Mosaic Tax-Free Trust
Letter to Shareholders
March 31, 1999
Dear Shareholder:
The six-months ended March 31, 1999 saw positive returns for all six funds in
the Mosaic Tax-Free Trust. Investors in municipal securities continued to
find absolute yields at the lower end of historic ranges, as we continue to
see very moderate inflation. Relatively low yields should not mask the more
important statistic of real return (yield minus inflation), which continued
at a healthy spread throughout this past six months. Total returns on longer-
term securities were dampened during this period by a modest rise in interest
rates. As interest rates rise, prices on existing bonds drop as they become
relatively less attractive compared to new issues.
The semi-annual period ended March 31, 1999 was marked by an economy that
continues to surprise many economists with its combination of above-average
growth with very low inflation. Looking forward, we expect the domestic
economy to continue to hum along at a moderate pace while inflation remains
well behaved. From raw materials to labor costs to productivity, good news
abounds on the inflation front. Meanwhile, rising interest rates threaten to
slow mortgage-refinancing activity and dampen the housing market. The lone
dark cloud on the inflation front is the recent jump in oil prices. However,
this may prove positive for bond prices as expensive fuel acts as a de facto
"tax" on consumers, slowing spending and acting as a drag on the economy.
It is interesting to note that during the prior three years the economy has
exhibited surprisingly strong economic growth in the first quarter followed
by a somewhat weaker second quarter. If this pattern continues, an economic
slowdown over the next six months may provide the Federal Reserve with the
opportunity to lower short-term interest rates again.
The municipal bond market outlook is not without risk, as nearly all sectors
of the U.S. economy are showing solid growth, including manufacturing, which
looks to be rebounding from a lackluster second half 1998. As the world
watches the fighting in the Balkans, several Asian equity markets are showing
early signs of recovery from last year's crisis conditions. The combined
effects of stronger than anticipated domestic growth and moderating global
financial stress have reduced the potential for further Federal Reserve
easing at this time. However, the strong economy has allowed state and local
governments to fill their coffers with record tax payments which have been
used to fund many projects out of current cash as opposed to borrowing. In
fact, municipal bond issuance was down 19 percent for the first quarter of
this year. It is also important to note that municipalities have been able to
use this unprecedented period of economic prosperity to improve their overall
credit quality. Rating agency upgrades have exceeded downgrades for 14
straight quarters. The only sector that continues to show signs of credit
deterioration is health care.
The municipal bond market posted a 1.49% total return for the six-month
period as measured by the Lehman Brothers Municipal Bond Index.
Our response to this environment was to emphasize bond structure 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 slightly shortening the duration and adding income to
the portfolios to coincide with our belief that interest rates will be
relatively stable in the near term. Credit spreads remain historically tight
as investors stretch for what little yield differentials they can find. We
believe that the risk/reward relationship for lower rated credits favors
issuers rather than investors at this time. We currently like insured bonds
with relatively high coupons and favorable call options.
NATIONAL FUND
The National Fund had a total return of 0.36% for the semi-annual period and
the 30-day SEC yield was 3.50%. The duration of the portfolio was reduced to
7.77 years while the average credit quality was maintained at AA. The United
States and its territories has issued $58 billion in municipal bonds year-to-
date through the end of March which represents a 19% decrease 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 0.95% for the
semi-annual period and the 30-day SEC yield was 3.56%. The duration of the
portfolio was reduced to 7.57 years while he average credit quality remained
at AA. Purchases during the period included Maricopa Industrial Development
Authority single family mortgage and Maricopa IDA for Catholic Health
Systems. Arizona ranked 27th in the country in terms of issuance on a year-
to-date basis.
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 0.37% for the semi-annual period and the 30-day SEC yield was
3.70%. The duration of the portfolio was reduced to 7.80 years while the
average credit quality was maintained at AA. Purchases during the period
included St. Louis Board of Education and Missouri Health and Education
Authority for BJC Health Systems. Missouri ranked 31st 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 0.80% for the semi-annual period and the 30-
day SEC yield was 3.71%. The duration of the portfolio was reduced to 7.76
years while the average credit quality continues to be AA. Purchases during
the period included Maryland Health and Education Authority for Charity
Obligation Group and Maryland Health and Education Authority for Johns
Hopkins University. Maryland ranked 25th 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 0.72% for the semi-annual period and the 30-
day SEC yield was 3.71%. The duration of the portfolio was reduced to 7.90
years while the average credit quality was maintained at AA. Purchases during
the period included Henrico Water and Sewer Authority, Northern Virginia
Transportation Authority, and the Pocahontas Parkway Association Toll Road
Project. Virginia ranked 22nd 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, 1999, the fund's seven-day yield was 2.37% which
is equivalent to a taxable yield of 3.71% for an investor in the 36% federal
tax bracket. The average maturity of the fund stood at 37 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
Portfolio of Investments - March 31, 1999 (unaudited)
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Credit Rating* Principal
Moody's S&P Amount Value
LONG TERM MUNICIPAL BONDS: 98.4% of Net Assets
EDUCATION: 4.9%
Aa2 nr Arizona Educational Loan Marketing Corporation, Student Loan
Revenue (AMT), 7%, 3/1/03 $ 400,000 $ 429,500
ELECTRIC: 9.7%
Baa1 BBB+ Puerto Rico Electric Power Authority, Power Revenue, 5%, 7/1/28 400,000 392,500
Aa2 AA Salt River Project Agriculture Improvement & Power Distribution,
Electrical System Revenue, 4.75%, 1/1/17 425,000 412,250
GENERAL OBLIGATION: 38.4%
Aaa AAA Chandler (FGIC Insured), 7%, 7/1/12 300,000 321,375
Aaa AAA Maricopa County Unified High School District # 216 (FGIC
Insured), 6.7%, 7/1/11 110,000 114,675
Aaa AAA Maricopa County School District #14 (Creighton) (FSA Insured),
5.3%, 7/1/09 300,000 323,250
Aa3 AA Maricopa County Unified High School District #210 (Phoenix),
5.375%, 7/1/13 400,000 434,000
A1 A+ Maricopa County School District #6 (Washington), 4.875%, 7/1/10 400,000 408,000
Aaa AAA Maricopa County School District #80 (Chandler) (FGIC Insured),
6.25%, 7/1/11 310,000 359,600
Aaa AAA Mohave County Elementary School District #16 (Mohave Valley)
(MBIA Insured), 5.375%, 7/1/13 425,000 443,063
Baa1 A Puerto Rico Commonwealth, Public Improvement, 4.5%, 7/1/23 400,000 369,000
Aa1 AA+ Phoenix, 5%, 7/1/19 430,000 430,537
HOSPITAL: 7.3%
#Aaa AAA Arizona Health Facilities Authority, Hospital Revenue (Phoenix
Baptist Hospital) (MBIA Insured) (Escrowed to Maturity), 6.25%,
9/1/11 200,000 216,500
A2 A Maricopa County Industrial Development Authority Health
Facilities Revenue (Catholic Healthcare West), 5.00%, 7/1/21 400,000 388,500
HOUSING: 9.1%
Aaa nr Maricopa County Industrial Development Authority, Single Family
Mortgage Revenue (AMT) (GNMA Collateralized), 4.3%, 12/1/06 225,000 224,719
nr AAA Phoenix Industrial Development Authority, Mortgage Revenue (Chris
Ridge) (FHA Insured), 6.75%, 11/1/12 500,000 533,750
INDUSTRIAL DEVELOPMENT: 3.8%
nr AA- Mohave County Industrial Development Authority Industrial
Development Revenue (Citizens Utilities), 7.05%, 8/1/20 300,000 314,340
REVENUE: 10.2%
Aaa AAA Puerto Rico Commonwealth Infrastructure Financing Authority
(AMBAC Insured), 5%, 7/1/28 400,000 399,500
Aaa AAA Scottsdale Preservation Authority, Excise Tax (FGIC Insured),
5.625%, 7/1/22 425,000 447,312
TRANSPORTATION: 6.8%
Aaa AAA Flagstaff, Street and Highway User Revenue, Junior Lien (FGIC
Insured), 5.9%, 7/1/10 500,000 567,500
WATER AND SEWER: 8.2%
Aaa AAA Chandler, Water and Sewer Revenue (FGIC Insured), 6.75%, 7/1/06 250,000 268,125
Aaa AAA Peoria, Water and Sewer Revenue (FGIC Insured), 4%, 7/1/18 75,000 416,219
TOTAL INVESTMENTS (Cost $7,787,112) $8,214,215
CASH AND RECEIVABLES LESS LIABILITIES: 1.6% of Net Assets 131,953
NET ASSETS: 100% $8,346,168
Maryland Fund
Portfolio of Investments - March 31, 1999 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG TERM MUNICIPAL BONDS: 97.6% of Net Assets
EDUCATION: 13.7%
Aaa AAA Maryland State Health & Higher Educational Facilities Authority
(Loyola College) (MBIA Insured), 5.375%, 10/1/26 $ 100,000 $ 102,750
nr BBB- Maryland State Health & Higher Educational Facilities Authority
(Green Acres), 5.3%, 7/1/28 100,000 98,125
Aaa AAA St. Mary's College, University Revenue (MBIA Insured), 5.55%,
9/1/23 100,000 103,500
ELECTRIC: 5.0%
Baa1 BBB+ Puerto Rico Electric Power Authority, Power Revenue, 6%, 7/1/14 100,000 110,000
GENERAL OBLIGATION: 18.5%
Aa AA+ Anne Arundel County, Solid Waster Projects (AMT), 5.5%, 9/1/16 100,000 104,375
Aaa AAA Baltimore, Public Improvements (AMBAC Insured), 6%, 10/15/04 100,000 110,750
Baa1 A Puerto Rico Commonwealth, Public Improvement, 4.5%, 7/1/23 100,000 92,250
Aaa AAA Prince George's County, Public Improvements (MBIA Insured),
5.375%, 3/15/16 100,000 104,250
HOSPITAL: 15.6%
Baa2 nr Maryland State Health & Higher Educational Facilities Authority
(Kennedy Krieger), 5.125%, 7/1/22 75,000 73,125
Aaa nr Maryland State Health & Higher Educational Facilities Authority
(Upper Chesapeake Hospitals) (FSA Insured), 5.125%, 1/1/38 100,000 100,125
Aa2 AA+ Maryland State Health & Higher Educational Facilities Authority
(Charity Obligation Group-Series A), 4.25%, 11/1/07 75,000 74,625
Aaa AAA Maryland State Health & Higher Educational Facilities Authority
(Johns Hopkins Medicine) (MBIA Insured), 5%, 7/1/33 100,000 98,250
HOUSING: 4.7%
Aa2 nr Maryland State Community Development Administration (Single-Family
Housing) (AMT), 6.2%, 4/1/17 100,000 105,375
LEASING: 10.7%
Aa AA- Maryland State Stadium Authority, Sports Facility Lease Revenue
(AMT), 7.5%, 12/15/10 125,000 130,739
nr AA Montgomery County Revenue Authority, Lease Revenue (Human
Services Headquarters Project), 5.6%, 8/1/14 100,000 106,125
POLLUTION CONTROL: 10.9%
A2 A Anne Arundel County, Pollution Control Revenue (Baltimore Gas and
Electric Company), 6%, 4/1/24 100,000 107,000
A1 A Prince George's County, Pollution Control Revenue (Potomac
Electric Power Company), 6.375%, 1/15/23 125,000 135,000
PUBLIC FACILITIES: 8.2%
Aaa AAA Baltimore Convention Center Revenue (MBIA Insured), 5%, 9/1/19 75,000 75,000
Aa2 AA- Howard County, Special Facilities Revenue, 5.95%, 2/15/10 100,000 107,500
TRANSPORTATION: 10.3%
Aa3 AA- Baltimore, Port Facilities Revenue (Consolidated Coal Sales),
6.5%, 10/1/11 100,000 109,625
#Aaa AAA Maryland State Transportation Authority Transportation, Facilities
Project Revenue (Escrowed to Maturity), 6.8%, 7/1/16 100,000 119,500
TOTAL INVESTMENTS (Cost $2,067,995) $2,167,989
CASH AND RECEIVABLES LESS LIABILITIES: 2.4% of Net Assets 53,299
NET ASSETS: 100% $2,221,288
Missouri Fund
Portfolio of Investments - March 31, 1999 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG TERM MUNICIPAL BONDS: 94.8% of Net Assets
AIRPORT: 4.2%
Aaa AAA St. Louis, Airport Revenue, Lambert-St. Louis International
(FGIC Insured), 5.125%, 7/1/22 $ 500,000 $ 503,125
EDUCATION: 14.4%
A nr Missouri Higher Education Loan Authority, Student Loan Revenue,
Subordinated Lien (AMT), 5.9%, 2/15/08 500,000 513,750
Aa3 nr Missouri State Health & Educational Facilities Authority,
Revenue (Baptist College) (LOC-Allied Irish Bank, PLC), 5.15%,
5/15/23 500,000 488,125
Aa1 AA+ Missouri State Health & Educational Facilities Authority,
Revenue (Washington University), 5%, 11/15/37 250,000 243,750
Aaa AAA Missouri State Health & Educational Facilities Authority,
Revenue (St. Louis University) (AMBAC Insured), 5.125%, 10/1/16 300,000 303,750
#Aaa AAA Missouri State Health & Educational Facilities Authority,
Revenue (St. Louis University) (AMBAC Insured) (Prerefunded
8/1/01 @ 102), 6.5%, 8/1/16 150,000 162,563
ELECTRIC: 3.8%
Aaa AAA Sikeston, Electric Revenue (MBIA Insured), 6%, 6/1/14 400,000 458,000
GENERAL OBLIGATION: 20.3%
Aa2 nr Jefferson City School District, 6.7%, 3/1/11 200,000 236,898
Aaa AAA Missouri State (Fourth State Building), 5.75%, 8/1/19 400,000 431,000
Aaa AAA Missouri State (Fourth State Building), 5.5%, 4/1/20 500,000 519,375
nr AA North Kansas City School District (Direct Deposit Program),
5.25%, 3/1/12 450,000 471,937
Baa1 A Puerto Rico Commonwealth, Public Improvement, 4.5%, 7/1/23 500,000 461,250
Aaa AAA St. Louis, Board of Education (FGIC Insured), 5.5%, 4/1/10 275,000 300,781
HOSPITAL: 22.4%
#Aaa nr Missouri State Health & Educational Facilities Authority,
Facilities Revenue (Prerefunded 1/1/00 @ 102), 7.625%, 7/1/18 95,000 99,883
Aa2 AA Missouri State Health & Educational Facilities Authority,
Facilities Revenue (BJC Health System), 5%, 5/15/38 500,000 476,250
Aaa AAA Missouri State Health & Educational Facilities Authority,
Facilities Revenue (Heartland Health System) (AMBAC Insured),
6.35%, 11/15/17 500,000 541,250
Aaa AAA Missouri State Health & Educational Facilities Authority,
Facilities Revenue (SSM Health Care) (MBIA Insured), 5%, 6/1/18 250,000 248,125
#Aaa nr Missouri State Health & Educational Facilities Authority,
Facilities Revenue (SSM Health Care) (MBIA Insured) (Prerefunded
6/1/02 @ 102), 6.25%, 6/1/16 45,000 49,275
Aaa nr Missouri State Health & Educational Facilities Authority,
Facilities Revenue (SSM Health Care) (MBIA Insured), 6.25%,
6/1/16 205,000 222,169
Aaa AAA Missouri State Health & Educational Facilities Authority,
Facilities Revenue (Health Midwest) (MBIA Insured), 6.25%,
2/15/22 500,000 533,750
Aaa nr New Liberty Hospital District, Revenue (MBIA Insured), 5%,
12/1/18 500,000 496,250
HOUSING: 6.3%
nr AAA Missouri State Housing Development Commission, Single-Family
Mortgage Revenue (GNMA Collateralized) (FHA) (AMT), 7.75%, 6/1/22 50,000 52,000
nr AAA Missouri State Housing Development Commission, Single-Family
Mortgage Revenue (GNMA Collateralized) (FHA) (AMT), 7.375%,
8/1/23 150,000 157,500
nr #AAA St. Louis County, Mortgage Revenue (Escrowed to Maturity) (AMT),
5.65%, 2/1/20 500,000 539,375
LEASING AND OTHER FACILITIES: 21.4%
Aaa AAA Kansas City Municipal Assistance Corp., Lease Revenue (Capital
Improvements) (AMBAC Insured), 5.2%, 1/15/06 $ 400,000 $ 425,000
#Aaa AAA Kansas City Municipal Assistance Corp., Lease Revenue (H. Roe
Bartle) (AMBAC Insured) (Prerefunded 4/15/01 @ 100), 6%, 4/15/20 500,000 524,375
nr AA- Missouri State Development Financial Board, Recreation Facilities
Revenue (YMCA - Greater St. Louis) (LOC-NationsBank, N.A.), 5%,
9/1/11 250,000 254,375
Aa3 A+ Missouri State Regional Convention and Sports Complex Authority,
5.5%, 8/15/13 250,000 260,000
Aa3 A+ Missouri State Regional Convention and Sports Complex Authority,
5.6%, 8/15/17 250,000 258,125
A A+ St. Louis County Regional Convention and Sports Complex Authority,
5.5%, 8/15/13 300,000 312,000
Aaa AAA St. Louis Parking Facilities Revenue (MBIA Insured), 5.375%,
12/15/21 500,000 514,375
POLLUTION CONTROL REVENUE: 2.0%
A1 A+ St. Louis Industrial Development Authority, Pollution Control
Revenue (Anheuser-Busch Co., Inc.), 6.65%, 5/1/16 200,000 236,250
LONG TERM MUNICIPAL BOND TOTAL 11,294,631
SHORT TERM MUNICIPAL BONDS: 3.4% of Net Assets
nr A-1+ Independence Missouri Industrial Authority Revenue, (Groves and
Graceland) (LOC-Credit Local de France), 3.15%, 11/1/27^ 200,000 200,000
VMIG1 nr Missouri State Health & Education Facilities Authority (Drury
College) (LOC-Chase Manhattan Bank), 3.20%, 8/15/21^ 200,000 200,000
TOTAL INVESTMENTS (Cost $11,167,789) $11,694,631
CASH AND RECEIVABLES LESS LIABILITIES: 1.8% of Net Assets 215,299
NET ASSETS: 100% $11,909,930
Virginia Fund
Portfolio of Investments - March 31, 1999 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG TERM MUNICIPAL BONDS: 95.0% of Net Assets
AIRPORT: 4.9%
Aaa AAA Capital Regional Airport Commission, Airport Revenue (AMBAC
Insured), 5.625%, 7/1/15 $ 500,000 $ 528,750
Aaa AAA Metropolitan Washington DC Airports, Airport Revenue (MBIA
Insured) (AMT), 6.625%, 10/1/12 500,000 546,250
Aaa AAA Metropolitan Washington DC Airports, Airport Revenue (FGIC
Insured) (AMT), 7%, 10/1/18 500,000 529,375
EDUCATION: 11.3%
A1 nr Loudoun County Industrial Development Authority, Facilities
Revenue (George Washington University), 6.25%, 5/15/22 $ 500,000 $ 532,500
nr A- Lynchburg Industrial Development Authority, Facilities Revenue
(Randolph-Macon Women's College), 5.875%, 9/1/13 500,000 521,250
nr #AAA Virginia College Building Authority, Facilities Revenue
(Marymount University) (Prerefunded 7/1/02 @ 102), 7%, 7/1/22 350,000 389,813
Aa2 AA Virginia College Building Authority, Facilities Revenue
(Washington and Lee University), 5.75%, 1/1/14 230,000 244,950
#Aaa AAA Virginia College Building Authority, Facilities Revenue
(Washington and Lee University) (Prerefunded 1/1/04 @ 102),
5.75%, 1/1/14 325,000 355,875
Aa2 AA Virginia State Public School Authority, Revenue, 6.2%, 8/1/13 500,000 552,500
Aa2 AA Virginia State Public School Authority, Special Obligation (York
County), 5.9%, 7/15/13 500,000 545,000
A1 AA- Virginia State Universities, University Revenue (Virginia
Commonwealth University), 5.75%, 5/1/15 500,000 531,875
ELECTRICAL: 6.9%
Aaa AAA Halifax County Industrial Development Authority, Power Revenue
(Old Dominion Electric) (MBIA Insured) (AMT), 6%, 12/1/22 1,000,000 1,051,250
Baa1 BBB+ Puerto Rico Electric Power Authority, Power Revenue, 5%,
7/1/28 1,250,000 1,226,562
GENERAL OBLIGATION: 10.0%
Aa3 AA Hampton (Prerefunded 1/15/05 @ 102), 6%, 1/15/08 500,000 555,000
A2 A Henry County, 6%, 7/15/14 500,000 547,500
Aaa AAA Leesburg (AMBAC Insured) (Prerefunded 6/1/05 @ 102), 5.6%,
6/1/15 500,000 551,875
Aaa AAA Norfolk (MBIA Insured), 5.75%, 6/1/13 500,000 538,750
Baa1 A Puerto Rico Commonwealth, Public Improvement, 4.5%, 7/1/23 1,200,000 1,107,000
HOSPITAL: 17.4%
Aaa AAA Danville Industrial Development Authority, Hospital Revenue
(Danville Regional Medical Center) (FGIC Insured) (Prerefunded
10/1/04 @ 101), 6.375%, 10/1/14 500,000 565,000
Aa2 AA Fairfax County Industrial Development Authority (Inova Health
System), 5.25%, 8/15/19 1,000,000 1,017,500
Aaa AAA Hanover County Industrial Development Authority (Bon Secours
Health Systems) (MBIA Insured), 6%, 8/15/10 640,000 720,000
A1 A+ Lynchburg Industrial Development Authority, Healthcare Revenue
(Centra Health), 5.2%, 1/1/28 1,000,000 990,000
Aa2 AA Norfolk Industrial Development Authority, Hospital Revenue
(Sentara Hospitals), 6.5%, 11/1/13 1,000,000 1,108,750
A3 nr Petersburg Hospital Authority Revenue (Southside Regional
Medical Center), 5.8%, 7/1/01 240,000 250,800
Aaa nr Prince William County Industrial Development Authority,
Hospital Revenue (FSA Insured), 4.625%, 10/1/11 500,000 498,125
Aaa AAA Roanoke Industrial Development Authority, Hospital Revenue
(Roanoke Memorial Hospitals) (MBIA Insured), 6.125%, 7/1/17 500,000 568,750
HOUSING: 1.9%
nr AAA Fairfax County Redevelopment & Housing Authority, Multi-Family
Housing Revenue (Castel Lani Project) (FHA Insured) (AMT), 5.5%,
4/1/28 625,000 635,156
INDUSTRIAL DEVELOPMENT: 8.0%
Baa2 nr Amherst Industrial Development Revenue (Georgia-Pacific Corp.)
(AMT), 5.25%, 2/1/11 500,000 498,750
Baa2 nr Greensville County, Industrial Development Revenue (Georgia-
Pacific Corp.), 5.3%, 8/1/14 500,000 498,125
Baa3 BBB Peninsula Ports Authority, Coal Terminal Revenue (Dominion
Terminal), 7.375%, 6/1/20 1,000,000 1,090,000
A1 A Puerto Rico Industrial Revenue (Pepsico. Inc.), 6.25%,
11/15/13 500,000 545,000
LEASING AND OTHER FACILITIES: 3.2%
nr BBB Fairfax County Park Authority, Recreational Facilities Revenue,
6.625%, 7/15/14 $ 500,000 $ 541,250
Aa2 AA Fairfax County Economic Development Authority, Lease Revenue
(Government Center), 5.5%, 5/15/18 500,000 511,875
TRANSPORTATION: 14.9%
Aaa AAA Chesapeake Bay Bridge & Tunnel Revenue (MBIA Insured), 5%,
7/1/22 1,000,000 988,750
Aaa AAA Northern Virginia Transportation District Commuter Rail
Revenue (Virginia Railway Express Project) (FSA Insured),
5.375%, 7/1/14 1,000,000 1,055,000
Baa3 BBB- Pocahontas Parkway Association, Toll Road Revenue, 5.5%,
8/15/28 1,000,000 990,000
Aaa AAA Virginia Port Authority (MBIA Insured) (AMT), 6%, 7/1/05 685,000 751,788
Aaa AAA Washington DC Metropolitan Area Transportation Authority
(FGIC Insured), 6%, 7/1/07 1,000,000 1,118,750
WATER & WASTE: 16.5%
Aaa AAA Augusta County Service Authority, Water & Sewer Revenue (MBIA
Insured), 5%, 11/1/24 1,500,000 1,479,375
nr BBB+ Charles City County Industrial Development Authority, Solid
Waste Disposal Facility Revenue (Waste Management) (AMT),
4.875%, 2/1/09 500,000 495,625
Aa2 AA- Henrico County Water & Sewer Revenue, 4%, 5/1/08 750,000 736,875
Aaa AAA Loudoun County Sanitation Authority, Water and Sewer Revenue
(FGIC Insured), 6.25%, 1/1/16 500,000 541,250
Aaa AAA Prince William County, Water & Sewer Revenue (FGIC Insured),
4.75%, 7/1/29 1,000,000 946,250
Aaa AAA Upper Occoquan Sewer Authority, Sewer Revenue (MBIA Insured),
4.75%, 7/1/29 1,000,000 946,250
Baa3 BBB West Point Industrial Development Authority, Waste Revenue
(Chesapeake Corporation), 6.25%, 3/1/19 250,000 265,312
LONG TERM MUNICIPAL BOND TOTAL $31,210,381
SHORT TERM MUNICIPAL BONDS: 2.7% of Net Assets
P-1 nr Peninsula Ports Authority, Coal Terminal Revenue (Dominion
Terminal) (LOC-Barclays Bank, PLC), 3.1%, 7/1/16^ 400,000 400,000
Aaa AAA Virginia Port Authority Facilities Revenue (MBIA Insured)
(AMT), 4.5%, 7/1/99 480,000 481,479
TOTAL INVESTMENTS (Cost $30,507,874) $32,091,860
CASH AND RECEIVABLES LESS LIABILITIES: 2.3% of Net Assets 752,311
NET ASSETS: 100% $32,844,171
National Fund
Portfolio of Investments - March 31, 1999 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG TERM MUNICIPAL BONDS: 97.0% of Net Assets
ARIZONA: 4.5%
Aa AA Arizona State Transportation Board, Highway Revenue, 6%, 7/1/08 $1,000,000 $ 1,130,000
DISTRICT OF COLUMBIA: 3.8%
Aaa AAA District of Columbia Revenue, Smithsonian Institute, 5%, 2/1/28 1,000,000 952,500
GEORGIA: 4.3%
Aaa AAA Georgia Municipal Electric Authority, Electric Revenue (MBIA
Insured), 5.5%, 1/1/12 1,000,000 1,082,500
ILLINOIS: 5.9%
Aaa AAA Regional Transportation Authority, Transit Revenue (AMBAC
Insured), 7.2%, 11/1/20 $ 300,000 $ 385,500
Aaa AAA University of Illinois, Certificate Participation, Utility
Infrastructure Projects (MBIA Insured), 5.75%, 8/15/09 1,000,000 1,101,250
IOWA: 4.4%
#Aaa AAA Mason City, Hospital Facilities Revenue (Sisters of Mercy) (FSA
Insured) (Prerefunded 8/15/01 @ 102), 7%, 8/15/14 1,000,000 1,095,000
KANSAS: 2.3%
Aa2 AA+ Kansas State Department of Transportation, Highway Revenue,
6.125%, 9/1/09 500,000 572,500
MASSACHUSETTS: 9.5%
Aa3 AA- Massachusetts Bay Transportation Authority, Transit Revenue, 7%,
3/1/14 1,000,000 1,223,340
Aa3 A+ University of Massachusetts Building Authority Revenue, 6.625%,
5/1/08 1,000,000 1,172,500
MINNESOTA: 1.9%
Aa2 AA+ Minnesota Housing Finance Agency, Housing Revenue (Single-Family
Mortgage) (AMT), 6.25%, 7/1/26 460,000 486,450
MISSISSIPPI: 6.3%
Aaa AAA Harrison County Wastewater Management District, Sewer Revenue
(Wastewater Treatment Facilities-Series A) (FGIC Insured), 8.5%,
2/1/13 500,000 705,000
Aaa AAA Harrison County Wastewater Management District, Sewer Revenue
(Wastewater Treatment Facilities-Series B) (FGIC Insured), 7.75%,
2/1/14 500,000 660,625
nr AAA South Panola School District, General Obligation (AMBAC Insured),
6.5%, 5/1/04 205,000 228,575
MISSOURI: 0.8%
Aaa AAA Missouri State Health & Educational Facilities Authority,
Educational Facilities Revenue (St. Louis University) (AMBAC
Insured), 5.125%, 10/1/16 200,000 202,500
NORTH CAROLINA: 4.0%
nr AA North Carolina Educational Facilities Financial Agency Revenue
(St. Augustine's College), 5.25%, 10/1/28 1,000,000 1,002,500
PENNSYLVANIA: 4.9%
Aaa AAA Lehigh County General Purpose Authority, Hospital Revenue
(Lehigh Valley Hospital) (MBIA Insured), 7%, 7/1/16 1,000,000 1,238,750
PUERTO RICO: 3.7%
Baa1 A Puerto Rico Commonwealth, Public Improvement, 4.5%, 7/1/23 1,000,000 922,500
SOUTH CAROLINA: 4.7%
Aaa AAA Piedmont Municipal Power Agency Electrical Revenue (FGIC
Insured), 6.5%, 1/1/16 855,000 1,004,625
#Aaa AAA Piedmont Municipal Power Agency Electrical Revenue (FGIC Insured)
(Escrowed to Maturity), 6.5%, 1/1/16 145,000 172,913
TEXAS: 12.8%
Aa2 AA Harris County, General Obligation, 6.5%, 8/15/15 790,000 863,075
#Aaa AAA Texas Public Building Authority, Building Revenue (MBIA Inusred)
(Escrowed to Maturity), 7.125%, 8/1/11 1,000,000 1,205,000
Aaa AAA United Independent School District, General Obligation (PSF
Guarantee), 7%, 8/15/05 1,000,000 1,161,250
VIRGINIA: 14.9%
#Aaa AAA Charlottesville Industrial Development Authority, Hospital
Revenue (Martha Jefferson) (AMBAC Insured) (Prerefunded 10/1/00
@ 102), 7.375%, 10/1/20 $1,000,000 $ 1,077,500
Aaa nr Dinwiddie County Industrial Development Authority, Lease Revenue
(County Courthouse Completion Project-Series C) (MBIA Insured),
5%, 2/1/17 300,000 296,625
Aaa nr Dinwiddie County Industrial Development Authority, Lease Revenue
(County School Completion Project-Series A) (MBIA Insured), 5%,
2/1/19 365,000 362,262
Aa2 AA Fairfax County Industrial Development Authority Revenue (Inova
Health Systems) (MBIA Insured), 5.25%, 8/15/19 1,000,000 1,017,500
Aaa AAA Hanover County Industrial Development Authority (Bon Secours
Health Systems) (MBIA Insured), 6%, 8/15/10 500,000 562,500
Aa1 AA+ Virginia State Housing Development Authority, Multifamily Housing
Revenue, 6.65%, 11/1/13 400,000 435,500
WASHINGTON: 8.3%
Aa1 AA+ King County, General Obligation, 5.25%, 1/1/14 1,000,000 1,033,750
Aa3 AA- Port Seattle, Revenue (AMBAC Insured) (AMT), 7.6%, 12/1/09 345,000 371,306
Aa3 AA- Port Seattle, Revenue (AMBAC Insured) (AMT) (Prerefunded 12/1/00
@ 102), 7.6%, 12/1/09 155,000 167,981
Aa1 AA Washington State Public Power Supply, Electric Revenue (Nuclear
Project Number 2), 4.9%, 7/1/05 500,000 518,750
LONG TERM MUNICIPAL BOND TOTAL $24,412,527
SHORT TERM MUNICIPAL BONDS: 1.2% of Net Assets
VMIG1 A-1+ New York, General Obligation (LOC-Morgan Guaranty Trust), 3.25%,
8/1/17^ 300,000 300,000
TOTAL INVESTMENTS (Cost $23,160,804) $24,712,527
CASH AND RECEIVABLES LESS LIABILITIES: 1.8% of Net Assets 448,655
NET ASSETS: 100% $25,161,182
Money Market
Portfolio of Investments - March 31, 1999 (unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
SHORT TERM MUNICIPAL SECURITIES: 97.8% of Net Assets
FLORIDA: 8.0%
VMIG1 nr Atlantic Beach Revenue (Fleet Landing) (LOC-Barnett Bank),
3.25%, 10/1/24^ $ 200,000 $ 200,000
VMIG1 nr Eustis Health Facilities Authority Revenue (Waterman Medical
Center), 2.95%, 12/1/15^ 300,000 300,000
ILLINOIS: 8.1%
nr A1+ Illinois Development Finance Authority, Industrial Development
Revenue (Field Container Corp.) (LOC-American National Bank &
Trust), 3%, 12/1/99^ 200,000 200,000
Aa2 AA Illinois State, General Obligation, 5.6%, 10/1/99 200,000 202,490
Aaa nr Naperville, General Obligation, 4.2%, 12/1/99 100,000 100,799
INDIANA: 3.3%
Aa2 nr Indianapolis, Marion County Public Library, 4.1%, 7/1/99 205,000 205,488
IOWA: 4.8%
nr SP1 Iowa Higher Education Loan Authority, Revenue Notes (Briar
Cliff), 4.25%, 7/7/99 300,000 300,765
KENTUCKY: 4.8%
P1 nr Ashland Pollution Control Revenue (Ashland Oil Inc) (LOC-Suntrust
Bank), 2.9%, 4/1/09^ 300,000 300,000
LOUISIANA: 11.3%
VMIG1 A1+ Louisiana Public Authority Hospital Revenue (Willis Knighton
Medical Project) (AMBAC Insured) (SPA- Credit Local De France),
3.1%, 9/1/23^ 200,000 200,000
VMIG1 A1+ New Orleans Aviation Board (MBIA Insured) (SPA- Credit Local De
France), 3%, 8/1/16^ 400,000 400,000
#Aaa AAA Tangipahoa Parish, School Board Sales & Use Tax (MBIA Insured)
(Escrowed to Maturity), 8.6%, 5/1/99 105,000 105,413
MISSISSIPPI: 1.6%
Aa3 AA Mississippi State, General Obligation, 5.6%, 12/1/99 100,000 101,664
MISSOURI: 8.0%
VMIG1 nr Columbia, Special Obligation (LOC-Toronto Dominion Bank), 2.95%,
6/1/08^ 300,000 300,000
VMIG1 nr Missouri State Health & Educational Facilities Authority,
Educational Facilities Revenue (Drury College) (LOC-Chase
Manhattan Bank), 3.2%, 8/15/21^ 200,000 200,000
NEBRASKA: 6.4%
VMIG1 AAA Nebhelp, Inc. Revenue, Multiple Mode Student Loans (MBIA Insured)
(SPA-Sallie Mae, 3.1%, 12/1/15^ 400,000 400,000
NEW YORK: 4.0%
#Aaa AAA Battery Park, City Authority Revenue (Prerefunded 5/1/99 @ 100),
6.5%, 5/1/99 250,000 250,539
NORTH CAROLINA: 9.6%
VMIG1 A1+ Greensboro, General Obligation (SPA-Wachovia Bank of NC), 2.95%,
4/1/07^ 300,000 300,000
VMIG1 A1+ North Carolina Medical Care Commission, Hospital Revenue (Pooled
Equipment Project) (MBIA Insured) (SPA- KBC Bank NV), 2.95%,
12/1/25^ 300,000 300,000
OREGON: 4.8%
Aa3 AA- Multnomah County School District No 1J (Portland), 4.35%, 6/1/99 300,000 300,573
TENNESSEE: 4.4%
VMIG1 A1+ Metropolitan Nashville Airport Authority Revenue (FGIC Insured)
(LOC-Societe Generale), 3.05%, 7/1/19^ 275,000 275,000
TEXAS: 6.4%
Aaa AAA Copperas Cove Independent School District (PSF-Guaranteed), 7%,
8/15/99 180,000 182,500
VMIG1 A1+ Port Development Corporation, Marine Terminal Revenue (Stolt
Terminal) (LOC-Canadian Imperial Bank), 2.95%, 1/15/14^ 400,000 400,000
WASHINGTON: 6.4%
nr A1+ Washington State Housing Finance Commission, Multi-Family
Mortgage Revenue (LOC-Pacific First Federal Savings), 3.1%,
7/1/20^ $ 300,000 $ 300,000
VMIG1 nr Washington State Housing Finance Commission, Housing Revenue
(Panorama City Project) (LOC-Key Bank Of Washington), 3.15%,
1/1/27^ 100,000 100,000
WISCONSIN: 2.8%
Aa2 AA+ Wisconsin State Clean Water Revenue, 6.2%, 6/1/99 175,000 175,821
TOTAL INVESTMENTS (Cost $6,100,051) $6,101,052
CASH AND RECEIVABLES LESS LIABILITIES: 2.2% of Net Assets 136,749
NET ASSETS: 100% $6,237,801
</TABLE>
Notes to Portfolio of Investments:
^ Security has a variable coupon rate and is subject to a demand
feature before final maturity.
Coupon rate as of March 31, 1999.
# Refunded or escrowed to maturity
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
PSF Permanent School Fund
S&P Standard & Poor's Corporation
* Credit Ratings are unaudited
Statements of Assets and Liabilities
March 31, 1999 (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)
Investment Securites $8,214,215 $2,167,989 $11,294,631 $31,210,381 $24,412,527 $ --
Short Term Securities -- -- 400,000 881,479 300,000 6,101,052
Total Investments 8,214,215 2,167,989 11,694,631 32,091,860 24,712,527 6,101,052
Cash 26,880 22,171 58,117 285,234 130,391 80,945
Receivables
Interest 111,956 31,966 169,428 479,330 329,672 58,203
Capital Shares Sold -- -- -- 14,000 9,337 47
Total Assets 8,353,051 2,222,126 11,922,176 32,870,424 25,181,927 6,240,247
LIABILITIES
Payables
Dividends 6,883 838 5,674 18,653 9,245 446
Capital Shares Redeemed -- -- 6,572 7,600 11,500 2,000
Total Liabilities 6,883 838 12,246 26,253 20,745 2,446
NET ASSETS (Note 5) 8,346,168 2,221,288 11,909,930 32,844,171 25,161,182 6,237,801
CAPITAL SHARES OUTSTANDING 785,716 219,396 1,113,741 2,790,341 2,324,235 6,236,857
NET ASSET VALUE PER SHARE 10.62 10.12 10.69 11.77 10.83 1.00
Statements of Operations
For Six-Months Ended March 31, 1999 (unaudited)
Arizona Maryland Missouri Virginia National Money
Fund Fund Fund Fund Fund Market
INVESTMENT INCOME (Note 1)
Interest income $220,488 $ 55,952 $307,355 $842,508 $623,586 $109,250
EXPENSES (Notes 2 and 3)
Investment advisory fee 26,106 6,848 36,904 102,095 79,199 17,186
Transfer agent,
administrative,
registration and
professional fees 20,467 5,588 27,752 63,707 55,755 12,346
Expenses waived -- -- -- -- -- (2,762)
Total expenses 46,573 12,436 64,656 165,802 134,954 26,770
NET INVESTMENT INCOME 173,915 43,516 242,699 676,706 488,632 82,480
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on
investments 26,852 -- 35,281 212,096 24,276 --
Change in net unrealized
appreciation of
investments (118,561) (24,393) (224,234) (645,395) (435,932) (2,366)
NET LOSS ON INVESTMENTS (91,709) (24,393) (188,953) (433,299) (411,656) (2,366)
TOTAL INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 82,206 $ 19,123 $ 53,746 $243,407 $ 76,976 $ 80,114
</TABLE>
Statements of Changes in Net Assets
For the Period Indicated (unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Arizona Fund Maryland Fund Missouri Fund
6-Months Ended Year Ended 6-Months Ended Year Ended 6-Months Ended Year Ended
3 31, 1999 9 30, 1998 3 31, 1999 9 30, 1998 3 31, 1999 9 30, 1998
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment income $ 173,915 $ 359,140 $ 43,516 $ 86,710 $ 242,699 $ 481,747
Net realized gain on
investments 26,852 144,610 -- 9,822 35,281 128,887
Net unrealized appreciation
(depreciation) of
investments (118,561) 85,687 (24,393) 39,574 (224,234) 236,429
Total increase in net
assets resulting from
operations 82,206 589,437 19,123 136,106 53,746 847,063
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (173,915) (359,140) (43,516) (86,710) (242,699) (481,747)
CAPITAL SHARE TRANSACTIONS
(Note 7) 187,287 (350,924) 132,685 (34,483) 96,652 83,439
TOTAL INCREASE (DECREASE)
IN NET ASSETS (278,996) (120,627) 108,292 14,913 (92,301) 448,755
NET ASSETS
Beginning of
period 8,625,164 8,745,791 2,112,996 2,098,083 12,002,231 11,553,476
End of period $8,346,168 $8,625,164 $2,221,288 $2,112,996 $11,909,930 $12,002,231
Virginia Fund National Fund Money Market
6-Months Ended Year Ended 6-Months Ended Year Ended 6-Months Ended Year Ended
3 31, 1999 9 30, 1998 3 31, 1999 9 30, 1998 3 31, 1999 9 30, 1998
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment income $ 676,706 $1,377,590 $ 488,632 $ 1,024,415 $ 82,480 $ 183,967
Net realized gain on
investments 212,096 536,649 24,276 224,781 -- --
Net unrealized
appreciation
(depreciation) of
investments (645,395) 469,046 (435,932) 679,410 (2,366) 3,388
Total increase in net
assets resulting from
operations 243,407 2,383,285 76,976 1,928,606 80,114 187,355
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (676,706) (1,377,590) (488,632) (1,024,415) (82,480) (184,342)
CAPITAL SHARE
TRANSACTIONS (Note 7) 665,347 (1,007,248) (33,910) (1,995,805) (1,029,802) 414,867
TOTAL INCREASE (DECREASE)
IN NET ASSETS 232,048 (1,553) (445,566) (1,091,614) (1,032,168) 417,880
NET ASSETS
Beginning of
period 32,612,123 32,613,676 25,606,748 26,698,362 7,269,969 6,852,089
End of period $32,844,171 $32,612,123 $25,161,182 $25,606,748 $6,237,801 $7,269,969
</TABLE>
Financial Highlights (unaudited)
Selected data for a share outstanding throughout each period ending
September 30:
<TABLE>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio
of net
invest-
Net Total Ratio of ment
Net realized & from Distri- Distri Net Newt expenses income
asset unrealized invest butions butions asset assets to to
value Net gain ment from net from Total value end of average averge
beginning investment (loss) on oper investmnt capital distri end of Total period net net Portflio
Year of period income investments ations income gains butions period return (thousands) assets-1 assets turnover
Arizona Fund
1999-4 $10.74 $0.22 $(0.12) $0.10 $(0.22) -- $(0.22) $10.62 1.91%-5 $8,346 1.11%-5 4.16%-5 7%
1998 10.45 0.45 0.29 0.74 (0.45) -- (0.45) 10.74 7.21 8,625 1.11 4.22 26
1997 10.15 0.47 0.30 0.77 (0.47) -- (0.47) 10.45 7.67 8,746 1.11 4.54 32
1996 10.11 0.44 0.04 0.48 (0.44) -- (0.44) 10.15 4.85 9,066 1.35 4.35 9
1995 9.71 0.44 0.40 0.84 (0.44) -- (0.44) 10.11 8.95 10,009 1.31 4.48 24
Maryland Fund
1999-4 $10.24 $0.20 $(0.12) $0.08 $(0.20) -- $(0.20) $10.12 1.61%-5 $2,221 1.13%-5 3.96%-5 0%
1998 10.00 0.41 0.24 0.65 (0.41) -- (0.41) 10.24 6.68 2,113 1.13 4.09 30
1997 9.71 0.42 0.29 0.71 (0.42) -- (0.42) 10.00 7.42 2,098 1.12 4.29 15
1996 9.74 0.41 (0.03) 0.38 (0.41) -- (0.41) 9.71 3.96 2,042 1.28 4.12 21
1995 9.32 0.42 0.42 0.84 (0.42) -- (0.42) 9.74 9.17 2,880 0.87 4.42 9
Missouri Fund
1999-4 $10.87 $0.22 $(0.18) $0.04 $(0.22) -- $(0.22) $10.69 0.76%-5 $11,910 1.09%-5 4.10%-5 3%
1998 10.53 0.44 0.34 0.78 (0.44) -- (0.44) 10.87 7.61 12,002 1.09 4.18 24
1997 10.22 0.46 0.31 0.77 (0.46) -- (0.46) 10.53 7.72 11,553 1.02 4.45 41
1996 10.13 0.44 0.09 0.53 (0.44) -- (0.44) 10.22 5.24 11,381 1.34 4.27 21
1995 9.73 0.44 0.40 0.84 (0.44) -- (0.44) 10.13 8.87 11,394 1.31 4.43 16
Virginia Fund
1999-4 $11.93 $0.24 $(0.16) $0.08 $(0.24) -- $(0.24) $11.77 1.43%-5 $32,844 1.01%-5 4.13%-5 11%
1998 11.56 0.50 0.37 0.87 (0.50) -- (0.50) 11.93 7.66 32,612 1.02 4.28 32
1997 11.21 0.52 0.35 0.87 (0.52) -- (0.52) 11.56 7.95 32,614 1.05 4.55 28
1996 11.12 0.51 0.09 0.60 (0.51) -- (0.51) 11.21 5.50 33,340 1.20 4.53 28
1995 10.63 0.50 0.49 0.99 (0.50) -- (0.50) 11.12 9.54 33,822 1.14 4.68 55
National Fund
1999-4 $11.00 $0.21 $(0.17) $0.04 $(0.21) -- ($0.21) $10.83 0.73%-5 $25,161 1.06%-5 3.85%-5 4%
1998 10.62 0.42 0.38 0.80 (0.42) -- (0.42) 11.00 7.66 25,607 1.07 3.91 20
1997 10.29 0.44 0.33 0.77 (0.44) -- (0.44) 10.62 7.70 26,698 1.05 4.20 44
1996 10.21 0.45 0.08 0.53 (0.45) -- (0.45) 10.29 5.17 29,286 1.20 4.32 39
1995 9.85 0.45 0.36 0.81 (0.45) -- (0.45) 10.21 8.40 32,734 1.18 4.49 56
Money Market
1999-4 $1.00 $0.01 $(0.00) $0.01 $(0.01) -- $(0.01) $1.00 2.40%-5 $6,238 0.78%-5,6 2.39%-5,6 --
1998 1.00 0.03 -- 0.03 (0.03) -- (0.03) 1.00 2.75 7,270 0.85 2.70 --
1997 1.00 0.03 -- 0.03 (0.03) -- (0.03) 1.00 2.71 6,852 0.832 2.683 --
1996 1.00 0.03 -- 0.03 (0.03) -- (0.03) 1.00 2.63 7,499 0.882 2.593 --
1995 1.00 0.03 -- 0.03 (0.03) -- (0.03) 1.00 2.87 8,454 0.81 2.83 --
</TABLE>
1 For the years ended September 30, 1997 and 1996, the ratio reflects fee
paid indirectly.
2 For the years ended September 30, 1997 and 1996, the ratio of expenses
before expenses incurred and paid by the investment advisor to average net
assets would have been 0.95% and 1.15%, respectively, for such years.
3 For the years ended September 30, 1997 and 1996, the 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, for such
years.
4 For the six-months ended March 31, 1999.
5 Annualized.
6 See Note 3.
Mosaic Tax-Free Trust
Notes to Financial Statements (unaudited)
March 31, 1999
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 invests in securities exempt from
federal taxes. The National Fund and the State Funds invest 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. Because the Trust is 100% no-
load, the shares of each fund are offered and redeemed at the net asset value
per share.
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. 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, substantially all
taxable income, if any, of each fund is distributed to its shareholders.
Therefore, no federal income tax provision is required. As of September 30,
1998, capital loss carryovers available to offset future capital gains for
federal income tax purposes were $251,700 for the Arizona Fund; $176,651 for
the Maryland Fund; $29,189 for the Missouri Fund; $267,977 for the Virginia
Fund; and $1,502,429 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. Such estimates 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, a wholly owned
subsidiary of Madison Investment Advisors, Inc., ("the Advisor"), earns an
advisory fee equal to 0.63% 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.
3. Other Expenses. Effective October 1, 1997, all expenses and support
services are provided by the Advisor under a Services Agreement for fees
based on a percentage of average net assets that is accrued daily and paid
monthly. 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. During the six-
months ended March 31, 1999, $2,762 of this fee was irrevocably waived for
the Money Market. Had this portion of the fee not been waived, the ratio of
expenses and net investment income to average net assets would have been
0.86% and 2.31%, respectively.
The Advisor is responsible for the fees and expenses of trustees who are
affiliated with the Advisor and certain promotional expenses.
4. Aggregate Cost and Unrealized Appreciation. The aggregate cost for federal
income tax purposes and the net unrealized appreciation are stated as follows
as of March 31, 1999:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Arizona Maryland Missouri Virginia National Money
Fund Fund Fund Fund Fund Market
Aggregate cost $7,787,112 $2,067,995 $11,167,789 $30,507,874 $23,160,804 $6,100,051
Gross unrealized
appreciation 429,425 101,225 543,180 1,616,599 1,581,402 1,001
Gross unrealized
depreciation (2,322) (1,231) (16,338) (32,613) (29,679) --
Net unrealized
appreciation 427,103 99,994 526,842 1,583,986 1,551,723 1,001
5. Net Assets. At March 31, 1999, net assets included the following:
Arizona Maryland Missouri Virginia National Money
Fund Fund Fund Fund Fund Market
Paid in capital $8,143,913 $2,297,945 $11,376,996 $31,316,066 $25,087,612 $6,236,800
Accumulated net realized
gains (losses) (224,848) (176,651) 6,092 (55,881) (1,478,153) --
Net unrealized appreciation
on investments 427,103 99,994 526,842 1,583,986 1,551,723 1,001
Total net assets $8,346,168 $2,221,288 $11,909,930 $32,844,171 $25,161,182 $6,237,801
</TABLE>
6. Investment Transactions. Purchases and sales of securities other than
short-term securities, for the year ended March 31, 1999, were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Arizona Maryland Missouri Virginia National
Fund Fund Fund Fund Fund
Purchases $ 610,363 $ 173,725 $ 300,658 $3,547,150 $1,103,550
Sales 650,451 -- 898,233 3,628,290 1,471,327
</TABLE>
7. Capital Share Transactions. An unlimited number of capital shares, without
par value, are authorized. Transactions in capital shares were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Arizona Fund Maryland Fund Missouri Fund
6-Months Ended Year Ended 6-Months Ended Year Ended 6-Months Ended Year Ended
3 31, 1999 9 30, 1998 3 31, 1999 9 30, 1998 3 31, 1999 9 30, 1998
In Dollars
Shares sold $ 194,038 $ 1,005,335 $ 420,147 $ 487,888 $ 285,781 $ 628,962
Shares issued in
reinvestment of
dividends 130,761 257,733 38,251 76,992 209,619 415,551
Total shares issued 324,799 1,263,068 458,398 564,880 495,400 1,044,513
Shares redeemed (512,086) (1,613,992) (325,713) (599,363) (398,748) (961,074)
Net increase (decrease) $ 187,287 $ 350,924 $ 132,685 $ 34,483 $ 96,652 $ 83,439
In Shares
Shares sold 18,219 95,174 41,255 48,324 26,653 59,077
Shares issued in
reinvestment of
dividends 12,276 24,415 3,758 7,620 19,480 39,010
Total shares issued 30,495 119,589 45,013 55,944 46,133 98,087
Shares redeemed (47,960) (153,470) (32,001) (59,419) (36,899) (90,706)
Net increase (decrease) (17,465) (33,881) 13,012 (3,475) 9,234 7,381
Virginia Fund National Fund Money Market
6-Months Ended Year Ended 6-Months Ended Year Ended 6-Months Ended Year Ended
3 31, 1999 9 30, 1998 3 31, 1999 9 30, 1998 3 31, 1999 9 30, 1998
In Dollars
Shares sold $ 2,195,509 $3,593,165 $1,419,032 $ 2,654,150 $2,471,098 $ 5,471,204
Shares issued in
reinvestment of
dividends 563,772 1,141,294 432,239 910,359 79,791 177,642
Total shares issued 2,759,281 4,734,459 1,851,271 3,564,509 2,550,889 5,648,846
Shares redeemed (2,093,934) (5,741,707)(1,885,181) (5,560,314)(3,580,691) (5,233,979)
Net increase (decrease) $ 665,347 $(1,007,248) $ (33,910) $(1,995,805)$(1,029,802) $ 414,867
In Shares
Shares sold 185,534 306,607 130,028 247,074 2,471,098 5,471,204
Shares issued in
reinvestment of
dividends 47,701 97,417 39,671 84,498 79,791 177,642
Total shares issued 233,235 404,024 169,699 331,572 2,550,889 5,648,846
Shares redeemed (176,968) (490,342) (172,867) (517,305) (3,580,691) (5,233,979)
Net increase (decrease) 56,267 (86,318) (3,168) (185,733) (1,029,802) 414,867
</TABLE>
