Mosaic Tax-Free Trust
Management's Discussion of Fund Performance
March 31, 1998
Dear Shareholder:
The semi-annual period ending March 31, 1998 was marked by an economy
that continued to produce moderate economic growth with very low
inflation. Consumer confidence remained at or above record levels while
the unemployment rate was at its lowest level in decades (below 5%). At
the same time, developing nations in Asia were experiencing serious
economic problems that were beginning to negatively affect the domestic
trade deficit. As the world continues to become more and more of a
global economy, the Asian crisis will help keep inflation in check and
the dollar strong as investors seek the safety of investing in the
relative stability of the United States. All of this should bode well
for domestic fixed income investors with intermediate and longer term
time horizons. In fact, we expect long-term interest rates to possibly
be as low as 4.5% on thirty-year municipal securities by the year 2000.
The thirty-year generic municipal bond yield fell twelve basis points
(100 basis points equals 1%) from 5.25% on September 30, 1997 to 5.13%
on March 31, 1998. The two-year generic muni bond yield fell a scant
five basis points from 3.9% at the end of September to 3.85% at the end
of the period. The municipal bond market posted a 3.89% total return
for the six month period as measured by the Lehman Brothers Municipal
Bond Index.
Our response to this environment was to seek the best available bonds
looking at yield, maturity and credit quality. We have purchased bonds
that will allow the Tax-Free Trust funds to participate in bull markets
(falling interest rates) through price appreciation while still
generating attractive levels of tax-free income. We are in the process
of extending the duration of the portfolios to coincide with our belief
that the overall trend in interest rates is down. With the
proliferation of bond insurance on new-issue municipals (over 50% of new
muni deals now come to market with an AAA-rated insurance wrapper), we
are beginning to see some value in uninsured and lower-rated credits.
Of course, only the bonds which we deem to have the most favorable
risk/return characteristics will be purchased for the Tax-Free Trust.
NATIONAL FUND
The National Fund had a total return of 3.28% for the semi-annual period
and the thirty-day SEC yield was 3.65% on March 31, 1998. The duration
of the portfolio was extended to 7.40 years while the average credit
quality was maintained at AA. The United States and its territories has
issued $68 billion in muni bonds year-to-date through the end of March
which represents a 70% increase in volume over the same period last
year.
ARIZONA FUND
Arizona continues to enjoy a strong, well-diversified service and
tourism based economy. The State does not have a credit rating because
it does not issue general obligation bonds. The Fund had a total return
of 2.88% for the semi-annual period and the thirty-day SEC yield was
3.58% on March 31, 1998. The duration of the portfolio was extended to
6.98 years while the average credit quality remained at AA. Purchases
during the period included Puerto Rico Infrastructure, Pima County
Unified School District, and Tuscon Airport Authority. Arizona ranked
16th in the country in terms of issuance on a year-to-date basis.
The Arizona Tax-Free was recently honored by Mutual Funds Magazine in
their May issue. The fund received the magazine's highest, five-star
ranking, placing it among the top 20% of 1,367 tax-free funds. Funds
are ranked by total return and standard deviation, a statistical measure
of volatility.
MISSOURI FUND
Missouri has a broad-based and diversified economy that is service-
sector oriented. The State's general obligation bonds are rated AAA.
The Fund had a total return of 2.97% for the semi-annual period and the
thirty-day SEC yield was 3.67% on March 31, 1998. The duration of the
portfolio was 6.60 years while the average credit quality was maintained
at AA. Purchases during the period included Puerto Rico general
obligations and Boone County Hospital revenues. Missouri ranked 25th in
the country in terms of issuance on a year-to-date basis.
MARYLAND FUND
Maryland's economy is diversified among services, light manufacturing,
and the federal government. The State's general obligation bonds are
rated AAA. The Fund had a total return of 3.08% for the semi-annual
period and the thirty-day SEC yield was 3.77% on March 31, 1998. The
duration of the portfolio was extended to 6.95 years while the average
credit quality continues to be AA. Purchases during the period included
Maryland Department of Transportation, Maryland State and Puerto Rico
general obligations. Maryland ranked 23rd in the country in terms of
issuance on a year-to-date basis.
VIRGINIA FUND
The Commonwealth of Virginia maintains a AAA general obligation bond
rating based on a well-diversified economy that emphasizes services and
government. The Fund had a total return of 3.30% for the semi-annual
period and the thirty-day SEC yield was 3.82% on March 31, 1998. The
duration of the portfolio was extended to 7.45 years while the average
credit quality was maintained at AA. Purchases during the period
included Prince William Water Authority, Amherst Industrial Development
Authority for Georgia Pacific and Prince William Industrial Development
Authority for Potomac Hospital. Virginia ranked 12th in the country in
terms of issuance on a year-to-date basis.
MONEY MARKET FUND
The fund continues to provide a high degree of liquidity and safety of
principal. As of March 31, 1998, the fund's seven day yield was 2.84%
which is equivalent to a taxable yield of 4.43% for an investor in the
36% federal tax bracket. The average maturity of the fund stood at
twenty-eight days at the end of March 1998.
We appreciate your confidence in Mosaic Funds and reaffirm our
commitment to provide you with competitive returns to meet your
investment objectives.
Sincerely,
(signature)
Michael J. Peters, CFA
Vice President
Arizona Fund
Statement of Net Assets -- March 31, 1998 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 96.7% of Net Assets
EDUCATION: 5.2%
Aa2 nr Arizona Educational Loan Marketing Corporation,
Student Loan Revenue (AMT), 7%, 3/1/03 $ 400,000 $ 434,000
GENERAL OBLIGATION: 50.1%
Aaa AAA Chandler (FGIC Insured), 7%, 7/1/12 300,000 327,375
Aaa AAA Maricopa County School District (FGIC Insured),
6.25%, 7/1/11 500,000 576,875
Aaa AAA Maricopa County School District (FGIC Insured),
6.7%, 7/1/11 300,000 319,875
Aaa AAA Mohave County Elementary School District (MBIA
Insured), 5.375%, 7/01/13 425,000 440,406
Aaa AAA Tempe High School District #213 (MBIA Insured),
4.7%, 7/1/08 400,000 405,000
Aaa AAA Maricopa County School District #14 (FGIC
Insured), 5.30%, 7/1/09 300,000 316,875
A1 A+ Maricopa County School Dist #6, 4.875%, 7/1/10 400,000 401,000
Aa3 AA Maricopa County School Dist #210, 5.375%, 7/1/13 400,000 413,500
Aa1 AA+ Phoenix, 5.0%, 7/1/19 430,000 422,475
Aaa AAA Pima County, United States School District #30,
4.875%, 7/1/09 190,000 193,088
Baa1 A Puerto Rico Commonwealth, Public Development,
4.5%, 7/1/23 400,000 360,500
HOSPITAL: 5.8%
Aaa AAA Arizona Health Facilities Authority, Hospital
Revenue (Samaritan Health Services) (MBIA Insured),
6.25%, 12/1/06 250,000 267,500
Aaa AAA Arizona Health Facilities Authority, Hospital
Revenue (Phoenix Baptist Hospital) (MBIA Insured),
6.25%, 9/1/11 200,000 218,000
HOUSING: 6.4%
nr AAA Phoenix Industrial Development Authority, Mortgage
Revenue (Chris Ridge)(FHA), 6.75%, 11/1/12 500,000 530,000
INDUSTRIAL DEVELOPMENT: 3.9%
nr AA+ Mohave County Industrial Development Authority,
Industrial Development Revenue (Citizens Utilities),
7.05%, 8/1/20 300,000 320,250
REVENUE: 10.0%
Aaa AAA Scottsdale Presv Authority Excise Tax (FGIC Insured),
5.625%, 7/1/22 425,000 442,531
Aaa AAA Puerto Rico Commonwealth Infrastructure Financing
Authority, 5%, 7/1/25 400,000 388,000
TRANSPORTATION: 12.1%
Aa AA Arizona State Transportation Board, Highway Revenue,
6%, 7/1/08 400,000 451,000
Aaa AAA Flagstaff, Street And Highway User Revenue (FGIC
Insured), 5.9%, 7/1/10 500,000 558,125
WATER AND SEWER: 3.2%
Aaa AAA Chandler, Water and Sewer Revenue (FGIC Insured),
6.75%, 7/1/06 250,000 270,625
TOTAL INVESTMENTS (Cost $7,625,611)+ $8,057,000
CASH, RECEIVABLES LESS LIABILITIES: 3.3% of Net Assets 278,524
TOTAL NET ASSETS:
Equivalent to offering and redemption price
$10.52 per share on 792,124 shares. $8,335,524
Maryland Fund
Statement of Net Assets - March 31, 1998 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 98.3% of Net Assets
EDUCATION: 9.5%
Aaa AAA Saint Mary's College, University Revenue (MBIA
Insured), 5.55%, 9/1/23 $ 100,000 $ 103,875
Aaa AAA Maryland State Health and Higher Educational
Facilities Authority (Loyola College)(MBIA
Insured), 5.375%, 10/1/26 100,000 102,500
ELECTRIC: 5.0%
Baa1 BBB+ Puerto Rico Electric Power Authority, Power
Revenue, 6%, 7/1/14 100,000 108,500
GENERAL OBLIGATION: 23.6%
Aa AA+ Anne Arundel County (AMT), 5.5%, 9/1/16 100,000 103,625
Aaa AAA Baltimore (AMBAC Insured), 6%, 10/15/04 100,000 110,375
Aaa AAA Maryland State & Local Facilities, 5%, 10/15/05 100,000 105,000
Aaa AAA Prince George's County (MBIA Insured), 5.375%,
3/15/16 100,000 103,000
Baa1 A Puerto Rico Commonwealth, 4.5%, 7/1/23 100,000 90,125
HOSPITAL: 4.7%
Baa nr Prince George's County Hospital, Hospital Revenue
(Greater SE Healthcare System), 6.2%, 1/1/08 100,000 102,500
HOUSING: 4.9%
Aa2 nr Maryland State Community Development Administration,
Single-Family Housing Revenue (AMT), 6.2%, 4/1/17 100,000 106,250
LEASING: 11.1%
Aa AA- Maryland State Stadium Authority, Sports Facilities
Lease Revenue (AMT), 7.5%, 12/15/10 125,000 134,375
nr AA Montgomery County, Human Services Headquarters
Project, Lease Revenue, 5.6%, 8/1/14 100,000 105,375
POLLUTION CONTROL: 11.1%
A2 A Anne Arundel County, Pollution Control Revenue
(Baltimore Gas and Electric Company), 6%, 4/1/24 100,000 106,000
A1 A Prince George's County, Pollution Control Revenue
(Potomac Electric), 6.375%, 1/15/23 125,000 134,844
PUBLIC FACILITIES: 5.0%
Aa2 AA Howard County, Special Facilities Revenue, 5.95%,
2/15/10 100,000 107,750
TRANSPORTATION: 14.0%
Aa3 AA- Baltimore, Port Facilities Revenue (Consolidated
Coal Sales), 6.5%, 10/1/11 100,000 109,750
Aa AA Maryland State Department of Transportation,
4.375%, 12/15/03 75,000 76,031
#Aaa AAA Maryland State Transportation Authority, Transpor-
tation Facility Projects Revenue, 6.8%, 7/1/16 100,000 118,125
WASTE: 9.4%
Aa1 AA Washington Suburban Sanitation District of
Maryland, 5.25%, 6/1/13 95,000 97,138
A nr Northeast Maryland Waste Disposal Authority, Solid
Waste Revenue (Montgomery County) (AMT), 6.3%,
7/1/16 100,000 106,875
TOTAL INVESTMENTS (Cost $2,027,369)+ $2,132,013
CASH, RECEIVABLES LESS LIABILITIES: 1.7% of Net Assets 37,286
TOTAL NET ASSETS: Equivalent to offering and redemption price
$10.10 per share on 214,816 shares. $2,169,299
Missouri Fund
Statement of Net Assets - March 31, 1998 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 96.2% 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 $ 536,250
EDUCATION: 8.5%
A nr Missouri Higher Education Loan Authority, Student
Loan Revenue Sub Lien (AMT), 5.9%, 2/15/08 500,000 519,375
Aaa AAA Missouri State Health & Educational Facilities
Authority, University Revenue (St. Louis University)
(AMBAC Insured), 6.5%, 8/1/16 150,000 162,375
Aaa AAA Missouri State Health & Educational Facilities
Authority (St. Louis University) (AMBAC Insured),
5.125%, 10/1/16 300,000 301,125
ELECTRIC: 10.0%
#Aaa AAA Puerto Rico Electric Power Authority, Power
Revenue, 8%, 7/1/08 175,000 180,371
Aaa AAA Sikeston, Electric Revenue (MBIA Insured), 6%,
6/1/14 400,000 450,500
nr A University Development Foundation, Lease Revenue
(Missouri Power), 5.75%, 5/1/13 500,000 522,500
GENERAL OBLIGATION: 24.9%
Aa nr Jefferson City School District, 6.7%, 3/1/11 200,000 237,000
Aaa AAA Missouri State, Correctional Facilities
Improvements, 5.5%, 4/1/20 500,000 520,000
Aaa AAA Missouri State (Fourth State Building), 5.75%,
8/1/19 400,000 422,000
nr AA North Kansas City School District, 5.25%, 3/1/12 450,000 466,312
Aaa AAA St. Charles County, Francis Howell School
District (FGIC Insured), 6.5%, 3/1/05 250,000 266,562
Aaa AAA St. Louis County, General Obligation, 5.20%,
2/1/12 500,000 515,000
Baa1 A Puerto Rico Public Improvement, General
Obligation, 4.5%, 7/1/02 500,000 450,625
HOSPITAL: 16.6%
A3 nr Boone County Hospital Revenue, 7.10%, 8/1/99 450,000 467,438
Aaa AAA Missouri State Health and Educational Facilities
Authority, Health Facilities Revenue (SSM Health
Care) (MBIA Insured), 6.25%, 6/1/16 250,000 269,687
Aaa AAA Missouri State Health and Educational Facilities
Authority, Health Facilities Revenue (Heartland
Health System) (AMBAC Insured), 6.35%, 11/15/17 500,000 544,375
nr nr Missouri State Health and Educational Facilities
Authority, Health Facilities Revenue, 7.625%,
7/1/18 95,000 102,600
Aaa AAA Missouri State Health and Educational Facilities
Authority, Health Facilities Revenue (Health
Midwest) (MBIA Insured), 6.25%, 2/15/22 500,000 537,500
HOUSING: 6.9%
nr AAA Missouri State Housing Development Commission,
Single-Family Mortgage Revenue (GNMA Collaterized)
(FHA) (AMT), 7.75%, 6/1/22 65,000 68,413
nr AAA Missouri State Housing Development Commission,
Single-Family Mortgage Revenue (GNMA Collaterized)
(FHA) (AMT), 7.375%, 8/1/23 140,000 191,475
nr AAA St. Louis County, Mortgage Revenue (Certificates
of Receipt) (AMT), 5.65%, 2/1/20 500,000 535,000
LEASING AND OTHER FACILITIES: 22.5%
Aaa AAA Kansas City Assistance Corp (AMBAC Insured),
5.20%, 1/15/06 $ 400,000 $ 422,000
Aa AA Missouri State Board of Public Buildings, Lease
Revenue (State Office Building), 6.4%, 12/1/08 300,000 321,375
A1 A+ Missouri State Regional Convention and Sports
Complex Authority, 5.5%, 8/15/13 250,000 258,125
A BBB+ St. Louis County Regional Convention & Sports
Complex, 5.50%, 8/15/13 300,000 304,875
A1 A+ Missouri State Regional Convention & Sports
Complex, 5.60%, 8/15/17 250,000 257,500
#Aaa AAA Kansas City Municipal Assistance Corporation,
Lease Revenue (H. Roe Bartle) (AMBAC Insured)
(prerefunded 4/15/01 @100), 6%, 4/15/20 500,000 527,500
Aaa AAA St. Louis Parking Facilities Revenue (MBIA
Insured), 5.375%, 12/15/21 500,000 510,625
REVENUE: 2.1%
A1 A+ St. Louis Industrial Development Pollution
Control (Anheuser-Busch Co., Inc.), 6.65%, 5/1/16 200,000 239,250
TOTAL INVESTMENTS (Cost $10,500,398)+ $11,107,733
CASH, RECEIVABLES, LESS LIABILITIES: 3.8% of Net Assets 444,084
TOTAL NET ASSETS:
Equivalent to offering and redemption price
$10.62 per share on 1,087,696 shares. $11,551,817
Virginia Fund
Statement of Net Assets - March 31, 1998 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 96.2% of Net Assets
AIRPORT: 5.0%
Aaa AAA Capital Regional Airport Commission, Airport
Revenue (AMBAC Insured), 5.625%, 7/1/15 $ 500,000 $ 521,875
Aaa AAA Metropolitan Washington D.C. Airports Authority,
Airport Revenue (MBIA Insured) (AMT), 6.625%,
10/1/12 500,000 548,750
Aaa AAA Metropolitan Washington D.C. Airports Authority,
Airport Revenue (FGIC Insured)(AMT), 7%, 10/1/18 500,000 538,125
EDUCATION: 13.1%
A1 nr Loudoun County Industrial Development Authority,
Facilities Revenue (George Washington University),
6.25%, 5/15/22 500,000 534,375
nr A- Lynchburg Industrial Development Authority,
Educational Facility for Randolph-Macon Women's
College, 5.875%, 9/1/13 500,000 527,500
nr BBB- Virginia College Building Authority, Facilities
Revenue (Marymount University), 7%, 7/1/22 350,000 383,250
Aa2 AA Virginia College Building Authority, Facilities
Revenue (Washington and Lee University), 5.75%,
1/1/14 555,000 581,363
Aa2 AA Virginia State Public School Authority, Revenue,
6.25%, 8/1/10 500,000 540,625
Aa2 AA Virginia State Public School Authority, Revenue,
6.2%, 8/1/13 500,000 551,250
Aa AA Virginia State Public School Authority, Special
Obligation (York County), 5.9%, 7/15/13 500,000 538,125
A1 AA- Virginia State Universities, University Revenue
(Virginia Commonwealth Univ), 5.75%, 5/1/15 500,000 527,500
ELECTRICAL: 3.2%
Aaa AAA Halifax County Industrial Development Authority,
Power Revenue (Old Dominion Electric) (MBIA
Insured) (AMT), 6%, 12/1/22 $1,000,000 $1,038,750
GENERAL OBLIGATION: 17.7%
Aa3 AA Hampton, 6%, 1/15/08 500,000 550,000
A2 A Henry County, 6%, 7/15/14 500,000 535,625
Aaa AAA James City County (FGIC Insured), 6.40%,
12/15/99 1,130,000 1,179,437
Aaa AAA Leesburg (AMBAC Insured), 5.6%, 6/1/15 500,000 525,625
Aaa AAA Norfolk (MBIA Insured), 5.75%, 6/1/13 500,000 529,375
Aaa AAA Virginia State, 5.125%, 6/1/21 1,250,000 1,262,500
Baa A Puerto Rico Public Improvement, 4.5%, 7/1/23 1,200,000 1,081,500
HOSPITAL: 13.9%
Aaa AAA Hanover County Industrial Development Authority,
Bon Secours Health System (MBIA Insured), 6.0%,
8/15/10 640,000 717,600
Aaa nr Prince William County Hospital Revenue, 4.625%,
10/1/11 500,000 485,000
Aaa AAA Danville Industrial Development Authority,
Hospital Revenue (Danville Regional Medical
Center) (FGIC Insured), 6.375%, 10/1/14 500,000 553,125
Aa2 AA Norfolk Industrial Development Authority,
Hospital Rev (Sentara Hospital), 6.5%, 11/1/13 1,000,000 1,106,250
Aaa AAA Roanoke Industrial Development Authority,
Hospital Revenue (Roanoke Memorial Hospitals)
(MBIA Insured), 6.125%, 7/1/17 500,000 566,875
Aa2 AA Fairfax County Industrial Development Authority
(Inova Health System), 5.25%, 8/15/19 1,000,000 1,030,000
HOUSING: 3.1%
Aaa AAA Virginia State Housing Development Authority,
Mortgage Revenue (AMT), 6.95%, 1/1/10 955,000 999,169
INDUSTRIAL DEVELOPMENT: 8.3%
Baa2 nr Amherst, Industrial Development Revenue, 5.25%,
2/1/01 500,000 496,875
A1 A Puerto Rico, Industrial Revenue (Pepsico, Inc.),
6.25%, 11/15/13 500,000 549,375
Baa2 nr Greensville County, Industrial Development
Revenue, 5.3%, 8/1/14 500,000 496,250
Baa3 BBB Peninsula Ports Authority, Coal Terminal Revenue,
7.375%, 6/1/20 1,000,000 1,107,500
LEASING AND OTHER FACILITIES: 3.3%
nr BBB Fairfax County Park Authority, Facilities
Revenue, 6.625%, 7/15/14 500,000 542,500
Aa2 AA Fairfax County Economic Development Authority,
Lease Revenue, 5.5%, 5/15/18 500,000 512,500
TRANSPORTATION: 5.8%
Aaa AAA Virginia Port Authority (MBIA Insured) (AMT),
6.0%, 7/1/05 685,000 747,506
Aaa AAA Washington D.C. Metropolitan Area Transportation
Authority, Transit Revenue (FGIC Insured), 6%,
7/1/07 1,000,000 1,112,500
WASTE: 4.2%
A1 A+ Fairfax County Economic Development Authority,
Revenue (Ogden Martin Systems)(AMT), 7.75%,
2/1/11 500,000 528,695
Aaa AAA Loudoun County Sanitation Authority, Water and
Sewer Revenue (FGIC Insured), 6.25%, 1/1/16 500,000 542,500
Baa3 BBB West Point Industrial Development Authority,
Waste Revenue (Chesapeake Corporation), 6.25%,
3/1/19 250,000 268,750
WATER: 18.6%
Aaa AAA Norfolk, Water Revenue (MBIA Insured), 5.75%,
11/1/12 $ 500,000 535,625
Aa3 AA Chesapeake Water & Sewer, 5.375%, 12/1/14 1,000,000 1,031,250
Aaa AAA Frederick-Winchester Service Authority, Sewer
Revenue (AMBAC Insured), 5.75%, 10/1/15 1,000,000 1,043,750
Aaa AAA Augusta County Service Authority Water & Sewer
(MBIA Insured), 5.0%, 11/1/24 1,500,000 1,455,000
Aa2 AA Fairfax County Water Authority, 5.0%, 4/1/29 1,000,000 971,250
Aaa AAA Prince William County, Water & Sewer, 4.75%,
7/1/29 1,000,000 933,750
LONG-TERM MUNICIPAL BONDS (Cost $29,064,376)+ $30,829,145
CASH, RECEIVABLES LESS LIABILITIES: 3.8% of Net Assets 1,222,981
TOTAL NET ASSETS:
Equivalent to offering and redemption price
$11.69 per share on 2,740,941 shares. $32,052,126
National Fund
Statement of Net Assets - March 31, 1998 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 101% of Net Assets
ARIZONA: 4.2%
Aa AA Arizona State Transportation Board, Highway
Revenue, 6%, 7/1/08 $ 1,000,000 $ 1,127,500
GEORGIA: 4.0%
Aaa AAA Georgia Municipal Electric Authority, Electric
Revenue (MBIA Insured), 5.5%, 1/01/12 1,000,000 1,070,000
ILLINOIS: 1.0%
Aaa AAA Regional Transportation Authority, Transit
Revenue (AMBAC Insured), 7.2%, 11/1/20 300,000 384,000
IOWA: 4.2%
Aaa AAA Mason City, Hospital Revenue (Sisters of Mercy)
(FSA Insured), 7%, 8/15/14 1,000,000 1,107,500
KANSAS: 2.1%
Aa AA Kansas State Department of Transportation,
Highway Revenue, 6.125%, 9/1/09 500,000 570,625
KENTUCKY: 2.0%
A1 NR Lexington-Fayette Urban County, 4.30%, 6/1/01 535,000 539,013
MAINE: 2.0%
Aaa AAA Maine State Turnpike Authority, Highway Revenue
(MBIA Insured), 6%, 7/1/18 500,000 537,500
MASSACHUSETTS: 9.0%
A1 A+ University of Massachusetts Building Referendum,
6.625%, 5/1/08 1,000,000 1,180,000
A1 AA- Massachusetts Bay Transportation Authority,
Transit Revenue, 7%, 3/1/14 1,000,000 1,225,000
MICHIGAN: 2.8%
Aa1 AA+ Michigan Muni Bond Authority, 5.40%, 10/1/00 725,000 746,750
MINNESOTA: 1.9%
Aa2 AA+ Minnesota State Housing Finance Agency, Housing
Revenue (Single-Family Mortgage)(AMT), 6.25%,
7/1/26 $ 500,000 $ 528,125
MISSISSIPPI: 5.1%
Aaa AAA Harrison County Wastewater Management District,
Sewer Revenue (Wastewater Treatment Facilities)
(FGIC Insured), 8.5%, 2/1/13 500,000 700,625
Aaa AAA Harrison County Wastewater Management District,
Sewer Revenue (Wastewater Treatment Facilities)
(FGIC Insured), 7.75%, 2/1/14 500,000 665,000
MISSOURI: 1.0%
Aaa AAA Missouri State Health & Educational Facilities,
St. Louis (AMBAC Insured), 5.125%, 10/1/16 200,000 200,750
NEW YORK: 3.8%
#Aaa AAA Triborough Bridge & Tunnel (prerefunded 1/1/00
@100), 6.0%, 1/1/20 1,000,000 1,033,750
PENNSYLVANIA: 8.6%
Aaa AAA Lehigh County, Hospital Revenue (Lehigh Valley
Hospital) (MBIA Insured), 7%, 7/1/16 1,000,000 1,223,750
Aaa AAA Pennsylvania State Industrial Development
Authority, Economic Development Revenue
(AMBAC Insured), 6%, 1/1/12 1,000,000 1,082,500
RHODE ISLAND: 1.9%
Aa1 AA Rhode Island State Health and Higher Educational
Facilities, University Revenue
(Brown University), 6.75%, 9/1/16 500,000 529,375
SOUTH CAROLINA: 8.0%
#Aaa AAA Piedmont Municipal Power Agency Electric Revenue
(FGIC Insured) (escrowed to maturity), 6.5%,
1/01/16 145,000 172,006
Aaa AAA Piedmont Municipal Power Agency Electric Revenue
(FGIC Insured), 6.5%, 1/01/16 855,000 1,001,419
Aaa AAA South Carolina Highway, 4.5%, 4/1/20 1,000,000 960,700
TEXAS: 13.0%
Aa2 AA Harris County, Genl Obligtion, 6.5%, 8/15/15 1,000,000 1,096,112
Aaa AAA Texas Public Building Authority, Building
Revenue (MBIA Insured), 7.125%, 8/1/11 1,000,000 1,193,750
Aaa AAA United Independent School District, General
Obligation (PSFG guarantee), 7%, 8/15/05 1,000,000 1,166,250
VIRGINIA: 15.6%
#Aaa AAA Charlottesville Industrial Development
Authority (prerefunded 10/1/00 @102),
7.375%, 10/1/20 1,000,000 1,096,250
Aa2 AA Fairfax County Industrial Development
Authority (MBIA Insured), Revenue (Inova
Health System), 5.25%, 8/15/19 1,000,000 1,030,000
Aaa AAA Hanover County Industrial Development
Authority, 6.0%, 8/15/10 500,000 560,625
Aa1 AA+ Virginia State Housing Development Authority,
Multifamily Housing Revenue, 6.65%, 11/1/13 400,000 436,000
Aaa AAA Virginia Beach Development Authority, Hospital
Revenue (General Hospital) (AMBAC Insured), 5%,
2/15/06 1,000,000 1,040,000
WASHINGTON: 7.8%
Aa1 AA+ King County, Genl Obligation, 5.25%, 1/01/14 1,000,000 1,018,750
Aa3 AA- Port Seattle, Revenue (AMBAC Insured) (AMT),
7.6%, 12/1/09 500,000 552,500
Aa1 AA- Washington State Public Power Supply, Electric
Revenue (System Nuclear Project Number 2),
4.9%, 7/01/05 500,000 510,625
WYOMING: 2.0%
Aaa AAA Wyoming Municipal Power Agency Authority,
Electric Revenue (MBIA Insured), 6.125%, 1/1/16 500,000 535,000
TOTAL LONG-TERM MUNICIPAL BONDS (Cost $25,170,837)+ $26,821,750
LIABILITIES LESS CASH, RECEIVABLES: (1.0%) of Net Assets (219,295)
TOTAL NET ASSETS:
Equivalent to offering and redemption price
$10.76 per share on 2,472,153 shares. $26,602,455
Money Market
Statement of Net Assets - March 31, 1998 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 97.4% of Net Assets
CALIFORNIA: 6.1%
MIG1 Spl+ West Contra Costa California UNI School District,
4.25%, 6/30/98 $ 300,000 $ 300,321
MIG1 Sp1 Los Angeles County, California Tax and Revenue,
4.5%, 6/30/98 100,000 100,170
FLORIDA: 3.0%
VMIG1 nr Atlantic Beach, Hospital Revenue (Fleet Landing)
(LOC - Barnett Bank), 4.0%, 10/1/24^ 200,000 200,000
GEORGIA: 4.5%
VMIG1 A1 Burke County Development Authority Pollution
Control (Georgia Power), 3.75%, 7/1/24^ 300,000 300,000
ILLINOIS: 3.0%
nr A1+ Illinois Development Finance Authority (Field
Container Corp.) (LOC-American National Bank),
3.7%, 12/1/99^ 200,000 200,000
INDIANA: 3.0%
#AAA nr Indianapolis Public, 8.0%, 7/10/98 190,000 195,960
KENTUCKY: 4.5%
P1 nr Ashland Pollution Control (Ashland Oil Inc.
Project) (LOC-Swiss Bank), 3.5%, 4/1/09^ 300,000 300,000
LOUISIANA: 9.1%
VMIG1 A1+ New Orleans Aviation Board, Airport Revenue
(MBIA Insured)(LOC - Credit Local de France),
3.75%, 8/1/16^ 400,000 400,000
VMIG1 A1 Louisiana Public Authority Hospital Revenue
(Willis-Knighton) (SPA-Mellon Bank)(AMBAC
Insured), 3.7%, 9/1/23^ 200,000 200,000
MARYLAND: 3.0%
nr A1+ Maryland State Economic Development Corp.
(LOC-Nations Bank N.A.), 3.70%, 6/1/20^ 200,000 200,000
MISSISSIPPI: 3.0%
P1 nr Jackson County Polution Control (Chevron USA
Inc. Project), 3.80%, 6/1/23^ 200,000 200,000
MISSOURI: 8.0%
VMIG1 nr Columbia (LOC - Toronto Dominion Bank), 3.75%,
6/1/08^ 300,000 300,000
VMIG1 nr Missouri State Health & Educational Facilities,
University Revenue (LOC-Chase Manhattan), 3.95%,
8/15/21^ 230,000 230,000
NEBRASKA: 6.1%
VMIG1 nr Nebraska Higher Education Loan Program, Student
Loan (MBIA Insured) (SPA-Sallie Mae), 3.70%,
12/1/15^ 400,000 400,000
NEW YORK: 1.5%
VMIG1 A1 New York, New York, 3.85%, 8/1/23 100,000 100,000
NORTH CAROLINA: 9.1%
VMIG1 A1+ Greensboro North Carolina, General Obligation
(LOC-Wachovia Bank), 3.70%, 4/1/07^ 300,000 300,000
VMIG1 A1+ North Carolina Medical Care Commission, Hospital
Revenue (SPA-Wachovia Bank), 3.65%, 6/1/22^ 300,000 300,000
OKLAHOMA: 3.8%
Aa2 AA Oklahoma City, Genl Obligation, 4.85%, 8/1/98 250,000 250,963
TEXAS: 10.7%
Aa2 AA Texas A&M University, 7.8%, 8/15/98 100,000 101,469
VMIG1 A1+ Port Development Corporation, Marine Terminal
Revenue (STOLT Terminals)(LOC-Credit Suisse, NY),
3.70%, 1/15/14^ 400,000 400,000
Aa2 AA North Central Texas, Baylor, 7.3%, 5/15/98 200,000 200,818
VIRGINIA: 1.5%
VMIG1 nr Henrico County, Industrial Development Revenue
(Hermitage Project) (LOC-Nations Bank of Virginia),
4.10%, 5/1/24^ 100,000 100,000
WASHINGTON: 6.8%
nr A1+ Port Kalama, Port Facilities Revenue (Conagra)
(LOC-Morgan Guaranty Trust), 3.65%, 1/1/04^ 50,000 50,000
nr A1+ Washington State Housing Finance Commission,
Multifamily Mortgage Revenue (LOC-Pacific First
Federal Savings), 3.75%, 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
WISCONSIN: 10.7%
Aa2 AA Wisconsin State, Genl Obligation, 5.30%, 5/1/98 250,000 250,337
Aa2 AA Rock County, Promissory Notes, 4.30%, 9/1/98 250,000 250,580
MIG1 nr Eau Claire County, 4.25%, 8/1/98 200,000 200,344
TOTAL INVESTMENTS (Cost $6,430,480)+ $6,430,962
LIABILITIES LESS CASH & RECEIVABLES: 2.6% of Net Assets 168,578
TOTAL NET ASSETS:
Equivalent to offering and redemption price
$1.00 per share on 6,599,115 shares. $6,599,540
Notes to Statement of Net Assets:
+ 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 $7,625,611 $2,027,369 $10,500,398 $29,064,376 $25,170,837 $6,430,480
Gross unrealized appreciation 447,190 107,183 619,059 1,800,434 1,657,214 506
Gross unrealized depreciation (15,801) (2,539) (11,724) (35,665) (6,301) (24)
Net unrealized appreciation
(depreciation) 431,389 104,644 607,335 1,764,769 1,650,913 482
</TABLE>
^ Security has a variable coupon rate and is subject to a demand
feature before final maturity.
Coupon rate as of March 31, 1998
#Aaa Refunded Bonds
AMBAC American Municipal Bond Assurance Corporation
AMT Subject to Alternative Minimum Tax
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
* Credit Ratings are unaudited
Statements of Assets and Liabilities
March 31, 1998 (unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Arizona Maryland Missouri Virginia National Money
Fund Fund Fund Fund Fund Market
ASSETS
Investments at value (Note 1)$8,057,000 $2,132,013 $11,107,733 $30,829,145 $26,821,750 $6,430,962
Cash 178,982 3,803 295,484 698,024 405,296 17,886
Receivables
Investment securities sold -- -- -- -- -- 100,000
Interest 110,074 34,218 155,015 527,710 343,518 46,645
Share subscription (Note 1) -- -- -- 16,630 2,285 4,862
Other assets -- -- -- 195 -- --
Total assets 8,346,056 2,170,034 11,558,232 32,071,704 27,572,849 6,600,355
LIABILITIES
Payables
Investment securities purchased -- -- -- -- 959,930 --
For fund shares redeemed 2,252 -- 1,016 -- 1,410 --
Dividends 8,280 735 5,399 19,578 9,054 463
Other liabilities -- -- -- -- -- 352
Total Liabilities 10,532 735 6,415 19,578 970,394 815
NET ASSETS (Note 4) $8,335,524 $2,169,299 $11,551,817 $32,052,126 $26,602,455 $6,599,540
</TABLE>
Statements of Operations
For the Six Months Ended March 31, 1998 (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 $226,695 $ 55,931 $300,601 $ 857,381 $659,353 $119,952
EXPENSES (Notes 3 and 4)
Investment advisory fee 26,418 6,679 35,606 100,993 82,979 16,800
Transfer agent and
administrative expenses 17,514 4,272 22,752 56,598 47,886 9,456
Registration and
professional fees 2,985 1,119 3,828 6,993 10,541 2,596
Total net expenses 46,917 12,070 62,186 164,584 141,406 28,852
NET INVESTMENT INCOME 179,778 43,861 238,415 692,797 517,947 91,100
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on
investments 87,029 818 2,203 359,920 -- --
Change in net unrealized
appreciation of
investments (28,588) 19,831 92,688 4,434 342,668 503
NET GAIN ON INVESTMENTS 58,441 20,649 94,891 364,354 342,668 503
TOTAL INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $238,219 $ 64,510 $333,306 $1,057,151 $860,615 $ 91,603
</TABLE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Arizona Fund Maryland Fund Missouri Fund
Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
March 31, 1998 Sept. 30, 1997 March 31, 1998 Sept. 30, 1997 March 31, 1998 Sept. 30 1997
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
Net investment income $ 179,778 $ 400,732 $ 43,861 $ 87,470 $ 238,415 $ 501,191
Net realized gain (loss)
on investments 87,029 120,555 818 10,664 2,203 122,415
Net unrealized appreciation
(depreciation) of investments (28,588) 131,914 19,831 46,291 92,688 209,786
Total increase in net assets
resulting from operations 238,219 653,201 64,510 144,425 333,306 833,392
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (179,778) (400,732) (43,861) (87,470) (238,415) (501,191)
CAPITAL SHARE
TRANSACTIONS (Note 6) (468,708) (572,609) 50,567 (813) (96,550) (159,832)
TOTAL INCREASE (DECREASE)
IN NET ASSETS (410,267) (320,140) 71,216 56,142 (1,659) 172,369
NET ASSETS
Beginning of period 8,745,791 9,065,931 2,098,083 2,041,941 11,553,476 11,381,107
End of period $8,335,524 $8,745,791 $2,169,299 $2,098,083 $11,551,817 $11,553,476
</TABLE>
<TABLE>
<CAPTION>
Arizona Fund Maryland Fund Missouri Fund
Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
March 31, 1998 Sept. 30, 1997 March 31, 1998 Sept. 30, 1997 March 31, 1998 Sept. 30 1997
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
Net investment income $ 692,797 $ 1,489,753 $ 517,947 $ 1,187,964 $ 91,100 $ 194,657
Net realized gain on investments 359,920 259,497 -- 389,761 -- 114
Net unrealized appreciation
(depreciation) of investments 4,434 756,780 342,668 500,002 503 125
Total increase in net assets
resulting from operations 1,057,151 2,506,030 860,615 2,077,727 91,603 194,896
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (692,797) (1,489,753) (517,947) (1,187,964) (91,475) (194,282)
CAPITAL SHARE
TRANSACTIONS (Note 6) (925,904) (1,742,549) (438,575) (3,477,538) (252,677) (647,793)
TOTAL DECREASE IN NET ASSETS (561,550) (726,272) (95,907) (2,587,775) (252,549) (647,179)
NET ASSETS
Beginning of period 32,613,676 33,339,948 26,698,362 29,286,137 6,852,089 7,499,268
End of period $32,052,126 $32,613,676 $26,602,455 $26,698,362 $6,599,540 $6,852,089
</TABLE>
Financial Highlights
Selected data for a share outstanding throughout each period:
Arizona Portfolio
<TABLE>
Years ended September 30,(4)
<C> <C> <C> <C> <C> <C> <C>
1998(6)1997 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $10.448 10.153 10.113 9.706 11.208 10.568 10.187
Net
investment
income $0.223 0.466 0.444 0.440 0.436 0.490 0.528
Net
realized &
unrealized
gains
(losses) on
securities $ 0.075 0.295 $0.040 0.407 (1.102) 0.786 0.434
Total from
investment
operations $0.298 0.761 0.484 0.847 (0.666) 1.276 0.962
Distributions
from net
investment
income $(0.223) (0.466)(0.444)(0.440)(0.436)(0.490)(0.528)
Distributions
from capital
gains $ -- -- -- -- (0.400)(0.146)(0.053)
Total
Distributions$(0.223) (0.466)(0.444)(0.440)(0.836)(0.636)(0.581)
Net asset
value end
of period $10.523 10.448 10.153 10.113 9.706 11.208 10.568
Total
Return 5.75%(2) 7.67% 4.85% 8.95% (6.20)%12.57% 9.74%
Net assets
at end of
period
(thousands) $ 8,336 8,746 9,066 10,009 11,815 15,471 11,911
Ratio of
expenses to
average net
assets(3) 1.11% 1.11% 1.35% 1.31% 1.29% 1.23% 1.15%
Net
investment
income to
average
net assets(5) 4.26% 4.54% 4.35% 4.48% 4.23% 4.54% 5.14%
Portfolio
turnover 12% 32% 9% 24% 67% 63% 23%
Maryland Portfolio
Years ended September 30,(4)
<C> <C> <C> <C> <C> <C>
1998(6)1997 1996 1995 1994 1993
Net asset
value
beginning
of period $ 9.998 9.714 9.738 9.323 10.441 10.000
Net
investment
income $ 0.206 0.421 0.405 0.418 0.455 0.274
Net
realized &
unrealized
gains
(losses) on
securities $ 0.100 0.284 (0.024) 0.415 (1.102) 0.441
Total from
investment
operations $0.306 0.705 0.381 0.833 (0.647) 0.715
Distributions
from net
investment
income $(0.206) (0.421)(0.405)(0.418) (0.455)(0.274)
Distributions
from capital
gains $ -- -- -- -- (0.016) --
Total
Distributions$(0.206)(0.421)(0.405)(0.418) (0.471)(0.274)
Net asset
value end
of period $10.098 9.998 9.714 9.738 9.323 10.441
Total
Return 6.17%(2)7.42% 3.96% 9.17% (6.33)%11.91%(2)
Net assets
at end of
period
(thousands) $2,169 2,098 2,042 2,880 3,083 3,377
Ratio of
expenses to
average net
assets(3) 1.13%(2)1.12% 1.28% 0.87% 0.64% 0.20%(2)
Net
investment
income to
average
net assets(5) 4.12%(2)4.29% 4.12% 4.42% 4.60% 4.72%(2)
Portfolio
turnover 6% 15% 21% 9% 78% 35%
</TABLE>
Missouri Portfolio
<TABLE>
Years ended September 30,(4)
<C> <C> <C> <C> <C> <C> <C>
1998(6) 1997 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $10.531 10.220 10.133 9.728 11.173 10.468 10.117
Net
investment
income $0.222 0.460 0.438 0.436 0.437 0.494 0.514
Net
realized &
unrealized
gains
(losses) on
securities $0.089 0.311 0.087 0.405 (1.058) 0.726 0.377
Total from
investment
operations $0.311 0.771 0.525 0.841 (0.621) 1.220 0.891
Distributions
from net
investment
income $(0.222)(0.460) (0.438) (0.436)(0.437)(0.494) (0.514)
Distributions
from capital
gains $ -- -- -- -- (0.387)(0.021) (0.026)
Total
Dist'butions $(0.222)(0.460) (0.438) (0.436)(0.824)(0.515) (0.540)
Net asset
value end
of period $10.620 10.531 10.220 10.133 9.728 11.173 10.468
Total
Return 5.93%(2)7.72% 5.24% 8.87% (5.80)%11.98% 9.06%
Net assets
at end of
period
(thousands) $11,552 11,553 11,381 11,394 11,490 14,001 11,023
Ratio of
expenses to
average net
assets(3) 1.09%(2) 1.02% 1.34% 1.31% 1.29% 1.23% 1.18%
Net
investment
income to
average
net assets(5) 4.12%(2) 4.45% 4.27% 4.43% 4.23% 4.59% 5.05%
Portfolio
turnover 4% 41% 21% 16% 52% 65% 8%
Virginia Portfolio
Years ended September 30,(4)
<C> <C> <C> <C> <C> <C> <C>
1998(6) 1997 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $11.564 11.209 11.115 10.631 12.372 11.621 11.351
Net
investment
income $0.250 0.515 0.508 0.503 0.479 0.569 0.592
Net
realized &
unrealized
gains
(losses) on
securities $0.130 0.355 0.094 0.484 (1.146) 0.871 0.387
Total from
investment
operations $0.380 0.870 0.602 0.987 (0.667) 1.440 0.979
Distributions
from net
investment
income $(0.250) (0.515) (0.508) (0.503)(0.479)(0.569) (0.592)
Distributions
from capital
gains $ -- -- -- -- (0.595)(0.120) (0.117)
Total
Distributions $(0.250) (0.515) (0.508) (0.503)(1.074)(0.689) (0.709)
Net asset
value end
of period $11.694 11.564 11.209 11.115 10.631 12.372 11.621
Total
Return 6.61%(2) 7.95% 5.50% 9.54% (5.67)%12.85% 8.92%
Net assets
at end of
period
(thousands) $32,052 32,614 33,340 33,822 35,550 44,092 37,421
Ratio of
expenses to
average net
assets(3) 1.02%(2) 1.05% 1.20% 1.14% 1.18% 1.10% 1.13%
Net
investment
income to
average
net assets(5) 4.29%(2) 4.55% 4.53% 4.68% 4.23% 4.80% 5.20%
Portfolio
turnover 17% 28% 28% 55% 104% 80% 74%
National Portfolio
Years ended September 30,(4)
<C> <C> <C> <C> <C> <C> <C>
1998(6) 1997 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $10.624 10.286 10.211 9.851 11.910 11.329 10.794
Net
investment
income $ 0.209 0.437 0.446 0.446 0.420 0.550 0.605
Net
realized &
unrealized
gains
(losses) on
securities $ 0.137 0.338 0.075 0.360 (1.122) 0.793 0.535
Total from
investment
operations $0.346 0.775 0.521 0.806 (0.702) 1.343 1.140
Distributions
from net
investment
income $(0.209) (0.437) (0.446) (0.446)(0.420)(0.550)(0.605)
Distributions
from capital
gains $ -- -- -- -- (0.937)(0.212) --
Total
Distributions$(0.209) (0.437) (0.446) (0.446)(1.357)(0.762)(0.605)
Net asset
value end
of period $10.761 10.624 10.286 10.211 9.851 11.910 11.329
Total
Return 6.55%(2) 7.70% 5.17% 8.40% (6.25)%12.44% 10.83%
Net assets
at end of
period
(thousands) $26,602 26,698 29,286 32,734 34,072 42,483 41,273
Ratio of
expenses to
average net
assets(3) 1.07%(2) 1.05% 1.20% 1.18% 1.23% 1.10% 1.17%
Net
investment
income to
average
net assets(5) 3.90%(2) 4.20% 4.32% 4.49% 3.98% 4.83% 5.47%
Portfolio
turnover -- 44% 39% 56% 175% 212% 114%
Money Market Portfolio
Years ended September 30,(4)
<C> <C> <C> <C> <C> <C> <C>
1998(6)1997 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $1.000 1.000 1.000 1.000 1.000 1.000 1.000
Net
investment
income $0.014 0.027 0.026 0.028 0.015 0.020 0.030
Net
realized &
unrealized
gains
(losses) on
securities $ -- -- -- -- -- -- --
Total from
investment
operations $0.014 0.027 0.026 0.028 0.015 0.020 0.030
Distributions
from net
investment
income $(0.014)(0.027) (0.026) (0.028)(0.015)(0.020)(0.030)
Distributions
from capital
gains $ -- -- -- -- -- -- --
Total
distributions$(0.014)(0.027) (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 1.000
Total
Return 2.72%(2)2.71% 2.63% 2.87% 1.56% 1.53% 2.57%
Net assets
at end of
period
(thousands) $6,600 6,852 7,499 8,454 8,916 13,391 14,861
Ratio of
expenses to
average net
assets(3) 0.87%(2) 0.83%5 0.88% 0.81% 0.81% 0.81% 0.83%
Net
investment
income to
average
net assets(5) 2.73%(2) 2.68%5 2.59% 2.83% 1.52% 1.52% 2.55%
Portfolio
turnover -- -- -- -- -- -- --
</TABLE>
(1) For the period from February 10, 1993 (inception) to September 30,
1993
(2) Annualized
(3) For the years ended September 30, 1997 and 1996, ratio reflects
fees paid indirectly (Note 3). Ratio of expenses before expenses
incurred and paid by the investment advisor to average net assets for
the Money Market fund would have been 0.95% and 1.15%, respectively.
(4) Effective July 31, 1996, the investment advisory services
transferred to Bankers Finance Advisors, LLC from Bankers Finance
Investment Management Corp. (See Note 2).
(5) For the years ended September 30, 1997 and 1996, ratio reflects
fees paid indirectly (see Note 3). Ratio of net investment income
before expenses incurred and paid by the investment advisor to average
net assets would have been 2.56% and 2.32%, respectively.
(6) For the six months ended March 31, 1998 (unaudited).
Mosaic Tax-Free Trust
Notes to Financial Statements
For the Six Months Ended March 31, 1998
1. Summary of Significant Accounting Policies. Mosaic Tax-Free
Trust (the "Trust"), known as GIT Tax-Free Trust before May 12, 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 maintains six separate funds (described
in the following sentences and defined as the "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 recorded 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 March 31, 1998, capital loss carryovers available to
offset future capital gains for federal income tax purposes were
$309,280 for the Arizona Fund; $185,655 for the Maryland Fund; $155,873
for the Missouri Fund; $444,706 for the Virginia Fund; and $1,727,211
for the National Fund. The preceding carryovers expire from September
30, 2003 through September 30, 2004.
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.
Change of Independent Auditor: Effective for fiscal years beginning
on and after October 1, 1996, the Trust's Independent Auditor is
Deloitte & Touche LLP. Financial information appearing in this Annual
Report for fiscal years beginning prior to October 1, 1996 was audited
by another independent auditor.
2. Investment Advisory Fees and Other Transactions with
Affiliates. The investment advisor to the Trust, Madison Mosaic, LLC
(formerly known as Bankers Finance Advisors, LLC), a wholly owned
subsidiary of Madison Investment Advisors, Inc., ("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, 1998, outside trustee fees were
$1,000 for each fund.
3. Other Expenses. Effective October 1, 1997, all expenses and
support services are provided by the Advisor under Service Agreement for
Fees based on a percentage of average net assets. This percentage is
0.49% for the Arizona Fund, 0.51% for the Maryland Fund, 0.47% for the
Missouri Fund, 0.39% for the Virginia Fund, 0.44% for the National Fund
and 0.36% for the Money Market Fund. For the six months ended March 31,
1998, operating expenses of $20,499 for the Arizona Fund, $5,391 for the
Maryland Fund, $26,580 for the Missouri Fund, $63,591 for the Virginia
Fund, $58,427 for the National Fund and $12,052 for Money Market Fund
have been reimbursed to the Advisor under the Services Agreement.
4. Net Assets. At March 31, 1998, net assets included the
following:
<TABLE>
<CAPTION>
Arizona Maryland Missouri Virginia National Money
Portfolio Portfolio Portfolio Portfolio Portfolio Market
<S> <C> <C> <C> <C> <C> <C>
Paid in capital $8,213,415 $2,250,310 $11,100,355 $30,732,063 $26,678,753 $6,599,058
Undistributed net
investment income -- -- -- -- -- --
Accumulated net
realized losses (309,280) (185,655) (155,873) (444,706) (1,727,211) --
Net unrealized appreciation
(depreciation) of
investments 431,389 104,644 607,335 1,764,769 1,650,913 482
Total net assets $8,335,524 $2,169,299 $11,551,817 $32,052,126 $26,602,455 $6,599,540
</TABLE>
5. Investment Transactions. Purchases and sales of securities
other than short-term securities, for the six months ended March 31,
1998, were as follows:
Arizona Maryland Missouri Virginia National
Portfolio Portfolio Portfolio Portfolio Portfolio
Purchases $957,329 $272,345 $462,195 $5,455,657 $958,110
Sales 2,380,496 129,855 423,800 6,723,353 --
6. Capital Share Transactions. An unlimited number of capital shares,
without par value, are authorized. Transactions in capital shares were
as follows:
<TABLE>
<CAPTION>
Arizona Fund Maryland Fund Missouri Fund
Six Mos Ended Year Ended Six Mos Ended Year Ended Six Mos Ended Year Ended
Mar 31, 1998 Sept. 30, 1997 Mar 31, 1998 Sept. 30, 1997 Mar 31, 1998 Sept. 30, 1997
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
In Dollars
Shares sold $434,401 $666,047 $287,367 $766,040 $365,772 $1,704,174
Shares issued in
reinvestment
of dividends 127,933 289,326 39,428 76,269 205,843 428,836
Total shares issued 562,334 955,373 326,795 842,309 571,615 2,133,010
Shares redeemed (1,031,042) (1,527,982) (276,228) (843,122) (668,165) (2,292,842)
Net increase
(decrease) $(468,708) $(572,609) $50,567 $(813) $(96,550) $(159,832)
In Shares
Shares sold 41,088 64,807 28,459 77,959 34,399 164,166
Shares issued in reinvestment
of dividends 12,141 28,120 3,905 7,759 19,375 41,465
Total shares issued 53,229 92,927 32,364 85,718 53,774 205,631
Shares redeemed (98,167) (148,830) (27,406) (86,058) (63,204) (222,102)
Net increase (decrease)(44,938) (55,903) 4,958 (340) (9,430) (16,471)
Virginia Fund National Fund Money Market
Six Mos Ended Year Ended Six Mos Ended Year Ended Six Mos Ended Year Ended
Mar 31, 1998 Sept. 30, 1997 Mar 31, 1998 Sept. 30, 1997 Mar 31, 1998 Sept. 30, 1997
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
In Dollars
Shares sold $1,461,343 $4,270,549 $1,627,618 $2,161,833 $2,698,843 $5,684,463
Shares issued in reinvestment
of dividends 576,909 1,262,506 463,785 1,075,273 87,700 187,148
Total shares issued 2,038,252 5,533,055 2,091,403 3,237,106 2,786,543 5,871,611
Shares redeemed (2,964,156) (7,275,604) (2,529,978) (6,714,644) (3,039,220) (6,519,404)
Net decrease $(925,904) $(1,742,549) $(438,575) $(3,477,538) $(252,677) $(647,793)
In Shares
Shares sold 124,956 377,392 151,739 208,047 2,698,843 5,684,463
Shares issued in reinvestment
of dividends 49,356 111,204 43,128 103,207 87,700 187,148
Total shares issued 174,312 488,596 194,867 311,254 2,786,543 5,871,611
Shares redeemed (253,763) (642,474) (235,850) (645,357) (3,039,220) (6,519,404)
Net decrease (79,451) (153,878) (40,983) (334,103) (252,677) (647,793)
</TABLE>
