Mosaic Equity Trust
Mosaic Investors Fund
Mosaic Mid-Cap Growth Fund
Mosaic Balanced Fund
Mosaic Foresight Fund
Annual Report
December 31, 1998
Mosaic Fund
Mosaic Equity Trust
Letter to Shareholders
December 31, 1998
Dear Shareholder:
The year ended December 31, 1998, our first full calendar year under the
Mosaic name, was an eventful one for the Equity Trust and the markets in
which the funds are invested. Despite some notable market volatility, all
four of the funds in the Equity Trust ended the period with positive results,
including the newest Equity Trust fund, Mosaic Foresight.
Foresight was launched at the beginning of the year as a vehicle for
investors who seek active management of their exposure to stocks, based upon
a professional assessment of market risk and opportunities. Foresight's
asset allocations are being managed by Frank Burgess, the founder of our
parent investment advisor, Madison Investment Advisors.
One-year results for the Equity Trust Funds through December 31, 1998 were:
18.66% for Investors; 15.15% for Balanced; 6.81% for Mid-Cap Growth; and
16.36% for Foresight. These overall positive results do not really
illuminate the broad difficulties that were experienced by domestic stocks or
the volatility of a year that saw a major stock pullback in late summer and
early fall.
From the beginning of the period, our stock selection recognized the dangers
in the market and was distinctly defensive in terms of the companies that
were held. Our research suggested that 1998 was likely to be a higher risk
investment environment that we had seen for some time. Declining corporate
profitability, extreme valuations, high expectations and massive global
turmoil were all clouds on the horizon. We purposefully steered clear of
companies with a major dependency on foreign sales or companies with
significant business exposure internationally. We were attracted to strong
companies with core businesses that tend to hold up well in difficult
economic times, such as supermarkets and pharmaceuticals. We concentrated
our investments in the financial area to companies, such as regional banks,
that would be relatively untouched by financial problems in Asia, Russia or
South America.
In the end, we were pleased with our risk-adjusted returns. For Investors
and Balanced, this was the fourth straight year of double-digit returns and
the eighth straight year of positive returns, demonstrating the strength of
the 1990s bull market. For the first time in history the S&P 500 recorded
four straight years of annual gains in excess of 20%. Yet it was not an easy
year for U.S. stocks in general. The average return for S&P 500 stocks was
only 7.1%, and small stocks fared even worse. This divergence was also
reflected in Mosaic's results, where our fund investing in the smallest
stocks, Mid-Cap Growth, trailed our other funds, which concentrate on larger
companies.
The past year was an important one for Mosaic, as we realized our initial
goals for our newly named fund family. Some of these improvements are
represented in our expanded newsletter and annual reports. Others are seen
in terms of service, as we've worked hard to make information more accessible
to you through our 24-hour automated telephone line, Mosaic Tiles (1-800-336-
3063) and our website at www.mosaicfunds.com.
We adjusted our fund lineup to provide a variety of investment vehicles and
realigned our stock funds to reflect our discipline of seeking the best
companies at reasonable valuations.
We hope you are taking advantage of our expanded services and will consider a
fresh look at our fund lineup in light of the diversification opportunities
we now provide.
Thank you again for your continued confidence in Mosaic.
Sincerely,
(signature)
Katherine L. Frank
President
Mosaic Funds
Mosaic Equity Trust
Management's Discussion of Fund Performance
December 31, 1998
The Year In Review
In the wake of three tremendous years for the stock indices, many observers
thought that 1998 would be a year in which the stock market took a breather.
Instead, it left us breathless, with a relatively steady march upward to
index-beating highs in mid-July, followed by a dramatic drop which lopped off
20% of market value as measured by the major indices. This drop was in turn
followed by a heady fourth-quarter rally that brought us close to the index
records set in July. By the year's end, the S&P 500 was up 28.6%, and the
Dow Industrial Average was ahead 18.1%.
Following a trend we've been observing for the past few years, these market
moves did not necessarily represent the "average" stock. In reality, a small
number of large stocks have dominated the popular indices, such as the S&P
500, while the rest of the market has performed less positively. In 1998 the
10 largest stocks in the S&P 500 (just 2% of the names on that list)
accounted for 43% of the index's gain. The 50 largest stocks (10% of the
companies in the index) accounted for 87.5% of the gain. Some of the broader
market indices, such as the small-cap Russell 2000, were actually negative
for the year. In fact, two-thirds of U.S. stocks actually ended the year
negative. Further cloaking the underlying difficulty for stocks was the
outsized performance of Internet stocks, which grabbed many of the headlines
and contributed to the overall, and somewhat misleading, impression of a
banner year for stocks.
While the domestic economy remained benign, albeit with signs of slowing, the
market indices were notably resilient in the face of such concerns as crises
in Asia, Russia, Latin America; the collapse of the sizeable hedge fund Long
Term Capital Management; troubles in Iraq; and finally declining corporate
profits. Countering these negative developments was the lowering of interest
rates, as Alan Greenspan and the Fed began dropping rates in September and
continued to ease throughout the remainder of the year.
Fund Overview
Mosaic Investors Fund
The performance of the Investors Fund in 1998, with a return of 18.66%,
mirrored the general trend lines of the stock market. When we reported to
you at mid-year, the fund was up 6.62%. The fund dipped along with the
market in July and August and then came back strong in the fourth quarter.
On November 1, 1998 we celebrated the fund's 20th anniversary. Since the
fund's inception, Investors has produced an average annual return of 15.40%
through the end of 1998. Its risk-adjusted performance since inception has
earned the Fund an overall 4-Star Morningstar rating through December 31,
1998, as well as a 4-Star rating for three and five years.
One of the challenges for our investment discipline is finding quality growth
stocks at reasonable valuations when the market is setting record highs in
terms of the indices and in terms of traditional valuation methods. All of
these suggest that many stock valuations are at relative highs as well. Our
investment strategy is based on picking stocks one at a time, yet we are
acutely aware of the investment and economic environment in which these
stocks exist. As a result, we made a decision going into 1998 to attempt to
avoid some of the pitfalls of the market by tempering international exposure
and concentrating on companies whose earnings we felt would be solid even if
the economic situation soured.
Our strongest returns came from the consumer sector, led by two of our larger
holdings, supermarket giant Safeway and CVS, the second-largest drugstore
chain in the U.S. While we had strong returns from Sun Microsystems and
Compaq in the technology sector, valuations in this sector kept our
investments below the S&P 500's technology weighting, and we did not fully
participate in the sector's strong showing. One of the longest held
positions in Investors, Freddie Mac, a top-ten holding, continued to justify
our confidence, as the stock rose 55% over the course of 1998.
On the downside, Investors' return was hurt by our holdings in Sunbeam, a
turnaround story that simply never happened. We eliminated our position in
this stock in July. Our search for reasonably priced technology stocks led
us to some smaller companies, including software developer Parametric
Technology and electronics distributor Arrow Electronics, both of which
turned in disappointing results and were no longer in the portfolio at year's
end.
TOP TEN HOLDINGS
% of net assets
PepsiCo 5.3%
Compaq 5.2%
Kroger 5.1%
Safeway 5.0%
MCI WorldCom 4.9%
CVS 4.5%
Wells Fargo 4.5%
Johnson & Johnson 4.5%
American Express 4.4%
Sun Microsystems 4.2%
Fund-at-a-Glance
Objective: Mosaic Investors seeks long-term capital appreciation through
investments in large growth companies.
Net Assets: $29.6 million
Date of Inception: November 1, 1978
Ticker: MINVX
MOSAIC BALANCED FUND
Balanced ended 1998 with a one-year return of 15.15% and 4-Star Morningstar
ratings for the life of the fund, as well as three and five years. The fund
began the year with approximately two-thirds of its assets in stocks, and
finished the year with a more conservative 58.6%. As consistent with its
investment objectives, Balanced showed some of the same moves as the stock
market as a whole, but with considerably dampened volatility. For instance,
in the third quarter of 1998, when the average domestic U.S. stock fund lost
close to 15%, Balanced dropped just 3.48%. For the year, Balanced was in
line with its peers, as indicated by the Lipper Balanced Fund Index, which
was up 15.09%.
The bond portion of Balanced contributed positively to its performance. Our
active management helped the bond portfolio outperform comparable bond
indices. An increase of bond maturities mid-year gave the fund a boost as
interest rates fell. Toward the end of the year we increased our positions
in corporate bonds and received an additional increase in value as investors
sought safety in the kind of high-quality corporate bonds that we favor.
TOP TEN HOLDINGS
% of net assets
Top Five Stock Holdings
(58.6% of total assets in stocks)
PepsiCo 3.39%
Kroger 3.33%
Compaq 3.26%
Safeway 3.15%
MCI WorldCom 3.12%
Top Five Fixed Income Holdings
U.S. Treasury Notes 6.25%, 4/30/01 4.15%
U.S. Treasury Notes 6.25%, 5/31/00 2.58%
Fannie Mae, 6.00%, 5/15/08 2.44%
U.S. Treasury Notes 6.25%, 1/31/01 2.05%
U.S. Treasury Notes 6.25%, 5/31/99 1.83%
Fund-at-a-Glance
Objective: Mosaic Balanced seeks to provide substantial current dividend
income while providing opportunity for capital appreciation by investing in a
combination of mid-to-large companies and bonds.
Net Assets: $24.7 million
Date of Inception: December 18,1986
Ticker: BHBFX
MOSAIC MID-CAP GROWTH
Mid-Cap Growth returned 6.81% for the period, indicative of the performance
gap between large and smaller stocks. Mid-cap stocks, representing companies
with market capitalizations in the $1-7 billion range, had, as a group, a
difficult year. Mid-sized stocks did not participate fully in the market
rise through July and were harder hit than larger stocks in the market drop
of late summer. Despite a strong recovery in the fourth quarter, mid-cap
stocks still underperformed larger stocks by a wide margin.
Over the course of the year, mid-caps were hurt by a broad wave of earnings
disappointments. The market was particularly unmerciful towards any negative
news on this front. More than one in five companies in the S&P Midcap Index
lost 25% or more of their value in 1998.
Unfortunately, our holdings were not immune. For example, Petco Animal
Supply, Sunbeam and Consolidated Stores all had difficulty meeting earnings
expectations and were sold at losses. On the positive side were several
technology holdings, including Lexmark, Solectron and American Power
Conversion. All three of these stocks advanced more than 100% over the
course of the year. Shares of Tommy Hilfiger were a plus as well, advancing
more than 70% over the period. As the year ended we continued to hold these
four stocks and are optimistic regarding the long-term prospects of solid,
reasonably priced mid-cap stocks.
TOP TEN HOLDINGS
% of net assets
Kroger 5.2%
CVS Corp. 5.1%
Fiserv 5.0%
American Power Conversion 4.9%
Network Associates 4.7%
Tommy Hilfiger 4.7%
Regions Financial 4.5%
Denstply 4.4%
Solectron 4.3%
Hillenbrand 4.2%
Fund-at-a-Glance
Objective: Mosaic Mid-Cap Growth seeks long-term capital appreciation through
the investment in small-to-mid sized growth companies.
Net Assets: $10.2 million
Date of Inception: July 21, 1983
Ticker: GTSGX
MOSAIC FORESIGHT
Mosaic Foresight returned 16.36% through December 31, 1998, its first year of
operation. This return was in line with the fund's peers, as indicated by
the Lipper Flexible Portfolio Fund Index, which was up 16.52% for the same
period.
Taking a clearly conservative posture, the Foresight Fund remained heavily in
cash reserves for most of 1998. Through the early months of the year cash
positions ranged from 60%-80% of the Fund's total assets. One of the Fund's
objectives is to attempt to avoid severe stock market declines. After such a
major decline in August and September, stock holdings in-creased: from 22% on
September 30 to 53% in mid-November. This reallocation into the market
helped propel the fund to its overall 16.36% increase for the year. Towards
the end of 1998 the Fund resumed a more conservative position, holding 25% in
stocks at year-end in the belief that the stock market remains substantially
overvalued and thus quite vulnerable in early 1999.
Foresight's charter is to provide capital appreciation while maintaining
sensitivity to market conditions and to actively adjust asset allocation when
conditions warrant. At year end the fund was 24.9% invested in stocks, 40.7%
in government agency notes, and 34.4% in cash.
Top Five Stock Holdings
(24.9% of total assets in stocks)
% of net assets
Compaq 3.8%
Marshall & Ilsley 3.5%
MBIA, Inc. 3.0%
Officemax 2.8%
Tommy Hilfiger 2.7%
Fund-at-a-Glance
Objective: Mosaic Foresight seeks long-term capital appreciation through
investments in large growth companies while pursuing capital preservation
through active management of market exposure.
Net Assets: $3.3 million
Date of Inception: December 31, 1997
Ticker: GEWWX
Comparison of Changes in the Value of a $10,000 Investment
Depicted herein are the following line graphs:
Investors S&P 500 Lipper Growth
Fund
1978 10,360 10,420 10,692
1979 12,337 12,369 13,825
1980 15,191 16,376 19,170
1981 17,277 15,508 17,863
1982 23,068 18,842 22,156
1983 27,159 23,101 26,886
1984 27,000 24,556 25,920
1985 35,505 32,365 33,733
1986 41,293 38,417 38,992
1987 41,751 40,453 40,261
1988 47,080 47,156 45,951
1989 54,644 62,105 58,574
1990 46,858 60,179 55,403
1991 61,881 78,534 75,530
1992 68,671 84,503 81,295
1993 70,684 93,012 91,033
1994 73,441 94,230 89,603
1995 91,529 129,642 118,860
1996 112,352 159,395 139,635
1997 151,495 212,569 178,842
1998 179,764 273,322 224,787
Value Line
Balanced Geometric
Fund Index Lipper Balanced
1988 10,000 10,000 10,000
1989 11,211 11,122 11,959
1990 10,393 8,423 12,110
1991 13,001 10,716 14,978
1992 14,093 11,461 16,410
1993 14,687 12,690 18,371
1994 14,854 11,927 17,995
1995 18,049 14,227 22,474
1996 21,020 16,130 25,398
1997 26,378 19,527 29,995
1998 30,374 18,787 34,522
Mid-Cap
Growth S&P 500 Lipper Mid-Cap
1988 10,000 10,000 10,000
1989 12,516 13,170 12,853
1990 10,531 12,762 12,277
1991 13,236 16,654 18,909
1992 14,126 17,920 20,537
1993 16,225 19,724 23,692
1994 15,582 19,983 23,214
1995 19,099 27,492 30,893
1996 20,272 33,802 35,921
1997 23,722 45,078 42,232
1998 25,264 57,961 48,111
Foresight S&P 500 Lipper Flexible
12/31/1997 10,000 10,000 10,000
03/31/1998 10,361 11,395 10,907
06/30/1998 10,360 11,771 11,075
09/30/1998 9,901 10,600 10,278
12/31/1998 11,636 12,858 11,656
Average Annual Total Return One Year Five Years Ten Years
Investors Fund 18.66% 20.52% 14.34%
Balanced Fund 15.15% 15.64% 11.75%
Mid-Cap Growth Fund 6.81% 9.25% 9.71%
Foresight Fund 16.36%*
*Since inception on 12/31/97
Past performance is not predictive of future performance.
Interview with lead equity manager Jay Sekelsky
Q. How would you characterize the performance in the Mosaic Equity Trust
Funds for this year?
A. If a year ago someone had handed me this year's performance numbers, I
would have been happy to take them. After all, 1995, 1996 and 1997 were
tremendous years for our funds (and the market) and we were certainly
prepared for more modest results. To add another double-digit year to
Investors and Balanced is really quite unprecedented. At first glance it
looks like it was another strong year for the market. But, of the past four
years, 1998 easily proved to be the most difficult year to generate double-
digit returns. In reality, a small minority of very large companies
generated the lion's share of the S&P 500's 28.6% return. In fact, the
average stock in the S&P 500 was up just 7% and over two-thirds of U.S.
stocks had a negative return for the year. This so-called "two-tiered
market" has been well documented. The bottom line is that it was a difficult
market for most investors to generate double-digit returns and so we are very
pleased to have done so.
Q. What aspects of market performance in the past year did you anticipate
going into this year?
A. A year ago, in this report, I stated that we expected to see a
continuation of international problems that were at that point concentrated
in Asia. Since then we've seen the collapse of Russia and the beginnings of
an economic crisis in South America. As a result, our decision to screen
companies for overseas exposure proved to be prudent. We did a good job of
avoiding the companies hit hardest by lost international sales. We also
reported that we found the market vulnerable as we entered 1998. Our
concentration on strong domestic companies with proven income streams was
part of our defensive strategy. When the market turned sharply downward in
July and August our stocks held up better than the overall market.
Q. What aspects of the market surprised you?
A. I'd have to say the biggest surprise was the size and speed in which
the market recovered at the end of the year. Investors returned 23.11% in
the last quarter, while Mid-Cap did 21.54%. By the end of the year the
indices were testing new highs, even though the majority of stocks were not
nearly that resilient. Nevertheless, the market's comeback was stronger and
steeper than we could have predicted.
Q. Did you make any substantial changes to the portfolios over the course
of the year?
A. While we are willing, and actually pleased to be able to hold a stock
for multiple years, our sell discipline is an important component of our
strategy. We will sell a stock when we feel it is fully valued or when we're
convinced we have better opportunities in another company. One of the
results of a volatile market like we had in 1998 is the way stocks sometimes
hit their target prices much faster than we expect and become sell
candidates. When the market dips, as it did in late summer, stocks of
attractive companies that may have been too pricey may rather quickly drop
into our buy range. As a result, we had slightly more turnover than we would
normally expect. Additionally, as the year progressed and valuations became
somewhat extended in certain sectors, such as healthcare, we reduced our
exposure to those sectors. On the other hand the financial sector became
more attractive, in our opinion, and we increased our holdings in that area.
Q. Where were the funds positioned in terms of types of industries or
sectors?
Our stock selection discipline leads us to four major sectors: consumer,
healthcare, financial and technology. Over a long period of time we'd expect
our exposure to be relatively evenly balanced across these sectors. For a
shorter period of time, including the one-year period we are reviewing,
conditions will likely produce a heavier weighting in one broad sector over
another. For the larger stocks represented in Investors and Balanced, we
favored the consumer sector, with substantial holdings in the supermarket
chains of Kroger and Safeway and the drugstore operator CVS. These were
companies with a history of strong, dependable earnings that were not
dependent on overseas sales. We were able to acquire these companies at
below-market valuations based on the S&P 500's valuation. Plus, we liked the
way these companies were likely to hold up in any downturn. After all,
consumers will still buy groceries and fill their prescriptions, regardless
of the short-term economic conditions. We were relatively underweighted in
technology, which turned out to be the best performing sector of the market.
While we had excellent results from Compaq and Sun Microsystems in Investors
and Balanced, overall technology valuations kept us from a heavier exposure
as this relatively pricey sector led the market to new and even pricier
valuations. Among the smaller stocks in Mid-Cap's universe we were able to
find more reasonably priced technology companies. Among the best performers
in our Mid-Cap portfolio were technology companies, led by printer
manufacturer Lexmark and Solectron, a provider of electronics manufacturing
services. As in our large-cap funds, Mid-Cap leaned toward the consumer
sector, but had relatively less success there. Not only were we fighting the
general investor bias towards larger stocks, but smaller companies were more
susceptible to being pinched between low-cost goods from Asia and rising
labor costs created by full employment.
Q. What is your outlook and strategy for 1999?
We head into 1999 with some of the same basic concerns and approaches
that served us well in 1998. We still find the international scene fraught
with dangers and prefer to somewhat limit our exposure to overseas economies,
although not to the same extent as last year. We think the highly priced
market as a whole remains vulnerable but remain positive about the domestic
economy and the ability of good, solid companies to prosper. With our risk-
conscious style of investing, success is not predicated on picking the next
"hot" stock, but on solid performance across the board--singles and doubles
rather than home runs, if you will. Our best results come when we have a
number of smaller success stories along with an avoidance of major problems.
So looking forward into 1999 we hope to avoid the major pitfalls of the
market by sticking with companies that can continue to prosper in the low-
inflation, lower-growth economy we foresee.
Independent Auditor's Report
To the Board of Trustees and Shareholders of Mosaic Equity Trust:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Investors, Balanced, Mid-Cap
Growth and Foresight (formerly Worldwide Growth) Funds (the "Funds") of the
Mosaic Equity Trust as of December 31, 1998, and the related statements of
operations for the year then ended, changes in net assets and the financial
highlights for the year then ended and the periods ended December 31, 1997.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
financial highlights of the Investors Fund and the Balanced Fund for each of
the years in the three year period ended December 31, 1996 were audited by
other auditors whose report, dated January 24, 1997, expressed an unqualified
opinion on those financial highlights. The statements of changes in net
assets for the year ended March 31, 1997 and the financial highlights of the
Mid-Cap Growth and Foresight Funds for each of the years in the three year
period ended March 31, 1997 were audited by other auditors whose report,
dated May 2, 1997, expressed an unqualified opinion on the statements of
changes in net assets and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1998, by correspondence with the
custodian and broker. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Investors, Balanced, Mid-Cap Growth and Foresight Funds of the Mosaic Equity
Trust as of December 31, 1998, the results of their operations for the year
then ended, the changes in their net assets, and their financial highlights
for the year then ended and the periods ended December 31, 1997 in conformity
with generally accepted accounting principles.
(signature)
Deloitte & Touche LLP
Princeton, New Jersey
February 10, 1999
<PAGE>
Investors Fund
Portfolio of Investments - December 31, 1998
Number
of
Shares Value
COMMON STOCKS: 91.16% of net assets
CAPITAL GOODS -
MANUFACTURING: 3.06%
US Industries, Inc. 48,550 $ 904,244
CONSUMER CYCLICALS: 6.59%
Dayton Hudson Corporation 18,850 1,022,613
Federated Department Stores, Inc.* 21,200 923,525
CONSUMER SERVICES -
TELECOMMUNICATIONS: 4.87%
MCI WorldCom, Inc.* 20,050 1,438,587
CONSUMER STAPLES -
BROADCAST MEDIA: 3.26%
Mediaone Group, Inc.* 20,450 961,150
CONSUMER STAPLES -
FOOD & BEVERAGE: 9.07%
Nabisco Holdings Corporation, Class A 26,900 1,116,350
PepsiCo, Inc. 38,150 1,561,766
CONSUMER STAPLES -
RETAIL: 14.63%
CVS Corporation 24,350 1,339,250
Kroger Company 24,750 1,497,375
Safeway, Inc.* 24,350 1,483,828
FINANCIAL - BANKS: 12.45%
First Union Corporation 18,850 1,146,315
National City Corporation 16,550 1,199,875
Wells Fargo & Company 33,300 1,329,919
FINANCIAL - INSURANCE: 3.31%
MGIC Investment Corporation 24,550 977,397
FINANCIAL - SERVICES: 11.40%
American Express Company 12,700 1,298,575
Citigroup, Inc. 17,550 868,725
Freddie Mac 18,590 1,197,893
HEALTHCARE: 11.08%
Abbott Laboratories 16,450 806,050
Bristol Myers Squibb Company 8,600 1,150,788
Johnson & Johnson 15,675 1,314,740
TECHNOLOGY: 11.44%
Compaq Computer Corporation 36,800 1,543,300
Hewlett-Packard Company 8,850 604,566
Sun Microsystems, Inc.* 14,400 1,233,000
TOTAL COMMON STOCKS (Cost $19,496,368) $26,919,831
REPURCHASE AGREEMENT: 9.27% of net assets
With Donaldson, Lufkin & Jenrette Securities
Corporation issued 12/31/98 at 4.625%, due
1/4/99, collateralized by $2,790,720 in
United States Treasury Notes due 6/30/00.
Proceeds at maturity are $2,737,406. (Cost $2,736,000) $ 2,736,000
TOTAL INVESTMENTS (Cost $22,232,368) $29,655,831
CASH AND RECEIVABLES
LESS LIABILITIES: (0.43%) of net assets $ (128,067)
NET ASSETS: 100% $29,527,764
*Non-income producing
Balanced Fund
Portfolio of Investments - December 31, 1998
Number
of
Shares Value
COMMON STOCKS: 58.58% of net assets
CAPITAL GOODS - MANUFACTURING: 2.01%
US Industries, Inc. 26,700 $497,288
CONSUMER CYCLICALS: 4.27%
Dayton Hudson Corporation 10,100 547,925
Federated Department Stores, Inc.* 11,650 507,503
CONSUMER SERVICES - TELECOMMUNICATIONS: 3.12%
MCI WorldCom, Inc.* 10,750 771,312
CONSUMER STAPLES - BROADCAST MEDIA: 2.14%
Mediaone Group, Inc.* 11,250 528,750
CONSUMER STAPLES - FOOD & BEVERAGE: 5.82%
Nabisco Holdings Corporation, Class A 14,450 599,675
PepsiCo, Inc. 20,500 839,219
CONSUMER STAPLES - RETAIL: 9.33%
CVS Corporation 12,800 704,000
Kroger Company 13,600 822,800
Safeway, Inc.* 12,800 780,000
FINANCIAL - BANKS: 8.23%
First Union Corporation 10,350 629,409
National City Corporation 9,200 667,000
Wells Fargo & Company 18,500 738,844
FINANCIAL - INSURANCE: 2.12%
MGIC Investment Corporation 13,200 525,525
FINANCIAL - SERVICES: 7.29%
American Express Company 6,850 700,412
Citigroup, Inc. 9,400 465,300
Freddie Mac 9,890 637,287
HEALTHCARE: 7.19%
Abbott Laboratories 8,850 433,650
Bristol Myers Squibb Company 4,600 615,538
Johnson & Johnson 8,700 729,713
TECHNOLOGY: 7.06%
Compaq Computer Corporation 19,250 807,297
Hewlett-Packard Company 4,200 286,912
Sun Microsystems, Inc.* 7,650 655,031
TOTAL COMMON STOCKS (Cost $10,895,021) $14,490,390
Principal
Amount Value
DEBT INSTRUMENTS: 34.40% of net assets
Corporate Obligations: 20.63%
Associates Corp of North America,
7.875%, 9/30/01 55,000 $58,369
Associates Corp of North America,
6%, 4/15/03 400,000 408,000
Walt Disney Company, Senior Notes,
6.375%, 3/30/01 355,000 365,206
Ford Motor Credit Company,
7.75%, 3/15/05 325,000 361,156
Gap, Inc., 6.9%, 9/15/07 345,000 379,069
General Motors Acceptance
Corporation, 5.875%, 1/22/03 430,000 434,300
Tommy Hilfiger USA, Inc.,
6.5%, 6/1/03 340,000 339,575
International Lease Finance
Corporation, 8.375%, 12/15/04 315,000 356,344
Kohls Corporation, 6.7%, 2/1/06 280,000 293,300
Lucent Technologies, Inc.,
6.9%, 7/15/01 350,000 366,187
Merrill Lynch & Company, Inc.,
7%, 1/15/07 300,000 322,875
Morgan Stanley Dean Witter & Co.,
6.375%, 8/1/02 355,000 363,431
Motorola, Inc., 5.8%, 10/15/08 430,000 439,675
Seagate Technology, Inc., Senior
Notes, 7.37%, 3/1/07 275,000 270,188
Xerox Corporation, 5.5%, 11/15/03 345,000 345,863
US Treasury & Agency Obligations: 13.77%
Fannie Mae Notes, 6%, 5/15/08 570,000 602,986
US Treasury Notes, 6.25%, 5/31/99 450,000 452,947
US Treasury Notes, 6.25%, 5/31/00 625,000 638,656
US Treasury Notes, 5.25%, 1/31/01 500,000 506,435
US Treasury Notes, 6.25%, 4/30/01 990,000 1,025,917
US Treasury Notes, 6.25%, 8/31/02 170,000 178,910
TOTAL DEBT INSTRUMENTS (Cost $8,343,978) 8,509,389
TOTAL INVESTMENT SECURITIES $22,999,779
REPURCHASE AGREEMENT: 6.88% of net assets
With Donaldson, Lufkin & Jenrette Securities
Corporation issued 12/31/98 at 4.625%, due
1/4/99, collateralized by $1,736,040 in United
States Treasury Notes due 6/30/00. Proceeds
at maturity are $1,702,875. (Cost $1,702,000) $ 1,702,000
TOTAL INVESTMENTS (Cost $20,940,999) $24,701,779
CASH AND RECEIVABLES
LESS LIABILITIES: 0.14% of net assets $ 33,631
NET ASSETS: 100% $24,735,410
*Non-income producing
Mid-Cap Growth Fund
Portfolio of Investments - December 31, 1998
Number
of
Shares Value
COMMON STOCKS: 91.36% of net assets
CAPITAL GOODS -
ELECTRICAL EQUIPMENT: 9.14%
American Power Conversion
Corporation* 10,250 $496,164
Solectron Corporation* 4,700 436,806
CAPITAL GOODS -
MANUFACTURING: 7.20%
Hillenbrand Industries, Inc. 7,475 425,141
US Industries, Inc. 16,650 310,106
CONSUMER CYCLICALS: 10.32%
Tommy Hilfiger Corporation* 8,000 480,000
Callaway Golf Company 12,750 130,687
Federated Department Stores, Inc.* 4,450 193,853
Officemax, Inc.* 20,550 249,169
CONSUMER SERVICES -
TELECOMMUNICATIONS: 3.06%
Telephone & Data Systems, Inc. 6,950 312,316
CONSUMER STAPLES -
WHOLESALE FOODS: 3.42%
Richfood Holdings, Inc. 16,800 348,600
CONSUMER STAPLES -
RETAIL: 10.31%
CVS Corporation 9,450 519,750
Kroger Company 8,800 532,400
FINANCIALS - BANKS: 11.76%
Regions Financial Corporation 11,300 455,531
Southtrust Corporation 9,525 351,830
Summit Bancorp 9,000 393,187
FINANCIALS - INSURANCE: 6.80%
MBIA, Inc. 5,575 365,511
MGIC Investment Corporation 8,250 328,453
FINANCIALS - SERVICES: 3.38%
Finova Group, Inc. 6,400 345,200
HEALTHCARE: 4.39%
Dentsply International, Inc. 17,500 448,438
TECHNOLOGY: 17.79%
Cadence Design Systems, Inc.* 13,550 403,112
Fiserv, Inc.* 9,900 508,922
Lexmark International Group, Inc.,
Class A* 4,200 422,100
Network Associates, Inc.* 7,275 481,969
TRANSPORTATION: 3.79%
Expeditors International of
Washington, Inc. 9,200 386,400
TOTAL COMMON STOCKS (Cost $8,051,734) $ 9,325,645
REPURCHASE AGREEMENT: 9.74% of net assets
With Donaldson, Lufkin & Jenrette Securities
Corporation issued 12/31/98 at 4.625%, due
1/4/99, collateralized by $1,013,880 in United
States Treasury Notes due 6/30/00. Proceeds at
maturity are $994,511. (Cost $994,000) $ 994,000
TOTAL INVESTMENTS (Cost $9,045,734) $10,319,645
CASH AND RECEIVABLES
LESS LIABILITIES: (1.10%) of net assets $ (112,751)
NET ASSETS: 100% $10,206,894
*Non-income producing
Foresight Fund
Portfolio of Investments - December 31, 1998
Number
of
Shares Value
COMMON STOCKS: 24.91% of net assets
CONSUMER CYCLICALS: 7.74%
Tommy Hilfiger Corporation* 1,500 $90,000
Federated Department Stores, Inc.* 1,700 74,056
Officemax, Inc.* 7,500 90,938
FINANCIALS - INSURANCE: 4.80%
MBIA, Inc. 1,500 98,344
MGIC Investment Corporation 1,500 59,719
FINANCIAL - BANKS: 5.95%
First Union Corporation 1,300 79,056
Marshall & Ilsley Corporation 2,000 116,875
TECHNOLOGY: 6.42%
Compaq Computer Corporation 3,000 125,812
Sun Microsystems, Inc.* 1,000 85,625
TOTAL COMMON STOCKS (Cost $568,269) $ 820,425
Principal
Amount Value
US GOVERNMENT AGENCY
OBLIGATIONS: 40.73%
Freddie Mac Discount Notes,
4.89%, 3/8/99 450,000 $ 446,220
Fannie Mae Discount Notes,
4.94%, 2/4/99 450,000 448,086
Fannie Mae Discount Notes, 4.94%,
2/18/99 450,000 447,221
TOTAL US GOVERNMENT
AGENCY OBLIGATIONS (Cost $1,341,456) 1,341,527
TOTAL INVESTMENT SECURITIES $2,161,952
REPURCHASE AGREEMENT: 31.67% of net assets
With Donaldson, Lufkin & Jenrette Securities
Corporation issued 12/31/98 at 4.625%, due
1/4/99, collateralized by $1,063,860 in United
States Treasury Notes due 6/30/00. Proceeds at
maturity are $1,043,536. (Cost $1,043,000) $1,043,000
TOTAL INVESTMENTS (Cost $2,952,725) $3,204,952
CASH AND RECEIVABLES
LESS LIABILITIES: 2.69% of net assets $ 88,664
NET ASSETS: 100% $3,293,616
*Non-income producing
Statements of Assets and Liabilities
December 31, 1998
Mid-Cap
Investors Balanced Growth Foresight
Fund Fund Fund Fund
ASSETS
Investments, at value (Note 1 and 2)
Investment securites $26,919,831 $22,999,779 $ 9,325,645 $2,161,952
Repurchase agreements 2,736,000 1,702,000 994,000 1,043,000
Total investments 29,655,831 24,701,779 10,319,645 3,204,952
Cash 604 374 129 133
Receivables
Dividends and interest 15,652 141,835 8,878 896
Capital shares sold 35,372 7,485 -- 89,620
Total assets 29,707,459 24,851,473 10,328,652 3,295,601
LIABILITIES
Payables
Dividends 96,512 103,806 41,062 1,985
Capital shares redeemed 83,183 12,257 80,696 --
Total liabilities 179,695 116,063 121,758 1,985
NET ASSETS (Note 6) $29,527,764 $24,735,410 $10,206,894 $3,293,616
CAPITAL SHARES OUTSTANDING 1,217,127 1,208,403 1,167,493 275,645
NET ASSET VALUE PER SHARE $24.26 $20.47 $8.74 $11.95
Statements of Operations
For the year ended December 31, 1998
Mid-Cap
Investors Balanced Growth Foresight
Fund Fund Fund Fund
INVESTMENT INCOME (Note 1)
Interest income $ 122,525 $ 504,663 $ 66,571 $ 81,988
Dividend income 220,835 106,772 59,921 6,941
Other income 13,507 12,679 -- --
Total investment income 356,867 624,114 126,492 88,929
EXPENSES (Notes 3 and 5)
Investment advisory fees 202,302 154,798 81,764 17,118
Transfer agent, administrative,
registration and
professional fees 107,894 92,879 54,509 12,561
Total expenses 310,196 247,677 136,273 29,679
NET INVESTMENT INCOME (LOSS) 46,671 376,437 (9,781) 59,250
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on
investments 3,052,185 1,728,871 574,775 127,562
Change in net unrealized
appreciation
of investments 1,535,620 864,681 140,432 252,227
NET GAIN ON INVESTMENTS 4,587,805 2,593,552 715,207 379,789
TOTAL INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $4,634,476 $2,969,989 $ 705,426 $ 439,039
Statements of Changes in Net Assets
For the period indicated
Investors Fund Balanced Fund
Year Ended Year Ended Year Ended Year Ended
12/31/1998 12/31/1997 12/31/1998 12/31/1997
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment income $ 46,671 $ 95,730 $ 376,437 $ 258,291
Net realized gain on
investments 3,052,185 3,209,113 1,728,871 2,051,649
Net unrealized appreciation
of investments 1,535,620 2,336,334 864,681 889,817
Total increase in net assets
resulting from operations 4,634,476 5,641,177 2,969,989 3,199,757
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (46,454) (104,054) (376,307) (287,828)
From net capital gains (2,505,125) (2,972,340) (1,761,206) (1,921,318)
Total distributions (2,551,579) (3,076,394) (2,137,513) (2,209,146)
CAPITAL SHARE TRANSACTIONS
(Note 8) 2,242,938 9,525,594 6,500,315 5,394,249
TOTAL INCREASE IN NET ASSETS 4,325,835 12,090,377 7,332,791 6,384,860
NET ASSETS
Beginning of period $25,201,929 $13,111,552 $17,402,619 $11,017,759
End of period $29,527,764 $25,201,929 $24,735,410 $17,402,619
<TABLE>
<CAPTION>
Mid-Cap Growth Fund Foresight Fund
Year Nine Months Year Year Nine Months Year
Ended Ended Ended Ended Ended Ended
December December March December December March
31, 1998 31, 1997 31, 1997 31, 1998 31, 1997 31, 1997
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
Net investment income (loss) $ (9,781) $ (31,388) $ (17,803) $ 59,250 $ (983) $ 2,895
Net realized gain on investments 574,775 1,579,590 4,734,760 127,562 127,653 60,864
Net realized loss on foreign
currency transactions -- -- -- -- (21,582) (6,455)
Net unrealized appreciation
(depreciation of investments) 140,432 1,250,952 (5,199,869) 252,227 (175,233) 225,620
Net unrealized appreciation
(depreciation) on foreign
currency transactions -- -- -- -- -- 3,044
Total increase (decrease) in net
assets resulting from operations 705,426 2,799,154 (482,912) 439,039 (70,145) 285,968
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income -- -- (15,133) (59,250) -- --
Net capital gains (1,192,307) (3,057,678) (9,039,372) -- -- --
Total distributions (1,192,307) (3,057,678) (9,054,505) (59,250) -- --
CAPITAL SHARE TRANSACTIONS
(Note 8) (773,816) 761,629 3,410,899 999,699 (597,912) (819,492)
TOTAL INCREASE (DECREASE)
IN NET ASSETS (1,260,697) 503,105 (6,126,518) 1,379,488 (668,057) (533,524)
NET ASSETS
Beginning of period $11,467,591 $10,964,486 $17,091,004 $1,914,128 $2,582,185 $3,115,709
End of period $10,206,894 $11,467,591 $10,964,486 $3,293,616 $1,914,128 $2,582,185
</TABLE>
Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
Ratio of
Net Ratio of net
Net realized & Distri- Net Net expenses investment
Year asset Net unrealized butions asset assets to income
ended value invest. gain Total from from netDist. value end of average (loss) Port.
Dec. begin income (loss) on invest. invest. fm. cap.Total end of Total period net to average turnover
31 period (loss) invest's operat's income gains dist'ions period return (1000s) assets net assets rate
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investors Fund-2
1998 $22.37 $0.04 $4.13 $4.17 $(0.04) $(2.24) $(2.28) $24.26 18.66% $ 29,528 1.16% 0.17% 85%
1997-1 19.16 0.14 6.39 6.53 (0.14)-5 (3.18)-5 (3.32)-5 22.37 34.84 25,202 1.15 0.49 78-6
1996 18.03 0.24 3.91 4.15 (0.25) (4.01) (4.26) 17.92 22.75 13,112 1.17 1.20 81
1995 15.84 0.42 3.45 3.87 (0.42) (1.26) (1.68) 18.03 24.63 11,860 1.17 2.44 58
1994 16.73 0.39 0.26 0.65 (0.39) (1.15) (1.54) 15.84 4.09 10,009 1.20 2.28 54
Balanced Fund-3
1998 $19.48 $0.37 $2.56 $2.93 $(0.37) $(1.57) $(1.94) $20.47 15.15% $ 24,735 1.20% 1.83% 94%
1997-1 18.09 0.40 4.04 4.44 (0.41)-5 (2.64)-5 (3.05)-5 19.48 25.49 17,403 1.35 1.80 78-6
1996 22.44 0.50 3.20 3.70 (0.50) (3.61) (4.11) 22.03 17.00 11,018 1.42 2.06 86
1995 20.16 0.75 3.53 4.28 (0.74) (1.26) (2.00) 22.44 21.51 10,857 1.36 3.36 66
1994 22.36 0.72 (0.46) 0.26 (0.72) (1.74) (2.46) 20.16 1.31 10,588 1.34 3.03 76
Mid-Cap Growth Fund-4
1998 $9.25$(0.01) $0.64 $0.63 -- $(1.14) $(1.14) $8.74 6.81% $10,207 1.26% (0.09)% 88%
1997-8 9.88 (0.03) 1.91 1.88 -- (2.51) (2.51) 9.25 26.06 11,468 1.27-7(0.35)-7 80
1997-9 20.49 (0.02) (0.47) (0.49) $(0.02) (10.10) (10.12) 9.88 (5.59) 10,964 1.62 (0.12) 127
1996-9 18.09 0.13 3.63 3.76 (0.12) (1.24) (1.36) 20.49 21.22 17,091 1.41 0.56 21
1995-9 21.11 0.15 0.19 0.34 (0.15) (3.21) (3.36) 18.09 2.27 31,590 1.30 0.76 4
1994-9 19.97 0.17 2.13 2.30 (0.17) (0.99) (1.16) 21.11 11.57 34,931 1.45 0.75 7
Foresight Fund
1998 $10.46 $0.22 $1.49 $1.71 $(0.22) -- $(0.22) 11.95 16.36% $ 3,294 1.30% 2.59% 185%
(Formerly) Worldwide Growth Fund-4
1997-8 10.97 (0.01) (0.50) (0.51) -- -- -- 10.46 (4.60) 1,914 2.41-7 0.05-7 2
1997-9 9.86 0.01 1.10 1.11 -- -- -- 10.97 11.21 2,582 2.50 0.10 47
1996-9 8.50 0.04 1.39 1.43 (0.07) -- (0.07) 9.86 16.88 3,116 2.38 0.43 78
1995-9 12.51 0.02 (2.48) (2.46) (0.03) $(1.52) (1.55) 8.50 (22.20) 3,319 2.05 0.21 65
1994-10 10.00 (0.04) 2.55 2.51 -- -- -- 12.51 26.19-7 3,526 1.81-7(0.48)-7 83
</TABLE>
1 All data reflect share price adjustment due to fund merger on June 13,
1997. (See note 1).
2 Data prior to June 13, 1997 represents Bascom Hill Investors, Inc.
3 Data prior to June 13, 1997 represents Bascom Hill BALANCED Fund, Inc.
4 Effective July 31, 1996, the investment advisory services transferred to
Madison Mosaic, LLC from Bankers Finance Investment Management Corp.
5 Includes distribution attributable to net investment income and net
realized gain from Mosaic Investors Fund and Mosaic Equity Income Fund. (See
note 1).
6 For purposes of determining portfolio turnover, the transfer of securities
pursuant to the merger on June 13, 1997 are not considered.
7 Annualized.
8 For the nine month period ended December 31, 1997.
9 For the years ended March 31.
10 For the period from April 16, 1993 (inception) to March 31, 1994.
11 Had the Advisor not waived advisory fees, the Worldwide Growth Fund's
ratios of expenses and net investment loss to average net assets would have
been 2.92% and (0.56)%, respectively, for the nine month period ending
December 13, 1997; 3.00% and (0.40)% for the year ended March 31, 1997; 2.97%
and (0.17)%, respectively, for the year ended March 31, 1996; and 3.05% and
(0.79)%, respectively, for the year ended March 31, 1995. Had the Advisor
not waived the advisory fee and deferred a portion of the operating expenses,
the Fund's annualized ratios of expenses and net investment loss to average
net assets would have been 4.24% and (2.92)%, respectively, for the period
from inception to March 31, 1994. Ratio of expenses to average net assets
includes fees paid indirectly for the years ended March 31, 1996 and 1997.
Mosaic Equity Trust
Notes to Financial Statements
For the period ended December 31, 1998
1. Summary of Significant Accounting Policies. Mosaic Equity Trust (the
"Trust") is registered with the Securities and Exchange Commission under the
Investment Company act of 1940 as an open-end, diversified investment
management company. The Trust offers shares in four separate portfolios
which invest in differing securities. The Investors Fund, the surviving
economic entity of the merger between Mosaic Equity Trust Investors Fund and
Bascom Hill Investors, Inc., which occurred on June 13, 1997, is invested in
established companies that may be undervalued or may offer good management
and significant growth potential. The Balanced Fund, the surviving economic
entity of the merger between Mosaic Equity Trust Equity Income Fund and
Bascom Hill BALANCED Fund, Inc., which occurred on June 13, 1997, is invested
in a combination of investment grade fixed-income securities and equity
securities of established companies. All financial information presented
prior to the effective date of the merger represents activity of the Bascom
Hill Investors, Inc. and the Bascom Hill BALANCED Fund, Inc. The Mid-Cap
Growth Fund is invested primarily in "mid-cap" companies that may offer rapid
growth potential. The Foresight Fund moves in and out of the stock and bond
markets when these markets appear unusually over-or-under valued. Prior to
January 1, 1998, the Foresight Fund had different investment policies and
objectives and was called Worldwide Growth Fund.
Share Price Adjustment Due to Merger: On June 13, 1997, the Balanced Fund
shares were adjusted pursuant to the merger as discussed above by
approximately the following factors: adjustment to shares, 1.218; adjustment
to net asset value per share, 0.821. Similarly, the Investors Fund shares
were adjusted as follows: adjustment to shares, 0.935; adjustment to net
asset value per share, 1.0699.
Fiscal Year and Accountants: Beginning April 1, 1997, the Trust's fiscal year
changed to December 31 and the Trust changed its Independent Auditors to
Deloitte & Touche LLP.
Securities Valuation: Securities traded on a national securities exchange are
valued at their closing sale price, if available, and if not available such
securities are valued at the mean between their bid and asked prices. Other
securities, for which current 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
statements and federal income tax purposes. Short-term securities (maturing
within 60 days) are valued at amortized cost which approximates market value.
Securities with maturities in excess of 60 days are valued at market value.
Investment Income: Interest and other income (if any) is accrued as earned.
Dividend income is recorded on the ex-dividend date.
Dividends: Substantially all of the Trust's accumulated net investment
income, if any, determined as gross investment income less accrued expenses,
is declared as a regular dividend and distributed to shareholders at fiscal
year end. The Trust intends to declare and pay regular dividends quarterly
on the Balanced Fund. Capital gain distributions, if any, are declared and
paid annually at calendar year end. 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 of the taxable
income of each portfolio is distributed to its shareholders, and therefore no
federal income tax provision is required. As of December 31, 1998, the Mid-
Cap Growth and Foresight Funds had available for federal income tax purposes
unused capital loss carryovers of $133,830, expiring December 31, 2006, and
$283,947, expiring December 31, 2003, respectively.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ
from those estimates.
2. Investments in Repurchase Agreements. When the Trust purchases
securities under agreements to resell, the securities are held for
safekeeping by the custodian bank as collateral. Should the market value of
the securities purchased under such an agreement decrease below the principal
amount to be received at the termination of the agreement plus accrued
interest, the counterparty is required to place an equivalent amount of
additional securities in safekeeping with the Trust's custodian bank.
Repurchase agreements may be terminated within seven days. Pursuant to an
Exemptive Order issued by the Securities and Exchange Commission, the Trust,
along with other registered investment companies having Advisory and Services
Agreements with the same advisor, transfers uninvested cash balances into a
joint trading account. The aggregate balance in this joint trading account
is invested in one or more consolidated repurchase agreements whose
underlying securities are U.S. Treasury or federal agency obligations.
3. Investment Advisory Fees and Other Transactions with Affiliates. The
Investment Advisor to the Trust, Madison Mosaic, LLC ("the Advisor"), earns
an advisory fee equal to 0.75% per annum of the average net assets of each of
the Investors, Balanced, Mid-Cap Growth and Foresight Funds; the fees are
accrued daily and are paid monthly. The Advisory Agreement between the Trust
and the Advisor was approved at the special meeting of the Trust's
shareholders on July 29, 1996. The Trustees approved a permanent reduction
in the fee payable with respect to the Foresight Fund from 1.00% to 0.75%
effective January 1, 1998.
4. Aggregate Cost and Unrealized Appreciation (Depreciation). The aggregate
cost for federal income tax purposes and the net unrealized appreciation are
stated as follows as of December 31, 1998:
Investors Fund Balanced Fund Mid-Cap Growth Fund Foresight Fund
Aggregate Cost $22,232,368 $20,940,999 $9,045,734 $2,952,725
Gross unrealized
appreciation $ 7,699,939 $ 3,923,376 $1,873,796 $ 252,227
Gross unrealized
depreciation (276,476) (162,596) (599,885) --
Net unrealized
appreciation $ 7,423,463 $ 3,760,780 $1,273,911 $ 252,227
5. Other Expenses. All expenses and support services are provided by the
Advisor under Services Agreement for fees based on a percentage of average
net assets. This percentage is 0.40% for the Investors Fund, 0.45% for the
Balanced Fund and 0.50% for the Mid-Cap Growth Fund and Foresight Fund.
The Advisor is also responsible for the fees and expenses of Trustees who are
affiliated with the Advisor and certain promotional expenses.
6. Net Assets. At December 31, 1998, net assets included the following:
Investors Fund Balanced Fund Mid-Cap Growth Fund Foresight Fund
Net paid in capital
on shares of
beneficial
interest $21,255,596 $20,552,731 $ 9,066,813 $3,325,336
Accumulated net
realized
gains (losses) 848,705 421,899 (133,830) (283,947)
Net unrealized
appreciation
on investments 7,423,463 3,760,780 1,273,911 252,227
Total Net Assets$29,527,764 $24,735,410 $10,206,894 $3,293,616
The Foresight Fund reclassified $983 from accumulated net investment losses
and $21,582 from accumulated foreign currency losses to paid in capital as a
result of permanent book and tax differences. This reclassification had no
impact on net asset value.
7. Investment Transactions. Purchases and sales of securities other than
short-term securities for the year ended December 31, 1998 were as follows:
Investors Fund Balanced Fund Mid-Cap Growth Fund Foresight Fund
Purchases $20,956,962 $21,163,433 $8,480,775 $1,783,518
Sales 23,076,233 17,579,428 9,941,143 1,342,720
8. Capital Share Transactions. An unlimited number of capital shares,
without par value, are authorized. Transactions in capital shares for the
following periods were:
Investors Fund Balanced Fund
Year Ended Year Ended Year Ended Year Ended
12/31/1998 12/31/1997 12/31/1998 12/31/1997
In Dollars
Shares sold $14,539,477 $ 6,367,150 $ 8,104,834 $ 506,400
Additional shares in
connection with
merged funds -- 8,167,826 -- 5,629,050
Shares issued in
reinvestment of
dividends 2,455,089 2,936,288 2,018,298 2,111,666
Total shares issued 16,994,566 17,471,264 10,123,132 8,247,116
Shares redeemed (14,751,628) (7,945,670) (3,622,817) (2,852,867)
Net increase $ 2,242,938 $9,525,594 $ 6,500,315 $ 5,394,249
In Shares
Shares sold 622,680 271,938 395,961 24,140
Additional shares in
connection with
merged funds, net -- 332,755 -- 400,072
Shares issued in
reinvestment of
dividends 101,199 134,417 98,882 103,505
Total shares issued 723,879 739,110 494,843 527,717
Shares redeemed (633,406) (344,210) (179,717) (134,580)
Net increase 90,473 394,900 315,126 393,137
Mid-Cap Growth Fund Foresight Fund
Year Ended 9 Months Ended Year Ended 9 Months Ended
12/31/1998 12/31/1997 12/31/1998 12/31/1997
In Dollars
Shares sold $6,985,781 $23,964,062 $1,588,929 560,174
Shares issued in
reinvestment of
dividends 1,151,393 2,971,370 57,264 --
Total shares issued 8,137,174 26,935,432 1,646,193 560,174
Shares redeemed (8,910,990) (26,173,803) (646,494)(1,158,086)
Net increase (decrease)$ (773,816) $ 761,629 $ 999,699 $ (597,912)
In Shares
Shares sold 747,858 2,599,323 147,745 47,038
Shares issued in
reinvestment
of dividends 131,738 353,118 4,792 --
Total shares issued 879,596 2,952,441 152,537 47,038
Shares redeemed (951,759) (2,822,303) (59,858) (99,499)
Net increase (decrease) (72,163) 130,138 92,679 (52,461)
