distributions$(0.257)(0.508)(0.503)(1.074)(0.689)(0.709)
Net asset
value end
of period $11.135 11.209 11.115 10.631 12.372 11.621
Total
Return 3.24%2 5.50% 9.54% (5.67)%12.85% 8.92%
Net assets
at end of
period
(thousands) $32,243 33,340 33,822 35,550 44,092 37,421
Ratio of
expenses to
average net
assets*** 1.14%2 1.20% 1.14% 1.18% 1.10% 1.13%
Net
investment
income to
average
net assets 4.55%2 4.53% 4.68% 4.23% 4.80% 5.20%
Portfolio
turnover 4% 28% 55% 104% 80% 74%
National Portfolio*
Years ended September 30,****
<C> <C> <C> <C> <C> <C>
1997# 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $10.286 10.211 9.851 11.910 11.329 10.794
Net
investment
income $ 0.224 0.446 0.446 0.420 0.550 0.605
Net
realized &
unrealized
gains
(losses) on
securities $(0.059)$0.075 0.360 (1.122) 0.793 0.535
Total from
investment
operations $0.165 0.521 0.806 (0.702) 1.343 1.140
Distributions
from net
investment
income $(0.224)(0.446)(0.446)(0.420)(0.550)(0.605)
Distributions
from capital
gains $ -- -- -- (0.937)(0.212) --
Total
Distributions$(0.224)(0.446)(0.446)(1.357)(0.762)(0.605)
Net asset
value end
of period $10.227 10.286 10.211 9.851 11.910 11.329
Total
Return 3.20%2 5.17% 8.40% (6.25)%12.44% 10.83%
Net assets
at end of
period
(thousands) $28,137 29,286 32,734 34,072 42,483 41,273
Ratio of
expenses to
average net
assets*** 1.08%2 1.20% 1.18% 1.23% 1.10% 1.17%
Net
investment
income to
average
net assets 4.33%2 4.32% 4.49% 3.98% 4.83% 5.47%
Portfolio
turnover 23% 39% 56% 175% 212% 114%
Money Market Portfolio
Years ended September 30,****
<C> <C> <C> <C> <C> <C>
1997# 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $ 1.000 1.000 1.000 1.000 1.000 1.000
Net
investment
income $ 0.013 0.026 0.028 0.015 0.020 0.030
Net
realized &
unrealized
gains
(losses) on
securities $ -- -- -- -- -- --
Total from
investment
operations $ 0.013 0.026 0.028 0.015 0.020 0.030
Distributions
from net
investment
income $(0.013)(0.026)(0.028)(0.015)(0.020)(0.030)
Distributions
from capital
gains $ -- -- -- -- -- --
Total
distributions$(0.013)(0.026)(0.028)(0.015)(0.020)(0.030)
Net asset
value end
of period $ 1.000 1.000 1.000 1.000 1.000 1.000
Total
Return 2.52%2 2.63% 2.87% 1.56% 1.53% 2.57%
Net assets
at end of
period
(thousands) $7,206 7,499 8,454 8,916 13,391 14,861
Ratio of
expenses to
average net
assets*** 0.89%2 0.88% 0.81% 0.81% 0.81% 0.83%
Net
investment
income to
average
net assets 2.50%2 2.59% 2.83% 1.52% 1.52% 2.55%
Portfolio
turnover -- -- -- -- -- --
* For the period from February 10, 1993 (inception) to September 30, 1993
2 Annualized
***For the year ended September 30, 1996 and thereafter, ratio reflects
fees paid indirectly (Note 3).
****Effective July 31, 1996, the investment advisory services transferred
to Bankers Finance Advisors, LLC from Bankers Finance Investment
Management Corp. (See Note 2).
# For the six months ended March 31, 1997 (unaudited).
The Notes to Financial Statements are an integral part of these
statements.
<PAGE>
Mosaic Tax-Free Trust
Notes to Financial Statements
March 31, 1997
(Unaudited)
1. Summary of Significant Accounting Policies. Mosaic Tax-
Free Trust (the "Trust"), formerly known as GIT Tax-Free
Trust, 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 maintains six separate funds which invest principally
in securities exempt from federal income taxes, commonly
known as "municipal" securities. The Arizona, Maryland,
Missouri and Virginia Funds (the "State Funds") invest
solely in securities exempt from both federal and state
income taxes in their respective states. The National Fund
seeks higher yields and invests in long-term securities.
The Money Market invests in short-term securities and is
priced according to the "penny rounding" method whereby the
share price is rounded to the nearest cent to maintain a
stable share price of $1.00. The State and National Funds'
price per share fluctuates with the market value of the
respective underlying portfolio of securities.
Securities Valuation: Securities having maturities of 60
days or less are valued at amortized cost, which
approximates market value. Securities having longer
maturities, for which market quotations are readily
available are valued at the mean between their bid and asked
prices. Securities for which market quotations are not
readily available are valued at their fair value as
determined in good faith by the trustees. 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.
Investment Income: Interest income, net of amortization of
premium and original issue discount, and other income (if
any) is accrued as earned.
Dividends: Net investment income, determined as gross
investment income less expenses, is declared as a regular
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. Capital gain
dividends, if any, are declared and paid annually in
December. Additional distributions may be made if
necessary.
Income Tax: In accordance with the provisions of Subchapter
M of the Internal Revenue Code applicable to regulated
investment companies, all taxable income, if any, of each
fund is distributed to its shareholders, and therefore, no
federal income tax provision is required. As of September
30, 1996, capital loss carryovers available to offset future
capital gains for federal income tax purposes were $516,865
for the Arizona Fund; $197,137 for the Maryland Fund;
$280,491 for the Missouri Fund; $1,064,123 for the Virginia
Fund; and $2,116,971 for the National Fund. The preceding
carryovers expire from September 30, 2003 through September
30, 2004. As of September 30, 1996, the capital loss
carryover available for the Money Market is $114, which
expires September 30, 1998.
Share Subscriptions: Shares purchased by check or otherwise
not paid for in immediately available funds are accounted
for as share subscriptions receivable and shares reserved
for subscriptions.
Use of Estimates: 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.
2. Investment Advisory Fees and Other Transactions with
Affiliates. The investment advisor to the Trust, Bankers
Finance Advisors, LLC ("the Advisor"), earns an advisory fee
equal to 0.625% per annum of the average net assets of the
State and National Funds and 0.5% per annum of the average
net assets of the Money Market; the fees are accrued daily
and are paid monthly. The Advisory Agreement between each
fund and the Advisor was approved at the special meeting of
the Trust's shareholders on July 29, 1996. The Advisor
purchased the investment management assets of Bankers
Finance Investment Management Corp. ("BFIMC"), the Trust's
previous investment advisor, effective July 31, 1996.
The Advisor is responsible for the fees and expenses of
trustees who are affiliated with the Advisor and certain
promotional expenses. For the six months ended March 31,
1997, outside trustee fees were $1,000 for each fund.
3. Other Expenses. With the exception of certain expenses
of the Trust payable by it directly, all support services
are provided to the Trust under a services agreement between
the Trust and the Advisor, pursuant to which such services
are provided for amounts not exceeding the cost to the
Advisor. Common expenses incurred by the Trust, Mosaic
Government Money Market Trust, Mosaic Income Trust and
Mosaic Equity Trust ("the Trusts") are allocated based on
the ratio of net assets of each fund to the combined net
assets of the Trusts. For the six months ended March 31,
1997, expenses of $22,572 for the Arizona Fund; $5,424 for
the Maryland Fund; $28,620 for the Missouri Fund; $82,493
for the Virginia Fund; $60,986 for the National Fund; and
$11,537 for the Money Market have been reimbursed under the
Services Agreement. For the six months ended March 31, 1997
the Advisor and BFIMC incurred expenses of $8,784 on behalf
of the Money Market Portfolio, the billing of which has been
waived.
Fees are reduced under an expense offset arrangement with
the Trust's Custodian. The amount of the expense offset for
the six months ended March 31, 1997 was $1,584 for the
Arizona Fund; $753 for the Maryland Fund; $2,251 for the
Missouri Fund; $3,281 for the Virginia Fund; $5,217 for the
National Fund; and $3,170 for the Money Market.
Had the billing of advisory fees or expenses not been waived
for the Maryland Fund and Money Market, the ratios of
expenses and net investment income to average net assets
would have been:
Ratio of Ratio of
Year ended expenses to net investment income to
September 30 average net assets4 average net assets
Maryland
Portfolio3 1996 1.86% 3.54%
1995 1.50 3.80
1994 1.34 3.90
19932 1.741 3.181
Money Market
Portfolio 19975 1.13%1 2.27%1
1996 1.15 2.32
1995 1.07 2.56
1994 1.02 1.31
1993 1.03 1.30
1992 1.02 2.36
1Annualized
2For the period from February 10, 1993 (inception) to September 30, 1993
3For the periods ended September 30, 1994 and 1993, ratios include
expenses of which the billing had been deferred.
4For the year ended September 30, 1996 and thereafter, the ratio
reflects fees paid indirectly.
5For the six months ended March 31, 1997 (unaudited)
4. Net Assets. At March 31, 1997, net assets included the following:
Arizona Maryland Missouri Virginia National Money
Portfolio Portfolio Portfolio Portfolio Portfolio Market
Net paid in
capital on
shares of
beneficial
interest $8,863,766 $2,249,266 $10,956,945 $32,515,416 $29,600,730 $7,206,546
Accumulated
net realized
losses (474,866) (197,158) (237,900) (1,004,457) (2,009,159) (114)
Net unrealized
appreciation
(depreciation)
of invest-
ments 265,892 27,990 184,674 731,935 545,103 (873)
Total net
assets $8,654,792 $2,080,098 $10,903,719 $32,242,894 $28,136,674 $7,205,559
5. Investment Transactions. Purchases and sales of securities other
than short-term securities, for the six months ended March 31, 1997,
were as follows:
Arizona Maryland Missouri Virginia National
Portfolio Portfolio Portfolio Portfolio Portfolio
Purchases $417,065 - - $450,000 $485,810 $6,502,015
Sales 938,213 $ 26,073 786,814 892,813 7,150,157
6. Capital Share Transactions. An unlimited number of capital shares,
without par value, are authorized. Transactions in capital shares for
the following periods were:
Arizona Fund Maryland Fund Missouri Fund
Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
3/31/97 9/30/96 3/31/97 9/30/96 3/31/97 9/30/96
In Dollars
Shares sold 344,578 757,915 456,022 652,771 530,846 1,076,024
Shares issued
in reinvestment
of dividends 144,452 294,581 38,157 95,818 213,259 410,156
Total shares
issued 489,030 1,052,496 494,179 748,589 744,105 1,486,180
Shares
redeemed (879,998)(2,041,936)(445,469)(1,576,275)(1,143,898)(1,600,447)
Net increase
(decrease) (390,968) (989,440) 48,710 (827,686) (399,793) (114,267)
In Shares
Shares sold 33,688 74,043 46,606 66,623 51,559 105,022
Shares issued in
reinvestment
of dividends 14,205 28,857 3,902 9,798 20,728 39,955
Total shares
issued 47,893 102,900 50,508 76,421 72,287 144,976
Shares
redeemed (86,196) (199,582) (45,470) (161,971) (110,989) (155,774)
Net increase
(decrease) (38,303) (96,682) 5,038 (85,550) (38,702) (10,797)
Virginia Fund National Fund Money Market
Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
3/31/97 9/30/96 3/31/97 9/30/96 3/31/97 9/30/96
In Dollars
Shares sold$1,998,481 $4,310,056 $ 895,248 $2,853,531 $2,891,254$6,433,272
Shares issued in
reinvestment
of dividends 636,712 1,325,938 572,641 1,210,230 90,128 206,235
Total shares
issued 2,635,193 5,635,994 1,467,889 4,063,761 2,981,382 6,639,507
Shares
redeemed (3,520,292)(6,384,927)(2,462,023)(7,757,677)(3,274,364)(7,594,792)
Net
decrease (885,099) (748,933) (994,134)(3,693,916) (292,982) (955,285)
In Shares
Shares sold 177,191 383,786 86,389 276,849 2,891,254 6,433,272
Shares issued
in reinvestment
of dividends 56,421 118,040 55,243 117,257 90,128 206,235
Total shares
issued 233,612 501,826 141,632 394,106 2,981,382 6,639,507
Shares
redeemed (312,176) (570,610) (237,776) (752,707)(3,274,364)(7,594,792)
Net decrease (78,564) (68,784) (96,144) (358,601) (292,982) (955,285)
<PAGE>
Telephone Numbers
Shareholder Service
Washington, DC area: 703 528-6500
Toll-free nationwide: 1 888 670-3600
Mosaic Tiles (24 hours automated information)
Toll-free nationwide: 1 800 336-3063
The Mosaic Family of Mutual Funds
Mosaic Equity Trust
Mosaic Investors Fund
Mosaic Equity Income/Balanced Fund
Mosaic Mid-Cap Growth Fund
Mosaic Worldwide Growth Fund
Mosaic Income Trust
Mosaic High Yield Fund
Mosaic Government Fund
Mosaic Tax-Free Trust
Mosaic Tax-Free Arizona Fund
Mosaic Tax-Free Maryland Fund
Mosaic Tax-Free Missouri Fund
Mosaic Tax-Free Virginia Fund
Mosaic Tax-Free National Fund
Mosaic Tax-Free Money Market
Mosaic Government Money Market
For more complete information on any Mosaic Fund, including charges and
expenses, request a prospectus by calling the numbers above. Read it
carefully before you invest or send money.
1655 Ft. Myer Drive, 10th floor
Arlington, Virginia 22209-3108
http://www.mosaicfunds.com
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